Taxes in Panama: the complete guide for expats and residents
Discover the principle of territoriality, tax rates for individuals and companies, and the taxes you legally won’t pay as a tax resident.
Panama tax calculator
Enter your annual income by category to get an accurate estimate of your tax burden in Panama, based on the principle of territorial taxation.
✅ Calculation complete!
Want a personalized tax strategy?
This calculation is the first step. We can help you analyze your specific case to maximize your benefits.
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. This is the cornerstone that allows for legal and efficient tax optimization.
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 (“offshore”) 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 from local income is taxed at 10%. If they come from foreign or export income, the rate is 5%.
Annual Franchise Tax
Every Panamanian company, regardless of whether it operates or not, must pay an annual franchise tax of $300 USD to remain active, according to the Public Registry.
Looking to optimize your company’s tax structure?
The difference between a good tax structure and an exceptional one can mean thousands of dollars in annual savings. If you want to explore how a Panamanian company can benefit your international business, we can guide you.
Design your corporate strategy
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%, with rates of 10% for alcohol and 15% for tobacco.
🏠 Property Tax
Properties in Panama 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?
Panama’s territorial system offers unique advantages for different professional and investment profiles. Identify how you can maximize your benefits.
📈 The Global Investor
Your capital gains from the sale of foreign-source stocks, cryptocurrencies, and other financial assets are not subject to taxes in Panama. Your portfolio grows free of local tax burdens.
💻 The Digital Nomad / Remote Professional
If your clients are outside Panama and pay you into a foreign bank account, 100% of your income for professional services is tax-exempt. Work from Panama for the world, with tax efficiency.
🌴 The Retiree or Pensioner
Your pension or retirement income from foreign sources is not taxed in Panama. This, combined with the lower cost of living, significantly increases your purchasing power to enjoy your retirement.
Myths and realities of the Panamanian tax system
MYTH: “Panama is an illegal and non-transparent tax haven.”
REALITY: Panama is a jurisdiction with a territorial tax system, not a “tax haven.” It complies with international transparency standards and has signed numerous tax information exchange agreements to combat evasion.
MYTH: “As a tax resident in Panama, I pay no taxes at all.”
REALITY: This is false. You do pay taxes, but only on income generated WITHIN Panama. Any local economic activity is subject to the corresponding rates, which demonstrates the legitimacy of the system.
MYTH: “The system is only for large corporations.”
REALITY: The tax system greatly benefits individuals. Through the different paths to residency, professionals, investors, and retirees can access its advantages in a fully legal and structured way.
The taxes you WILL NOT pay in Panama
Just as important as knowing what taxes are paid is knowing which ones do not exist in Panamanian legislation, which represents a huge competitive advantage for protecting your assets.
- Foreign Source Income Tax: The biggest benefit. Your income from outside Panama is not taxed.
- Wealth Tax: Panama does not have a tax on your total net worth.
- Inheritance and Gift Tax: Inheritances and gifts to direct heirs (spouse, children, parents) are exempt from taxes.
Important note from our team
This article provides an overview of Panama’s tax system. Tax planning is a complex discipline that depends on your personal circumstances and the regulations of your home country (such as CFC rules). We provide the information for you to understand the landscape, and we strongly recommend a consultation with a qualified tax lawyer to design your personal structure. We can help you find the right professional.
Frequently asked questions about taxes
Do I have to declare my worldwide income in Panama?
No. As a tax resident in Panama, you are only obligated to declare income generated within Panama. Foreign source income is not declared or taxed in the country. However, it is crucial that you consult the tax obligations of your home country (CFC rules, etc.).
What is ITBMS?
ITBMS is the Tax on the Transfer of Movable Goods and Services, the equivalent of VAT. The general rate is 7%, one of the lowest in the region. It does not apply to basic foods, medicines, or health services.
Does Panama have double taxation treaties?
Yes, Panama has double taxation treaties with several countries. These agreements are key to avoid paying taxes twice on the same income and provide legal certainty for tax residents. You can consult the official list on the DGI website.
Want a tax structure tailored to you?
Understanding the theory is the first step. The next is applying it to your personal or business situation to maximize the benefits. Our team can help you map out the roadmap.
Request a Strategic Consultation