About Panama Taxation

Panama is one of the best countries in the world when it comes to offshore business and investments residing in a fast paced and growing third world country.

Panama income tax

Panama Home and Liability for Taxation

Any person is considered resident if he is current in Panama for more than 180 days in any tax year Panama makes no distinction between foreigners and Panamanian people. Income tax is based on Panama-sourced income only. With “Panama-Source” we mean services created or sold out of Panama. For any Panamanian company employee paid not currently residing in Panama no tax applies. Residence has to be recognised by the Government.

Definition of income: Income of Panamanian sources following deduction of allowable bills, losses and ignoring exempt earnings. Earnings includes income from work and from rendering independent private services, earnings from company activities, and investment earnings.

Employment income in respect of work carried out in Panama is taxable regardless of exactly where the cost is made or obtained. Dividends aren't included in income.

Medical expenses incurred in Panama are deductible  and a few charitable donations.

2009 Panama tax rate

Up to $9,500, tax free
->$12,000 20.5%
->$15,000 21.5%
->$20,000 23%
->$30,000 24%
$30,000 -> 27%

Entrepreneurs are topic to an alternative minimum tax of 1.4% of business income.

Social Security Taxes

An employee in Panama will pay social security at 11.5% of salaries and salary, and on top of that 0.75%  in special fee (total contributed 11.75%). The employee itself pays 8%.

Retirement is currently 65 years old for men and 60 years for women.

Panama Real Estate Taxes

There are currently three types of taxes for real estate owners and investors. Annual taxes on value of real estate, capital gains tax on profits (when a sale occurred) and transfer tax (also on sale).

Annual tax: (based upon valuation of property/real estate)
0.70% $30,000->$50,000+
0.90% $50,000->$75,000+
1.00% everything above

Capital gains tax:
3% tax is withheld in advance payments against capital gains tax.

Transfer of real estate:
Transfer of real estate is taxed at 2%. Payable by the seller and credited against capital gains tax.

Panama VAT (Value added tax)

The Panama VAT is tax on consumer goods paid by the seller to the government. When importing to Panama VAT is paid by the importer.

Taxed value:
7% of goods value (10% if alcohol, 15% tobacco) plus customs value.

Any export out of Panama are VAT free.

Special tax (excise tax) are imposed on some products and services at 5%. Excised tax items are: cars, cable tv, cellphones, airfares, motorcycles.