Panama has a territorial principle of taxation: only income generated in Panama is taxed.
The tax rates are progressive:
Gains from the sale of assets are taxed at the rate of 10%.
When selling securities, the buyer is subject to withholding tax on the transaction amount at the rate of 5%, this tax can then be credited against income tax (or refunded).
When selling immovable property, the buyer is subject to withholding tax on the transaction amount (or cadastral value, if higher) at the rate of 3%, this tax can then be credited against income tax (or refunded).
For certain categories of taxpayers (developers, etc.), the rates are different.
Immovable property transactions are also usually subject to immovable property transfer tax at the rate of 2%.
Panama has a territorial principle of taxation: only income generated in Panama is taxed.
The corporate income tax rate is 25%. If the taxable profit of the company exceeds USD 1 500 000, then it pays either normal corporate income tax or 4.67% of gross taxable income, whichever is higher.
At the municipal level, a local tax is levied on gross income. The tax depends on the type of activity, but usually does not exceed USD 2 000 per month for each activity.
Dividends from Panamanian sources are subject to withholding tax, generally at the rate of 10% (no corporate income tax is payable when dividends are received). There are various exceptions. If a company has both taxable and non-taxable income, it can potentially apply a 5% withholding tax rate in relation to dividends. If the company has bearer shares, then the tax rate rises to 20%. If a company distributes less than 40% of its after-tax profit, then it must pay in advance a dividend withholding tax on the difference between 40% of its after-tax profit and the distributed dividend.
Gains from the sale of assets are taxed at the rate of 10%.
When selling securities, the buyer is subject to withholding tax on the transaction amount at the rate of 5%, this tax can then be credited against corporate income tax (or refunded). When selling immovable property, the buyer is subject to withholding tax on the transaction amount (or cadastral value, if higher) at the rate of 3%, this tax can then be credited against corporate income tax (or refunded).
For certain categories of taxpayers (developers, etc.), the rates are different.
Immovable property transactions are also usually subject to immovable property transfer tax at the rate of 2%.
None.
The standard withholding tax rate for dividends is 10%, in some cases the rate of 5% or 20% applies.
Royalties, service fees and interest are taxed at the rate of 12.5%. With royalties and service fees, this tax may be avoided if the paying company does not deduct them as expenses for corporate income tax purposes.
This tax is similar to VAT.
The standard tax rate is 7%.
Some goods and services are taxed at the rates of 10% and 15%.
Social security contributions are payable on employment remuneration at the rate of 9.75% by employees and 12,25% by employers.
In addition, a contribution to educational insurance is payable on employment remuneration at the rate of 1,25% by employees and at the rate of 1.5% by employers.
Employers also pay professional risk insurance premiums, the premium rates vary by industry and range from 0,33% to 6,25%.
This annual tax is levied at the rate of 2% on the net assets of the company.
In general, the tax cannot be less than USD 100 and more than USD 60 000.
Property owners pay an annual immovable property tax at rates up to 1%.
Some commercial contracts are subject of USD 0,10 per USD 100 (or fraction there of) commercial levy.
Panama has entered into 17 Double Tax Treaties (DTT) and one Tax Information Exchange Agreement (TIEA) with the following jurisdictions:
17 DTTs: Barbados, Czech Republic, France, Ireland, Israel, Italy, Korea (Republic of), Luxembourg, Mexico, Netherlands, Portugal, Qatar, Singapore, Spain, United Arab Emirates, United Kingdom, Viet nam.
1 TIEAs: United States.
Panama has signed and ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The MLI entered into force for Panama on March 1, 2021.
On January 15, 2018, Panama signed the Multilateral Competent Authorities Agreement on Automatic Exchange of Financial Account Information under the Common Reporting Standard (CRS MCAA), under which Panama receives information from its financial institutions and automatically exchanges this information with other jurisdictions on an annual basis. The automatic exchange began in September 2018.
Foreign exchange transactions can generally be made without restrictions.