Quick answer — company setup in Latin America for foreigners. Panama, Paraguay and Costa Rica tax mainly local-source income, and Uruguay offers new residents a multi-year exemption on foreign passive income. Mexico, Colombia and Brazil tax residents on worldwide income and have higher corporate rates, so a company there mainly suits founders who live and invoice locally. Most countries allow 100% foreign ownership; Brazil requires a resident administrator.
Executive Summary & Context
Latin America offers two very different opportunities for location-independent founders. On one side are territorial-tax jurisdictions — Panama, Paraguay, Costa Rica and, for new residents' foreign income, Uruguay — where foreign-source income can be taxed lightly or not at all. On the other are the region's nomad hotspots — Mexico City, Medellín, São Paulo, Florianópolis — where life is vibrant but tax systems are worldwide and corporate rates are high.
Mixing them up is the most common mistake. Living for most of the year in Mexico or Colombia while owning a Panama company does not make you a Panama taxpayer: you can become tax resident where you live, and your company can be taxed there too. The right structure starts with where you will actually spend your time.
Who this guide is for
- Founders seeking a territorial tax base with a realistic residency route.
- Nomads spending long periods in Latin American hubs who need to understand residency and local company options.
- Founders building Latin American businesses with local clients or teams.
Who it is not for
It is not for retirees on pension-based visas, locally employed expats, or founders only travelling briefly in the region.
Not sure this branch fits you? Compare all situations in our guide to business setup for remote founders.
Legal Entities & Comparison Matrix
| Country | Typical entity | Tax system | Corporate tax | Residency route | Main catch |
|---|
| Panama | Sociedad Anónima (SA) | Territorial | 25% on Panama-source profits | Friendly Nations visa and investor visas | Bank due diligence; home-country CFC rules |
| Paraguay | Empresa por Acciones Simplificada (EAS) | Mainly territorial | 10% | Temporary then permanent residency | Proving tax residency to your home country |
| Uruguay | Sociedad por Acciones Simplificada (SAS) | Territorial for companies; holiday on foreign passive income for new residents | 25% | Residency with presence or investment | Higher costs; holiday covers passive, not business, income |
| Costa Rica | Sociedad de Responsabilidad Limitada (SRL) | Territorial | 30%, lower rates for small companies | Digital nomad visa and investor residency | Rules on some passive foreign income have been tightened |
| Mexico | S. de R.L. de C.V. or SAS | Worldwide for residents | 30% | Temporary residency | Centre-of-vital-interests residency test |
| Colombia | SAS | Worldwide for residents | 35% | Digital nomad visa and others | 183 days in any 365 makes you resident |
| Brazil | LTDA / SLU | Worldwide for residents | About 34% combined | Digital nomad visa and others | Resident administrator; complex taxes |
Read each country guide
Substance, Residence & Compliance Governance
Territorial does not mean tax-free everywhere
A territorial system only exempts income that is foreign-source under that country's rules. If you live and work in another country, that country may tax you and treat your company as managed there. Your previous home country's CFC rules may also catch low-taxed company profits.
Residency tests vary
- Colombia: 183 days in any rolling 365-day period.
- Mexico: having a home in Mexico, and if you also have one elsewhere, your centre of vital interests.
- Brazil: 183 days in 12 months for temporary visa holders, or immediately with permanent residence.
- Panama, Paraguay, Costa Rica, Uruguay: day counts combined with home or investment tests.
Banking and AML/KYC
Latin American banks apply strict due diligence to foreign-owned companies, especially in Panama. Expect requests for references, source of funds and proof of local activity.
Setup Costs & Economic Model
| Country | Typical setup cost | Typical yearly running cost | Biggest recurring items |
|---|
| Panama | US$1,500–3,000 | US$1,000–3,000 | Registered agent, annual franchise tax, accounting |
| Paraguay | US$1,000–3,000 | US$1,000–2,500 | Accountant, legal address |
| Uruguay | US$1,500–4,000 | US$2,000–5,000 | Accountant, social security |
| Costa Rica | US$1,000–3,000 | US$1,500–4,000 | Legal representative, annual corporate tax, accounting |
| Mexico | US$1,500–4,000 | US$2,000–6,000 | Accountant, e-invoicing |
| Colombia | US$800–2,500 | US$1,500–4,000 | Accountant, chamber renewal |
| Brazil | US$1,500–5,000 | US$3,000–8,000 | Accountant, resident administrator, complex filings |
Ranges are indicative for a small company.
The economic model
- Territorial hubs suit founders who will live there and serve clients abroad: foreign-source income may be untaxed or lightly taxed, but only if you are truly resident there and your previous country lets you go.
- Worldwide-tax hubs suit founders who live there and serve local clients: corporate tax is higher, but you may need a local company anyway.
- No local company can be right for nomads on a visa who work for foreign clients — as long as they don't stay long enough to become resident.
Step-by-Step Formation & Business Banking
- Decide where you will spend most of your time over the next two years.
- Check the residency test in that country and in any country you spend long periods in.
- Choose between a territorial base and a local company where you live.
- Plan your exit from your previous country, including proof of new residency.
- Incorporate following the country guide and register with the tax authority.
- Open banking, often requiring an in-person visit and detailed KYC.
The Latin America Comparison Guide sets out tax systems, residency routes and costs side by side — get it when you check your fit with Heavnn.
Frequently Asked Questions (FAQ)
Which Latin American countries have territorial taxation?
Panama, Paraguay and Costa Rica tax mainly local-source income. Uruguay taxes companies on a territorial basis and offers new residents a multi-year exemption on foreign passive income.
Can I live in Mexico or Colombia and use a Panama company?
You can own one, but if you live in Mexico or Colombia long enough to become resident, those countries can tax your income, and may consider the company managed there. Panama's territorial system does not protect you from that.
Do Latin American countries allow 100% foreign ownership?
Generally yes, in most sectors. Brazil requires a resident administrator for an LTDA, and Mexico's S. de R.L. needs at least two partners.
What is the easiest residency in Latin America for founders?
Paraguay and Panama are often cited for accessible residency routes. Requirements change, so confirm current conditions.
Are corporate taxes high in Latin America?
They vary: Paraguay is 10%, Panama 25% on local profits, Mexico 30%, Colombia 35% and Brazil about 34% combined.
Check Your Fit in Latin America
In Latin America, where you live decides more than where you incorporate. Heavnn checks your residency before you choose.
- Get the Latin America Comparison Guide for tax systems, residency routes and costs.
- Then find out whether your stays make you tax resident before you incorporate.
Find the right setup with Heavnn →
This guide is general information, not tax or legal advice. Rates and costs are indicative as of October 2026.
