Panama has a territorial tax system, in which the Panamanian government only taxes Panamanian corporations on net income that is derived from sources within the territory of Panama. This means that if your Panamanian corporations products or services are consumed by Panamanian residents or other Panamanian companies, within the territory of Panama, then your Panamanian company is obligated to file tax declarations in Panama, and pay taxes on net income (after deductible expenses) in Panama. The corporate tax rate in Panama is currently 25% of net income, plus 10% dividend withholding tax.
Otherwise, if there are no products or services sold to Panamanian residents or other Panamanian corporations within the territory of Panama, then there is no obligation to file a tax declaration in Panama, or pay income taxes in Panama. Therefore the Panama corporation tax structure provides a great fiscal platform for doing international business.
Non-resident Panama Corporations offer some of the following tax advantages:
- No Income Tax: Panama corporations do not pay taxes on income derived from sources outside of Panama.
- No Capital Gains Tax: Panama corporations do not pay capital gains taxes on gains resulting from the purchase & sale of securities transacted outside of Panama (for example, the purchase and sale of publicly traded securities on non-Panamanian stock markets).
- No Interest Income Tax: Panama corporations do not pay taxes on any bank interest income earned either inside or outside of Panama (for example, there is no Panamanian tax on interest earned from savings accounts or certificates of deposit in Panama banks).
- No sales tax: Panama corporations do not pay taxes on product or service sales that are conducted outside of Panama.
- No Tax on Issuance of Corporate Shares: Panama corporations do not pay taxes on issuance of shares.
- No dividend tax to shareholders: Shareholders of non-resident Panama corporations do not pay taxes on dividends, for income generated from sources outside of Panama.
Flat Annual Panama Corporate Franchise Tax
The only tax paid by non-resident Panama Corporations is the flat annual corporate franchise tax of US$300 (referred to as the “tasa unica”).
According to the Law, the corporate franchise tax payment deadlines are as follows;
|Incorporation Date:||Tax Payment Deadline:|
|From 1 of January to June 30:||July 15|
|From 1 of July to December 31:||January 15|
Late Payment Penalty:
If the flat annual corporate franchise tax (“tasa unica”) is not paid on or before the due dates mentioned above, the entity will be charged a late penalty of US$50 per year that the tax is not paid.
Second Late Payment Penalty:
If the flat annual corporate franchise tax (“tasa unica”) is not paid after two “deadline” periods, the entity will be charged a second late penalty of US$300 per year for every additional “deadline” period missed thereafter.
The corporate franchise taxes and late penalties mentioned above apply to all “entities” (Panama corporations, Panama foundations, or Panama trusts) registered at the public registry of Panama.
Disclaimer: *The Panama corporation tax information contained on this page is for informational purposes only and should not be relied upon for any tax consulting or otherwise any tax advisory services. A professional tax advisor should be hired for any and all tax advisory or tax consultations on taxes or related issues involving tax planning. The law firm International Relocation Firm shall not be held liable for any information contained within this website that may be out dated, incorrect, or otherwise misused by the reader in any way for tax abuse. The reader takes full responsibility for all decisions relating to structuring his or her business affairs.
NOTICE TO US PERSONS: U.S. Taxpayers (citizens or residents of the United States of America) MUST Report Foreign Income and Disclose Foreign Financial Accounts and Entities.