For those considering individual business activities in Panama in 2025, this article provides an overview of the sole proprietorship option, often referred to as Persona Natural Comerciante, and the associated requirements and tax implications.
Availability of Sole Proprietorship Status in Panama
Sole proprietorship, or Persona Natural Comerciante (Natural Person Merchant), is officially recognized and widely used in Panama. This status allows individuals to conduct business under their own name without forming a separate legal entity. It is accessible to Panamanian citizens and residents seeking to operate independently as freelancers, consultants, or small business owners.
Registration Process
To operate as a Persona Natural Comerciante in Panama, individuals must complete the following registration steps:
- Register as a merchant with the Registro Público de Panamá.
- Register for tax purposes with the Dirección General de Ingresos (DGI).
- Obtain any sector-specific or municipal licenses depending on the business activity.
- Enroll for social security (where applicable).
Taxation for Sole Proprietors
Sole proprietors in Panama are subject to the general income tax regime for individuals. Income is taxed on a progressive scale, with tax rates defined as follows for the year 2025:
| Annual Net Income (USD) | Income Tax Rate (%) |
|---|---|
| $0 – $11,000 | 0% |
| $11,000 – $50,000 | 15% |
| Above $50,000 | 25% |
If annual turnover exceeds $36,000, registration for and collection of Panama’s value-added tax (ITBMS) is mandatory. As of 2025, the ITBMS standard rate is 7%. Social security contributions may also apply to individuals operating under this status.
| Tax / Contribution Type | Threshold / Rate (USD / %) |
|---|---|
| Income Tax: Progressive | 0% to 25% (based on net income) |
| ITBMS (VAT) | 7% (mandatory if turnover > $36,000/year) |
| Social Security | Applicable (specific rates depend on income and sector) |
Business Activities Allowed
The Persona Natural Comerciante status is broadly used by:
- Freelancers
- Consultants
- Small business owners (e.g., retail, professional services)
This structure is ideal for individuals who do not require the complexity or separation of a corporate entity and prefer simpler administrative requirements.
Pro Tips for Operating as a Sole Proprietor in Panama
- Register early with both the public registry and tax authority to avoid delays or penalties.
- Monitor your annual turnover carefully—if you approach $36,000 in sales, ensure timely ITBMS (VAT) registration.
- Consider consulting with an accountant familiar with Panamanian small business regulations to optimize deductions and stay compliant.
- Keep thorough records of income, expenses, and tax payments, as audits for sole proprietors are possible under Panamanian law.
- Review municipal licensing requirements, which can vary depending on your location and business type.
Official Sources for More Information
- Dirección General de Ingresos (DGI)
- Panama Emprende
- Registro Público de Panamá
- Ministerio de Comercio e Industrias
In summary, Panama’s Persona Natural Comerciante status offers a straightforward path for individuals to engage in business activity with moderate administrative requirements. The progressive personal tax rates, ITBMS obligations for higher turnover, and routine social security contributions are central components to plan for in 2025. Keeping careful records and ensuring compliance with both national and municipal requirements will help ensure smooth operations as a sole proprietor in Panama.