Panama tax system: audit, reporting and optimization of taxation of Panaminian companies and individuals: VAT, income tax and capital gains

Basic taxes (briefly)

Personal tax 0-25%
Corporate tax (in detail) The corporate income tax rate is 25%. If the taxable profit of the company exceeds $ 1.5 million, then it pays income tax or 4.67% of gross taxable income, if the latter amount is greater.
Capital gains tax. Details Gains from the sale of assets are taxed at a rate of 10%.
VAT. Details The tax is similar to VAT. The standard tax rate is 7%. Some goods and services are subject to rates of 10% and 15%.
Other taxes Social contributions, Operations Notice tax, Real estate tax
Government fee
Stamp duty 0,1%

International tax agreement

Barbados, Czech Republic, France, Ireland, Israel, Italy, Korea (Republic of), Luxembourg, Mexico, Netherlands, Portugal, Qatar, Singapore, Spain, United Arab Emirates, United Kingdom, Viet nam
   
United States


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Personal taxes

Panama has a territorial principle of taxation: only income generated in Panama is taxed.

The tax rates are progressive:

  • income up to USD 11,000 – 0%;
  • from USD 11,000 to 50,000 – 15%;
  • over USD 50,000 – 25%.

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%.

Corporate income tax

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%.

CFC rules

None.

Withholding tax

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.

Movable goods and services transfer tax (ITBMS) / VAT

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

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%.

Operations Notice tax

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.

Immovable property tax

Property owners pay an annual immovable property tax at rates up to 1%.

Stamp duty

Some commercial contracts are subject of USD 0.10 per USD 100 (or fraction there of) commercial levy.

Double Tax Agreements

The Panama has exchange of information relationships:

17 DTCs: 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.

Exchange control

Foreign exchange transactions can generally be made without restrictions.

    Taxes of Panama

    Min. rate for corporate tax 25%
    Capital gains tax 10%
    VAT 7%
    Withholding tax 10%(5%,20%)/12,5%/12,5%
    Exchange control No
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