Panama Payroll Services

At Bradford Jacobs, we navigate the administration of the Panama payroll system for you. We do the work, so you do not have to.

Panama Payroll

Bradford Jacobs’ expertise provides complete answers for companies targeting Panama in their global expansion plans. Panama has been one of the fastest growing economies in the region over the 10 years up to 2022. The highly-developed services sector accounts for up to 80% of GDP, with 10% coming from revenue from the Panama Canal. A US$5.5 billion expansion programme created wider locks and deeper channels to accommodate larger vessels and boost revenues, confirming Panama as a major strategic and logistics hub in the region.

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At Bradford Jacobs, we make business expansion easy, thanks to our Professional Employer Organisation (PEO) and Employer of Record (EOR) platforms.

Additionally, the Colón Free Trade Zone is the world’s second-largest free port. The Trans-Panama Pipeline transports crude oil between the Pacific and Atlantic and Panama gathers more revenue by licensing and registering merchant ships to the Panamanian flag.

In Panama’s ‘dollarized’ economy its currency the ‘balboa’ has 1:1 parity with the US dollar and functions alongside it, helping the nation to converge with US living standards at a quicker rate than any other Latin American nation. In effect, the dollar is the means of exchange.

Panama’s global role is confirmed by membership of the United Nations, the World Bank, the International Monetary Fund, the Inter-American Development Bank and as a founder member of the Latin American Economic System. Free Trade Agreements include the US and Mexico and an association agreement with the European Union.

Bradford Jacobs’ specialists become your employees’ effective Employer of Record (EOR) for all these issues, while they remain under your daily operational control.

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Available Panama Payroll Options

  • Remote payroll – This option allows businesses to operate under a single payroll system, by adding employees in Panama to your parent company’s payroll. However, these employees must operate under different regulations, which is likely to cause problems.
  • Internal payroll – You may operate payroll for your subsidiary, especially if you are committed to growing your company’s presence in Panama. However, this does require hiring dedicated HR staff who understand Panama employment and compliance laws.
  • Panamas’ payroll processing company – If you are considering outsourcing, then working with a Panama payroll company will help in processing your payroll – but not when it comes to compliance.
  • Panamas’ payroll outsourcing – However, there is another option available that solves both concerns – by working with Bradford Jacobs. We can handle payroll and compliance for all your employees in Panama. We take the administrative stress off your shoulders so you can focus on what you do best.

The opportunities build and build, but inevitably there are challenges – and payroll management in Panama is among them. Whether your company is planning to move staff abroad or hire employees in the new territory, you cannot risk making mistakes operating in Panama’s payroll and income tax regime – it could cost you time and money.

In principle, foreign companies planning to hire staff in Panama and operate their payroll must establish a legal entity in the country. This is essential to deal with the General Revenue Department (Direccíon General de Ingresos, DGI), operating under the Ministry of Economy and Finance. The same requirement applies to complying with the Panamanian Social Security Fund (Caja de Seguro Social Panameña, CSS).

The preferred choices for opening a subsidiary in Panama are a Corporation/Joint Stock Company (Sociedad Anónima, SA) or a limited liability company (Sociedad de Responsabilidad Limitada, SRL), both of which provide protection against liabilities for owners and shareholders..

Employers must comply with restrictions imposed by the Labor Code (Código del Trabajo) that only 10% of the workforce can be foreign. This can be increased to 15% in the case of having specialists or trained technicians on the payroll.

Outsourcing payroll in Panama will streamline your operations by dealing with the following:

  • Employers must register employees with the social insurance authority (CSS) during the first week of employment. Both employers and employees contribute to the social security system.
  • Obtain or ensure the employee has a Unique Taxation Registration Number (Registro Único de Contribuyentes, RUC). This can be obtained from the government’s e-Tax website.
  • Complete the registration process at the DGI website.
  • Ensure full-time employees are correctly classified and not as independent contractors, as they are treated differently for taxation. Confusing the two can lead to fines and sanctions.
  • Employment contracts should always be in written form, in Spanish with translations if required.

Foreign companies intending to hire staff and run their payroll in Panama must establish a legal entity in the country and decide on the optimum business structure to suit their plans. The decision is typically made between two options – a Corporation/Joint Stock Company (Sociedad Anónima, SA) or a limited liability company (Sociedad de Responsabilidad Limitada, SRL), both of which provide protection for owners and shareholders against liabilities.

In the case of a limited liability company, registration and other requirements include:

  • Confirm choice of unique company name with Panama’s Public Registry, which lists all companies in the country
  • Obtain the company’s Unique Taxation Registration Number (Registro Único de Contribuyentes, RUC) from the General Revenue Department (Direccíon General de Ingresos, DGI) of the Ministry of Economy and Finance
  • Obtain the Notice of Operation Number (Panama Emprende System, MICI), different from the RUC
  • Provide Articles of Association of the parent company and minutes of the board meeting authorising setting up the subsidiary
  • Draft the subsidiary’s bylaws or constitution, giving details of shareholders who must be entered in the Public Registry, the business address and type of operation. If the bylaws are not in Spanish, there must be a translation
  • A minimum of two shareholders, at least one of which must be a Panama national or resident
  • Appoint the company’s legal representative, who must be a Panamanian
  • Have bylaws notarised to receive the company’s Public Deed and subsequently register the Deed with Public Registry
  • Register with the district municipality of the DGI and with the Ministry of Commerce (Ministerio de Comercio e Industrias)
  • Register with the Panamanian Social Security Fund (Caja de Seguro Social Panameña, CSS) of the Ministry of Labour

There is no minimum share capital requirement, although typically companies will initially deposit US$10,000 after opening their corporate bank account.

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