International Relocation Firm can assist clients with any Panama tax related advisory, as we are qualified Panamanian attorneys, and we have specialists available for consultations in Panama tax laws.
We also have ongoing associations with Spanish or English speaking Panama Certified Public Accountants (Panama CPA).
Our law firm provides in-depth analysis of our clients’ individual tax situations with solutions for Panama taxes for both individuals and Panama corporations. These Panama tax advisory services are also available for foreign corporations considering doing business in Panama.
Our Panama tax services begin with learning about you and your company’s products and services, and the type of structure and legal entities involved. Whether your company will solely be selling its products and services to customers and clients residing outside of Panama, or to Panamanian citizens, residents and tourists, will make a difference concerning your company’s Panama tax liabilities. Knowing these facts will make it easier for us to recommend the right types of resources to help you and your tax liabilities.
Territorial Income Tax System
Panama applies a territorial income tax system, meaning only income generated within Panama is subject to taxation. Foreign-sourced income is exempt from Panama’s income tax laws. Corporate Income Tax in Panama (Legal Entities)
Corporate Income Tax in Panama (Legal Entities)
Taxable income includes:
- Sales revenue
- Service income
- Commissions
- Interest
- Rental income earned within Panama
Exempt income: Earnings from international business activities or specific sectors like call centers and offshore commerce are not subject to income tax.
Corporate income tax rate: 25% standard rate for most businesses
Deductions and calculations:
- Businesses can deduct operational expenses that are properly documented within the fiscal year.
- Companies earning over USD $1.5 million annually must pay the higher of:
- The traditional corporate rate
- Or 4.67% of gross income
Monthly advance payments – MITA:
- Since 2011, businesses must make monthly advance tax payments of 1% of cumulative taxable income, due by the 15th of each month.
- Industry-specific rules may apply.
- These prepayments are credited against the final annual tax due.
Loss carry-forwards:
- Businesses can carry forward tax losses for up to 5 years, applying no more than 20% of total annual losses per year.
- Special rules may apply to industries like mining.
Annual tax filing:
- Tax returns are due within 3 months of the end of the fiscal year.
- Most companies use the calendar year but can request a different fiscal year.
Learn more about Panama Corporate taxes.
Personal Income Tax in Panama (Individuals)
Who pays and at what rates?
- Annual income below USD $11,000 → tax-exempt
- USD $11,000 – $50,000 → taxed at 15%
- Over USD $50,000 → taxed at 25%
Allowed deductions include:
- Married couples filing jointly: USD $800
- Mortgage interest on primary residence: up to USD $15,000
- Student loan interest
- Health insurance premiums
- Pension plan contributions: up to 10% of gross income or USD $15,000 (whichever is lower)
Foreign residents:
- Individuals residing in Panama for more than 183 days in a year are considered tax residents.
- However, they are taxed only on Panama-source income; foreign earnings remain exempt.
Filing deadlines:
- Personal tax returns must be submitted by March 15 each year.
- If all income comes from salary and taxes are already withheld by the employer, filing may not be required.
Capital Gains Tax & Dividends
Capital gains:
- Real estate sales in Panama: taxed at 10%
- Transfer of local company shares: subject to a 5% withholding by the buyer (applied as a tax credit)
- Publicly traded shares: generally exempt from capital gains tax
Dividends:
- Bearer shares: dividends taxed at 20%
- Registered shares: dividends generally exempt at the personal level; the company handles applicable withholding
Learn more about Panama Individual income taxes.
More about Panama Taxes
The different types of taxes in Panama are explained in more detail below.