Panama Company Setup for Canadians, With the Canadian Tax Side Covered
A Panama company can suit regional trade or holding activity in Latin America. For a Canadian owner it also brings Canadian rules and reporting. Bestax arranges the setup with a Panama resident agent and plans how Canada will treat the company before it is formed.
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Who Considers a Panama Company
Canadians usually look at Panama for trade in the region, as a holding company for regional operations, or for a private interest foundation. Each can work, but only when the Canadian tax position is understood and the company has a real role.
- Canadian businesses trading with suppliers or customers across Central and South America.
- Owners who want a regional holding company for operations outside Canada.
- Families considering a Panama private interest foundation to hold assets.
- Canadians planning to live in Panama for part of the year who want to understand their residency.
- Owners of an existing Panama company whose Canadian reporting has never been filed.
- Anyone told a Panama company is tax-free who wants to check what that means in Canada.
Panama generally taxes only income from Panama sources. That does not change Canada’s rules: a Canadian resident is taxed on worldwide income, and a Panama company owned from Canada still has Canadian reporting.
Already operating across borders? See our Cross-Border & International Tax service for the yearly filings in each country.
What Our Panama Company Setup Covers
Formation in Panama and reporting in Canada are planned together, so the structure holds up in both countries.
- A review of whether a sociedad anónima, a foundation or another structure fits what you want to do.
- Company or foundation formation through our international business setup team and a licensed Panama resident agent.
- Guidance on where the company will be managed and controlled, and how to keep it that way.
- Canadian reporting for the company: Form T1134 for a foreign affiliate and Form T1135 where it applies.
- A FAPI review of the company’s income, so passive or related-party income is reported in Canada when due.
- Bookkeeping and record keeping set up so both Panama and Canadian requirements can be met each year.
How Canada Treats a Panama Company You Own
Panama uses a territorial system: it generally taxes only income earned from sources in Panama. A Canadian resident, however, is taxed in Canada on income from everywhere, and the Panama company’s income can reach the Canadian owner in several ways.
The most important is residency. Under Canadian law a company is resident where its central management and control is exercised. If the key decisions are made in Canada, the CRA can treat the Panama company as resident in Canada and tax all of its income here.
A Canadian resident who owns a foreign affiliate generally files Form T1134 for it each year.
Form T1135 applies when specified foreign property costs more than $100,000 at any time in the year.
Passive income of a controlled foreign affiliate, and some income from trading with related Canadian parties, can be taxed in Canada each year as FAPI.
A company run from Canada can be resident in Canada, whatever its country of formation.
A Panama company works for a Canadian owner when it has a genuine business role, is managed where it says it is, and is reported in Canada every year. We plan for all three before it is formed.
Panama Structures and Their Canadian Reporting
The structure you choose sets which Canadian rules apply. Each needs its own review before formation.
| Structure | Typical use | Canadian filing timing | Canadian points to review |
|---|---|---|---|
| Sociedad anónima owned by an individual | Regional trade or services | Form T1134 each year after the company’s year-end | FAPI, central management and control, dividends taxed in Canada |
| Sociedad anónima owned by a Canadian corporation | Regional subsidiary or holding company | Form T1134 each year, with the parent’s T2 | FAPI, surplus rules on dividends, transfer pricing with the parent |
| Private interest foundation | Holding family or investment assets | Depends on how Canada classifies it | Possible treatment as a trust, and the non-resident trust rules |
| Other foreign property held personally | Accounts or investments outside Canada | Form T1135 with your return | Whether cost exceeds $100,000 at any time in the year |
A foundation is not a company under Canadian law, and its classification depends on its terms. Transfers to and distributions from a non-resident trust have their own forms, so we review the foundation’s documents before you settle it.
What We Need to Plan Your Panama Company
The resident agent will ask for identification and due diligence documents. The Canadian planning needs a clear picture of who will own and run the company and what it will earn.
Panama banks often carry out their own due diligence and may ask to meet you, so we look at banking requirements early.
- A valid passport and proof of address for each owner, director or foundation council member.
- A short description of the business, its customers and where decisions will be made.
- Who will own the company: you personally, your Canadian corporation or another entity.
- Bank or professional references, if the resident agent or bank asks for them.
- For an existing company: its public deed, registry extract and past financial records.
- Your latest Canadian return, and your corporation’s T2 if it will be the owner.
Our Panama Company Setup Process
Review the purpose
We discuss what the company is for and whether Panama, or a structure in Canada, serves it better.
Plan the Canadian side
We set out residency, FAPI and reporting before anything is formed, so there are no surprises later.
Form through a resident agent
Our international business setup team arranges formation through a licensed Panama resident agent.
Banking and records
We support the bank application and set up bookkeeping that meets both countries’ requirements.
Report in Canada
We prepare the T1134, T1135 and FAPI calculations for each Canadian year-end.
Stay compliant
We review the company each year so its management, substance and records stay where they should be.
Why Canadians Choose Bestax for a Panama Company
A presence in Panama
Bestax works with clients across Canada, the USA, the UAE and Panama.
Canadian rules first
We explain how Canada will treat the company before you form it, not after the first year-end.
Measured advice
We tell you plainly when a Panama company does not fit what you are trying to achieve.
One point of contact
Formation, records and Canadian reporting are coordinated by one firm.
Lawyers where needed
Legal documents are prepared by the Panama resident agent, and we say when you need Canadian legal counsel too.
Related Bestax Services
Cross-Border & International Tax for the yearly filings in each country once the company is running.
Transfer Pricing when a Canadian company and its Panama affiliate trade with each other.
T2 Corporate Tax Returns for the Canadian corporation that owns the Panama company.
UAE Business Setup for Canadians comparing Panama with a company in the UAE.
What Our Clients Say
I had a wonderful experiance with bestax while setting up my company. They made everything so simple and took care of all the paper work. Very efficient team for company registration in Mississauga!
Google review 1 of 4: Jason Duffy
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Frequently Asked Questions
No. Panama generally taxes only Panama-source income, but Canada taxes its residents on worldwide income. Dividends you receive are taxable in Canada, passive income can be taxed each year as FAPI, and the company must be reported on Form T1134.
Yes. A company is resident where its central management and control is exercised. If the real decisions are made by you in Canada, the CRA can treat the company as resident in Canada and tax all of its income here.
Usually not. Formation is done through a licensed Panama resident agent, as Panama law requires. Some banks ask to meet you before opening an account, so we check banking requirements early.
It depends on the foundation’s terms. It may be treated as a trust for Canadian purposes, which brings in the non-resident trust rules and their reporting. We review the documents with you before the foundation is set up.
Panama requires companies to keep accounting records, and the CRA expects you to support the T1134, FAPI and any dividends with the company’s books. We set up bookkeeping that serves both from the start.
No. Legal documents are prepared by the Panama resident agent, and Canadian legal counsel should advise on any trust, estate or shareholder arrangements. We handle the accounting and Canadian tax side alongside them.