Why so many ships fly the Panama flag
Panama runs an open registry: any person or company of any nationality can register a ship, with no domicile in Panama.
Income from international maritime trade of Panamanian ships is not taxed in Panama, registrations can be handled at merchant marine consulates around the world, and the law gives discounts to fleets and to ships with a clean inspection record.
Open to any owner
Any person, individual or company, can register vessels it owns in the Panamanian Merchant Marine, with no special requirement of nationality or domicile. The owner only needs a resident agent who is a Panamanian lawyer.
Source: Law 57 of 2008, articles 3 and 102
Tax on shipping income
Income from the international maritime trade of merchant ships registered in Panama is not subject to income tax, even if the contracts are made in Panama. Activities in Panamanian waters are taxed. The 2026 economic substance law has a specific exclusion for entities that operate Panamanian ships and meet its conditions.
Source: Tax Code, article 708, literal e, as worded by Law 57 of 2008, article 172; Law 526 of 2026, article 707-M
Registering from abroad
Provisional registration and the preliminary recording of titles and mortgages can be done at Panamanian merchant marine consulates abroad, so a ship can enter the registry without calling at Panama.
Source: Merchant Marine Circular MMC-3; Law 57 of 2008, articles 109 and 110
Discounts written into the law
- Groups with 5 to 15, 16 to 50 or more than 51 ships registered when the law was enacted get 20, 35 or 60 percent off the registration fee, annual tax and consular fee of the year a new ship is registered.
- Three or more ships of a group registered together get 25, 40 or 60 percent according to tonnage.
- Ships with no port state detention in 24 months get 15 percent off the next year’s annual tax and consular fee.
Source: Law 57 of 2008, articles 149 to 152
Ship mortgages
A ship mortgage can be written in any language and recorded first on a preliminary basis, with full effect for six months. It ranks ahead of State claims for fees and taxes.
Source: Law 55 of 2008, articles 244, 252 and 260
Questions people ask
Is Panama a flag of convenience?
Panama runs an open registry: the law lets any owner of any nationality register a ship without living in Panama.
Do I have to be Panamanian to fly the Panama flag?
No. Nationality and domicile are not required.
Does a Panama-flagged ship pay Panamanian income tax?
Not on income from international maritime trade. Activities in Panamanian waters are taxed.
What the law does not say
- Whether the sale of a Panamanian ship is taxed in Panama.
- How the 2026 economic substance law applies to a holding company that owns but does not operate the ship.
Official sources
Last verified: October 28, 2026
Header photo: David Brossard, CC BY-SA 2.0, cropped.
Registering a vessel in Panama?
Book a free 15-minute call with a Panamanian lawyer. We will tell you what your ship needs and what to prepare.