Puerto Rico or Panama: where should your business be based?
Panama ranks higher in the index, =15 against 22. Which suits you depends on where the owners live, what the company is for and how it will be run.
Pillar by pillar
Doing business, side by side
Tax
The normal tax is 18.5% plus a surtax of up to 19%, giving a top rate of 37.5%. An Act 60 export services decree fixes the rate at 4%, with dividends from that income exempt. There is no VAT; the sales and use tax is 11.5%.
Corporate income tax is 25% on Panamanian-source profit only. Income from business conducted outside Panama is exempt, though a 5% dividend tax can apply when it is paid out. ITBMS is 7%.
Set-up
A stock corporation is formed online with the Department of State for $150, or an LLC for $250, with no set waiting period. A corporation files a $150 annual report by 15 April; an LLC pays a $150 annual fee.
The deed is notarised and recorded at the Registro Público in about 5 working days. A first tasa única of US$250 is paid at registration, then US$300 a year.
On the ground
The certificate must name a designated office and a resident agent in Puerto Rico. Directors need not live there, and audited accounts are needed once the volume of business passes $10 million.
Every sociedad anónima needs a resident agent who is a Panamanian lawyer or law firm. Directors need not live in Panama, and an Aviso de Operación is needed only to trade locally.
Ownership
There is no beneficial ownership register. FinCEN's March 2025 interim rule removed federal beneficial ownership reporting for companies formed in the US, including Puerto Rico.
Resident agents file beneficial owners in a private register run by the Superintendency of Non-Financial Entities under Law 129 of 2020. Only competent authorities can see it.
Residence
US citizens can move to Puerto Rico freely. Foreign nationals need US immigration status, such as an EB-5 green card from $800,000 in a targeted employment area or $1,050,000 elsewhere.
Permanent residence is available from US$300,000 in a new property, or US$500,000 in a resale property, securities or a fixed deposit at a state bank.
Living and working
Currency
US dollar.
The balboa, at par with the US dollar. US dollar notes are used for everyday payments.
Time zone
UTC-4 all year, with no daylight saving.
UTC-5 all year, with no daylight saving.
Personal tax
Puerto Rico income tax rises to 33% above $61,500 of net taxable income. Long-term capital gains and dividends are taxed at 15%.
Residents pay 0% up to US$11,000, 15% up to US$50,000 and 25% above that, on Panamanian-source income only. Foreign income is not taxed.
Flights
San Juan's Luis Munoz Marin airport has nonstop flights to about 60 destinations, mostly on the US mainland, plus Madrid, Bogota and Panama City.
Tocumen International Airport, the hub of Copa Airlines, has nonstop flights to about 92 destinations in 35 countries.
Puerto Rico vs Panama: common questions
Puerto Rico: The normal tax is 18.5% plus a surtax of up to 19%, giving a top rate of 37.5%. An Act 60 export services decree fixes the rate at 4%, with dividends from that income exempt. There is no VAT; the sales and use tax is 11.5%. Panama: Corporate income tax is 25% on Panamanian-source profit only. Income from business conducted outside Panama is exempt, though a 5% dividend tax can apply when it is paid out. ITBMS is 7%.
Puerto Rico: A stock corporation is formed online with the Department of State for $150, or an LLC for $250, with no set waiting period. A corporation files a $150 annual report by 15 April; an LLC pays a $150 annual fee. Panama: The deed is notarised and recorded at the Registro Público in about 5 working days. A first tasa única of US$250 is paid at registration, then US$300 a year.
Puerto Rico: The certificate must name a designated office and a resident agent in Puerto Rico. Directors need not live there, and audited accounts are needed once the volume of business passes $10 million. Panama: Every sociedad anónima needs a resident agent who is a Panamanian lawyer or law firm. Directors need not live in Panama, and an Aviso de Operación is needed only to trade locally.
Puerto Rico: There is no beneficial ownership register. FinCEN's March 2025 interim rule removed federal beneficial ownership reporting for companies formed in the US, including Puerto Rico. Panama: Resident agents file beneficial owners in a private register run by the Superintendency of Non-Financial Entities under Law 129 of 2020. Only competent authorities can see it.
Puerto Rico: US citizens can move to Puerto Rico freely. Foreign nationals need US immigration status, such as an EB-5 green card from $800,000 in a targeted employment area or $1,050,000 elsewhere. Panama: Permanent residence is available from US$300,000 in a new property, or US$500,000 in a resale property, securities or a fixed deposit at a state bank.
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