# Holding Company

> A Panama holding company (S.A. under Law 32 of 1927) leverages the territorial tax system: 0% Panama tax on foreign-source dividends received and 0% capital gains tax on the sale of foreign assets. Panama has 17 double taxation treaties in force (Spain, Mexico, Singapore, UAE, Netherlands, and more). No minimum capital, formation in 3-5 business days. Ideal for regional LatAm holdings, IP holding, real estate portfolios and family wealth structures.

[Canonical page](https://investpanama.biz/en/guides/holding-company)

A Panama holding company is a corporation (S.A.) incorporated under Law 32 of 1927 whose purpose is to hold equity interests, shares, real estate or other assets, generally located outside Panama. Thanks to the territorial tax system, foreign-source dividends received by the holding pay no income tax in Panama (0% when received; note that when the company distributes dividends out of that foreign-source income, a 5% dividend withholding applies if it holds an operations notice (aviso de operación) or operates in Panama — purely offshore holdings with no Panama operations avoid it), and capital gains from the sale of foreign assets are likewise not taxed in Panama. Panama also has a network of 17 double taxation treaties in force (Spain, Mexico, Singapore, United Arab Emirates, Netherlands, Luxembourg, South Korea, Qatar, among others, per the Ministry of Economy and Finance and PwC tax summaries), which can reduce withholding in the source country when tax residency and substance requirements are met. No minimum capital is required and formation takes 3-5 business days. It is a common structure for regional Latin American holdings, intellectual property holding, real estate portfolios and family wealth planning.

## Benefits

### Tax Benefits

- **0% Tax on Foreign-Source Dividends Received** (0%) — Under the territorial tax system, dividends the holding receives from foreign subsidiaries are not Panama-source income and pay no income tax in Panama. Important: the exemption applies when the dividends are received; when the company distributes dividends out of that foreign-source income and holds an operations notice (aviso de operación) or operates in Panama, a 5% dividend withholding applies (purely offshore holdings with no Panama operations avoid it).
  - _Source: Código Fiscal de Panamá, art. Principio de territorialidad (Art. 694)_
- **0% Capital Gains on Sale of Foreign Assets** (0%) — The sale of shares, equity interests or real estate located outside Panama triggers no capital gains tax in Panama.
  - _Source: Código Fiscal de Panamá, art. Principio de territorialidad_
- **Double Taxation Treaty Network** (17) — Panama maintains 17 double taxation treaties in force, including Spain, Mexico, Singapore, UAE, Netherlands, Luxembourg, South Korea and Qatar (source: MEF / PwC tax summaries). Their application requires tax residency and substance in Panama.
  - _Source: Convenios para Evitar la Doble Imposición, art. Listado oficial del MEF_
- **Reduced Withholding When Distributing Foreign-Source Income** (10% / 5%) — If the holding distributes dividends from Panama-source profits, a 10% withholding applies; distributions from foreign-source or exempt income are subject to 5% withholding (applicable to companies holding an operations notice).
  - _Source: Código Fiscal de Panamá, art. Art. 733 (impuesto de dividendos)_
### Corporate Flexibility

- **No Minimum Capital** ($0) — Law 32 of 1927 requires no minimum paid-in capital; the standard authorized capital is $10,000 for registration fee purposes only.
  - _Source: Ley 32 de 1927_
- **Fast Formation** (3-5 días) — The company is registered at the Public Registry in approximately 3-5 business days.
  - _Source: Registro Público de Panamá_
- **100% Foreign Ownership** (100%) — Shareholders and directors may be foreigners with no nationality or residency restrictions.
  - _Source: Ley 32 de 1927_

## Frequently asked questions

### Does the holding pay Panama tax on dividends received from abroad?

No. Under the Fiscal Code's territorial system, foreign-source dividends are not taxed in Panama. However, this does not eliminate source-country taxes (withholding) or the shareholders' tax obligations in their countries of residence.

### Can I apply the double taxation treaties automatically?

No. To benefit from a treaty, the holding generally must obtain a tax residency certificate from the DGI and demonstrate real economic substance in Panama (effective management, expenses, staff as applicable). Treaties include anti-abuse clauses. Consult a tax advisor before structuring.

### What withholding applies when the holding distributes dividends to its shareholders?

If the company requires an operations notice and distributes Panama-source profits, the withholding is 10%; distributions of foreign-source or exempt income are subject to 5%. Purely offshore companies with no Panama operations or operations notice are generally not subject to this withholding. Verify your case with a Panamanian tax advisor.

### Must the holding keep accounting records even if it does not operate in Panama?

Yes. Law 52 of 2016 (as amended) requires Panamanian legal entities not operating in Panama to keep accounting records and supporting documentation, available through their resident agent. Non-compliance triggers fines and can lead to suspension of the company.

_This information is general guidance and does not constitute legal, tax or financial advice. Panama's laws and tax rates change; always verify current rules with the DGI and MEF. Consult a licensed Panama attorney and tax advisor (and advisors in your country of residence) before forming a holding company. Last verified: July 2026._