Panama Capital Gains Tax
The Panama Capital Gains Tax rate differs by the type of property being transferred. Only properties located in Panama are subject to the capital gains tax. The standard rate is 10% of the realized gain from the sale.
Transferring Shares of a Panama Corporation
Transfer of shares of a Panama corporation which obtains Panama source income requires the buyer to withhold 5% of the purchase price for the tax officials within 10 days. This is considered an advance of the seller’s capital gains tax. The seller can declare the 5% to be the total Panama capital gains tax or if the amount exceeds the normal 10% rate of the actual gain, the seller can claim a tax credit for the excess amount when the annual tax return is filed. A Panamanian entity whose exclusive income is obtained from non-Panama sources (outside of Panama) is exempt from the capital gains tax.
Transferring Shares of a Panama Corporation via Stock Exchange
Transfer of shares from a Panama corporation that are registered with the Panama National Securities Commission through a licensed stock exchange are exempt from paying the Panama capital gains tax even if the Panama corporation obtains Panama source income. Therefore, selling shares through the stock exchange is exempt from the Panama capital gains tax. Mergers and reorganization of Panama corporations registered with the Panama National Securities Commission and listed on the stock exchange involving transfer of shares are also exempt from the Panama capital gains tax if they meet specific requirements. Tender offers as defined by the securities regulations are not exempt and the purchaser must withhold 5% of the total purchase price as the Panama capital gains tax.
Panama Real Estate
Panama real property transfers involving persons considered to be in the business of selling and/or buying real estate are subject to the Panama capital gains tax. Such persons are considered real estate dealers who sell 10 or more properties within a year. Their Panama capital gains tax rate is 10% of the realized gain from the sale. Prior to the recording of the deed, the seller is required to pay the Panama tax officials 3% of the larger amount between the sales price and the recorded property value as an advance of the Panama capital gains tax. Similar to the sale of shares, the seller can claim this payment was in excess of the actual Panama capital gains tax on the realized gain and receive a tax credit on the difference. This tax credit can be used to pay other taxes, be converted into cash by the tax officials, or transferred to 3rd parties.
Since July 1, 2010, the Panama capital gains tax rate was reduced to 3.75% of the larger amount of the sales price or the registered value of the property.