Taxes in Panama: the complete guide for expats and residents in
Discover the principle of territoriality, tax rates for individuals and companies, and the taxes you legally won’t pay as a tax resident.
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Enter your annual income by category to get an accurate estimate of your tax burden in Panama, based on the principle of territorial taxation.
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Contact an expertDisclaimer: This calculator is for informational purposes only and does not constitute tax or legal advice. Calculations are based on standard tax rates and do not consider specific deductions or credits. The EUR/USD exchange rate used is approximate.
Panama tax guide
The pillar of the system: territorial taxation
Panama’s appeal as a global financial center lies in a simple yet incredibly powerful principle: territorial taxation. Unlike most countries that tax the worldwide income of their residents, Panama only applies taxes to income generated from economic activities carried out within its borders. Last update: .
Panamanian source income
This is income generated from activities within Panama. It is subject to taxes.
- Salary from a local company
- Sale of property in Panama
- Business with local clients
Foreign source income
This is income generated outside of Panama. It is 100% tax-exempt.
- Crypto/Stock profits
- Consulting for clients outside PA
- E-commerce with no local operation
Taxes for legal entities (companies)
Panamanian companies that generate local source income are subject to a flat rate, while those that only operate abroad enjoy a full exemption.
Income Tax (ISR)
The general rate for companies with Panamanian source income is 25% on net taxable income. It is one of the most competitive corporate rates in the region.
Dividend Tax
The distribution of dividends is taxed at 5% if they come from local source income (paid to nominative shares), foreign source, or export income. The rate increases to 10% if local source dividends are paid to bearer shares.
Annual Franchise Tax
Every Panamanian company must pay an annual franchise tax to remain active. The first payment upon registration is $250 USD, and subsequent annual payments are $300 USD.
Maintenance and Legal Compliance
Law 254 of 2021 requires all companies to maintain accounting records and provide a copy of them annually to their Resident Agent. This is a mandatory requirement to avoid fines and the possible suspension of the company.
Inquiry about Accounting Records
Other important taxes you should know
📈 ITBMS (VAT)
The Tax on the Transfer of Movable Goods and Services (ITBMS) is Panama’s VAT. The general rate is 7%.
🏠 Property Tax
Properties are subject to an annual tax. The main residence is exempt up to $120,000 USD and enjoys reduced rates on higher brackets.
💰 Capital Gains
The sale of Panamanian source real estate or securities is subject to a capital gains tax, which is generally a flat rate of 10%.
Tax profiles: how does it benefit you?
📈 The Global Investor
Your capital gains from the sale of foreign-source financial assets are not subject to taxes in Panama. Your portfolio grows free of local tax burdens.
💻 The Digital Nomad
If your clients are outside Panama, 100% of your income for professional services is tax-exempt. Work for the world with maximum tax efficiency.
🌴 The Retiree
Your pension from foreign sources is not taxed. This, combined with a competitive cost of living compared to the US or Europe, significantly increases your purchasing power.
Myths and realities of the Panamanian tax system
MYTH: “Panama is an illegal and non-transparent tax haven.”
REALITY: Panama is committed to tax transparency and has implemented important reforms, signing numerous information exchange agreements. While it continues to work on fully complying with international standards and exiting monitoring lists, its legal framework has adapted to cooperate globally.
MYTH: “As a tax resident in Panama, I pay no taxes at all.”
REALITY: False. Taxes are paid on income generated WITHIN Panama. Any local economic activity is subject to the corresponding rates, which validates the legitimacy of the territorial system.
The taxes you WILL NOT pay in Panama
- Foreign Source Income Tax: The greatest benefit of the territorial system.
- Wealth Tax: There is no tax on your total net worth.
- Inheritance and Gift Tax: Exempt for direct heirs (spouse, children, parents).
Frequently asked questions about taxes
Do I have to declare my worldwide income in Panama?
No. As a tax resident, you only declare income generated in Panama. Foreign income is not reported or taxed locally, although you must monitor the laws of your home country.
Does Panama have double taxation treaties?
Yes, Panama has treaties with several countries to avoid double taxation and provide legal certainty. You can consult the updated list on the DGI website.
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