Taxes in Panama in 2026

Tax rates in Panama in 2026: the short version

Panama takes up to 25% of a salary and 25% of company profit, but only on money earned inside the country. Income from abroad is outside the tax net entirely, for a resident and for a local company alike. The rule sits in Article 694 of the Tax Code and has worked this way for decades.

The arithmetic is easy: the national currency, the balboa (written B/.), is pegged to the US dollar at 1:1, and the banknotes in circulation are US dollars. An amount in balboas equals the same amount in dollars. Taxes are collected by the General Directorate of Revenue under the Ministry of Economy and Finance.

The main news of 2026 is Law 526 of 28 May 2026. From the 2027 fiscal year, Panamanian companies that belong to multinational groups keep the zero rate on foreign dividends, interest and royalties only if they prove a real presence in the country: people, premises, decisions. Otherwise the rate is 15%. The second change is already on the payroll: the employer contribution to the social security fund rose from 12.25% to 13.25% in April 2025 and will go up twice more.

For comparison within the region: Costa Rica charges 13% value added tax and 30% corporate tax, while Paraguay has personal and corporate income tax at 10% each. A summary for other countries is on the taxes by country page.

Compare taxes in 146 countries: relocation taxes 2026

How the territorial tax system works and who is a tax resident of Panama

Panama does not care where the recipient of income lives or how many days he spent in the country if the money came from abroad: tax follows the place where income is earned. Article 694 of the Tax Code taxes income arising within the territory of the republic, wherever it is received. Everything earned outside it stays out of the tax base.

The code names three operations that do not count as Panamanian income even when they are run from an office in Panama: reselling goods that never enter the country; transactions that are concluded and performed abroad; and distributing dividends out of foreign profit. Trading and holding companies have been built on these three points for decades.

Where the territorial principle breaks down

The weakest spot is remote work. A service physically performed from Panama can, on the letter of Article 694, be treated as Panamanian income even if the customer sits in Europe. For holders of the digital nomad visa the visa condition matches the logic of the code: the income comes from abroad and the result of the work is used outside Panama. A freelancer with permanent residence who works from Panama City for foreign customers for years should draft contracts in advance so that they show where the result is used.

The second limit is a Panamanian customer. One contract with a local company turns part of the income into Panamanian income: the scale of up to 25%, value added tax and contributions all appear.

Who counts as a tax resident

Under Article 762-N of the code, a resident is someone who spent more than 183 days in Panama, consecutive or not, during the fiscal year or the year before. The second route is a permanent home in the country. The tax office reads it strictly: buying or renting an apartment is not enough, the applicant has to prove that he or his family actually live in it and that the centre of vital interests is in Panama.

A company is resident if it is registered in Panama and is really managed from there: an office, staff, decisions. Board meetings at a Panamanian address alone are not enough.

Residence matters little for the rates: residents and non-residents both pay only on Panamanian income. It is needed for something else - a tax residency certificate to show to a bank or to the tax authority of another country. The procedure is set by Resolution 201-0354 of the tax office of 13 January 2016, and the burden of proof is on the applicant.

The inconvenient truth: a residence permit and tax residence are different things. A Panama residence permit card proves nothing by itself: without 183 days or a lived-in home the tax office will not issue the certificate. And without the certificate it is hard to convince the previous country that tax residence has moved. How countries count days is covered in the article on the 183-day rule.

Panama tax residency requirements: days, home and certificate

Panama is one of the rare countries where last year's days make you resident this year too. Article 762-N of the Tax Code treats as resident anyone who spent more than 183 days in the country in the current or previous tax year. The second route is a permanent home and a centre of vital interests: family, work or business in Panama.

The status barely changes the rates: Panama taxes only Panamanian-source income, for residents and non-residents alike. Residency matters for the certificate, without which your former country keeps treating you as its resident. A residence permit without days lived is like a ticket without a boarding pass: it will not get you on board. The calculator below also counts last year.

Mistakes cost more: a lease alone is not enough, you also have to prove your centre of interests in Panama, and without a certificate your former country keeps taxing worldwide income. Murblz support removes these risks: we count days over two years, gather proof of your centre of interests, obtain the tax residency certificate and apply double tax treaties where they are in force. We guarantee professional work and a transparent process, and in most cases a result on the first filing.

Talk to a manager now

What is the income tax in Panama: brackets and a salary calculation example

The first $11,000 of Panamanian income a year is not taxed at all, and the top rate of 25% starts only at $50,000. The scale in Article 700 of the Tax Code is the same for citizens and resident foreigners, and it has not changed for more than ten years.

The base includes everything earned in Panama: base pay, bonuses, commissions, housing and a car paid by the employer, income from private practice and rent. Interest on deposits in Panamanian banks and on government bonds is exempt.

Worked example: a salary of $2,500 a month

The employer calculates tax on an annual amount of 13 salaries: the thirteenth-month salary is mandatory in Panama and is paid in three parts, in April, August and December. The annual tax is divided by 13 and withheld from each payment.

This is a simplified example without personal deductions. $523 leaves the salary, or 20.9%. At a salary of $6,000 the annual amount of 78,000 reaches the top bracket: 5,850 + 25% of 28,000 = $12,850 of tax for the year, or $988 from each payment.

Deductions that reduce the tax

Spouses filing a joint return deduct $800 a year. Mortgage interest on a home in Panama reduces the base by up to $15,000 a year, education costs by up to $3,600 per student, and contributions to pension funds by up to $15,000. Medical expenses count if they were incurred in Panama and are documented.

Deductions are claimed in the annual return. An employee with a single employer and no deductions does not file a return: the tax has already been withheld.

Representation expenses: a separate scale

Executives in Panama are often paid part of their remuneration as representation expenses. They have their own scale: 10% on amounts up to $25,000 a year, and $2,500 plus 15% on the excess. It is calculated separately from the salary, and at high incomes this arrangement costs noticeably less than the general scale with its 25%.

How much a non-resident pays

A foreigner who works for a Panamanian customer for fewer than 183 days in a year gets neither deductions nor the zero bracket. 15% income tax and a 2.75% educational contribution are withheld from his Panamanian income at the moment of payment.

How much employees and employers pay in social contributions in Panama

Hiring in Panama gets more expensive on a schedule: the employer contribution to the Social Security Fund rose from 12.25% to 13.25% in April 2025 and will climb two more percentage points by 2029. That is how the pension reform is built - Law 462 of 18 March 2025. It left the employee share untouched: 9.75%, as before.

The contributions have no ceiling: they are calculated on the whole salary, however high. An expensive employee costs the employer proportionally more.

In the same example with a salary of $2,500 the employer pays an extra $331.25 to the fund and $37.50 of educational contribution. The full cost of the employee is $2,868.75 a month before occupational risk insurance, plus the thirteenth salary. From March 2029 the same position will cost $2,918.75.

On the thirteenth salary the employee contribution is lower, 7.25%, and no educational contribution is charged on it.

Contributions for the self-employed

Before the reform the self-employed and independent professionals could stay out of the system. Law 462 made the pension contribution mandatory: 9.36% of the income the payer declares. The self-employed who joined the system after 18 March 2025 fall under the new funded scheme with a solidarity guarantee.

Health cover from the fund is optional for the self-employed: 8.5% of declared income, but the base cannot be lower than $800 a month, which means at least $68.

Foreigners pay on the general terms

The law expressly requires all workers, local and foreign, to be registered with the fund. The reform did not change the retirement age: 57 for women and 62 for men. Who does not need contributions: holders of the digital nomad visa and retirees with income from abroad - they have no Panamanian employer and nothing to pay contributions on.

What is the corporate tax in Panama and how are dividends taxed

A Panamanian company can pay 25% on profit or 0% - it all depends on where its customers are. The 25% rate applies to profit from Panamanian sources. Profit from transactions carried out entirely abroad stays out of the base: the same territorial principle as for individuals.

Hence the offshore reputation. A company that trades and provides services only outside Panama is not required to file an income tax return, and its corporate tax is zero. Two things remain mandatory: the annual fee of $300 and the accounting records which, under Law 254 of 11 November 2021, the company hands over every year by 30 April to its resident agent - a licensed representative in Panama. How registration works is covered on the page company registration in Panama and in the article on Panamanian companies in 2026.

Minimum tax for large companies

Companies with taxable income above $1.5 million calculate tax in two ways and pay the higher amount. The first is the usual one: 25% of net profit. The second is the alternative calculation: 4.67% of gross taxable income is deemed to be profit and taxed at 25%, which comes to about 1.17% of revenue. A loss-making company can ask the tax office not to apply the alternative calculation, and the authority has six months to answer.

Law 526: the end of free holdings with no presence in the country

From the 2027 fiscal year the zero tax on foreign passive income stops being unconditional. Law 526 of 28 May 2026 covers Panamanian companies that are part of a multinational group - two or more related companies in different countries - and receive dividends, interest, royalties, capital gains or income from property from abroad.

To keep 0%, such a company has to show a real presence in Panama: paid qualified employees, strategic decisions taken in the country, and expenses proportionate to the income. No presence means 15% on net passive income. The law does not touch shipping and the regulated financial sector, and it names no revenue or asset threshold: the rule applies to small holdings too.

Executive Decree 32 of 2 September 2026 spelled out the minimum: at least one paid qualified employee or contractor, premises in Panama and no fewer than two board meetings in the country a year. Staff and expenses may be outsourced to a Panamanian provider under a written contract; strategic decisions may not. Companies that only hold shares or real estate get a lighter test: a director who lives in Panama or paid local staff is enough.

For a standalone company outside a group and for individuals the law changes nothing. But the classic setup - a Panamanian company with no employees that owns stakes in foreign firms and collects dividends - from 2027 costs either a director or staff in Panama, or 15%.

Dividend tax

A company that does business in Panama and operates under a notice of operation withholds tax when it pays dividends: 10% on profit from Panamanian sources and 5% on foreign and export profit. On bearer shares the rate is 20%. Article 733 of the code does not let profit pile up forever: if a company distributed less than 40% of its net profit for the year, it pays 10% on the shortfall up to 40% - this is the complementary tax, in effect an advance against future dividends. A loan to a shareholder is taxed at the same 10%.

A company with no Panamanian income that does not need a notice of operation withholds no dividend tax.

Small but mandatory payments

A business operating in Panama pays the notice of operation tax: 2% of the company's net worth a year, not less than $100 and not more than $60,000 (in free zones 1% and not more than $50,000). Municipalities charge their own tax on gross income by type of activity, usually not more than $2,000 a month per activity.

What is the VAT in Panama and when do you have to register

Panamanian value added tax is 7%, one of the lowest in Latin America: Costa Rica charges 13%, Paraguay 10%, Uruguay 22%. Officially it is the tax on the transfer of movable goods and the provision of services. It works like ordinary value added tax: the seller charges tax on the price and deducts the tax paid to suppliers.

Registration threshold: $36,000 a year

A seller or service provider becomes a taxpayer once revenue for the previous year exceeded $36,000, that is, more than $3,000 a month on average. Below the threshold the tax is neither charged nor refunded. For comparison: the threshold equals the minimum annual income for the digital nomad visa.

The value added tax return (form 430) is filed every month by the 15th of the following month through the tax office's online portal e-Tax 2.0. A nil return is filed as well: skipping it costs a fine even with zero turnover.

Electronic invoices are mandatory for new taxpayers

Law 256 of 26 November 2021 moves business to electronic invoices. Everyone who received a taxpayer number from 1 January 2022 onwards issues electronic invoices from day one.

From 1 January 2026 the tax office left its free state invoicing service only to the smallest: revenue of up to $36,000 a year and no more than 100 documents a month (Resolution 201-6299 of 29 July 2025). Everyone else needs a contract with an authorised e-invoicing operator, and that is a paid service.

What about services for foreign customers

Value added tax is charged on services provided in Panama. A freelancer on the digital nomad visa who works for foreign customers does not become a taxpayer: there is no Panamanian revenue. Once a local customer appears and the $36,000 threshold is crossed, registration, 7% on top of the price and a monthly return follow.

What tax breaks exist for small business, sole traders, freelancers, nomads and retirees

A small Panamanian firm pays not 25% but from 7.5% on profit - if it has registered in the state small business register. The relief was introduced by Law 189 of 17 December 2020 (Article 699-A of the Tax Code) and is still in force.

Small business: a scale instead of 25%

There are two conditions: gross income of no more than $500,000 a year and an entry in the register of the small business authority. The company must not be a fragment of a split-up business or a subsidiary of another company, and the right to the relief is confirmed with the tax office every year.

Panama has no separate turnover-tax regime of the kind Argentina offers to sole traders. An entrepreneur without a company pays at the general 0-25% scale or at the reduced scale in the table, plus the mandatory 9.36% pension contribution.

Digital nomads

The short-stay visa for remote workers was created by Decree 198 of 7 May 2021. It is granted for 9 months with one extension for the same period to those who receive at least $36,000 a year from abroad and work for a foreign company or for their own foreign customers. Under the visa condition the income is foreign and the result of the work is used outside the country, so no Panamanian income tax arises on it. Details are on the page digital nomad visa for Panama.

What the visa does not give: it is a non-resident immigration status, it does not by itself make the holder a tax resident of Panama, and working for Panamanian companies is not allowed on it.

Retirees and people living on investment income

A foreign pension is not taxed in Panama: it is foreign income. The same goes for dividends, interest and rent from abroad. So the retirement visa works as a tax regime without any separate law on reliefs - the conditions are covered in the article Panama retirement visa.

Headquarters and free zones

Panama offers multinational groups two licensed regimes with a 5% rate instead of 25%. The first is the multinational headquarters regime (Law 41 of 2007 as amended by Law 57 of 2018): tax is charged on net profit from the services the Panamanian office provides to its group. The second is for multinational companies providing manufacturing-related services (Law 159 of 31 August 2020), with the same 5% rate and an exemption from import duties.

Residents of free zones - the Colon Free Zone at the Atlantic entrance to the canal and the Panama Pacifico special economic area - receive exemptions from corporate tax on foreign operations, from import duties and from value added tax on goods that do not reach the domestic market; the set of reliefs depends on the zone and the activity. All these regimes are designed for a business with an office, a warehouse and staff, not for a company consisting of one director.

What are the taxes on property, cars, inheritance, capital gains and crypto

An apartment in Panama worth less than $120,000 in which the owner lives is not subject to property tax at all. That is the effect of Law 66 of 2017, in force since 2019: it introduced a reduced scale for the main home and cut the top rate for everything else to 1%.

The rates apply in steps: each slice of the value has its own rate. Worked example: a rental apartment with a cadastral value of $300,000. The first 30,000 - nothing, the next 220,000 at 0.6% - $1,320, the last 50,000 at 0.8% - $400. Total $1,720 a year. The same apartment as a main home would cost $900: 0.5% on the 180,000 above the tax-free 120,000.

The reduced scale does not switch on by itself: the home has to be registered with the tax office as the main family home. Property bought to rent out goes by the general scale.

Sale of real estate and securities

Capital gains in Panama are taxed at 10%, but the tax is collected as an advance on the deal price. The seller of real estate pays 2% transfer tax and a 3% advance on capital gains tax - both on the higher of two amounts: the sale price or the cadastral value. Then there is a choice: treat the 3% as the final tax, or calculate 10% of the real gain and claim back the overpayment.

The choice depends on the gain. On a sale for $300,000 the advance is 9,000. If the real gain is 50,000, the 10% tax is $5,000 and it makes sense to ask for a refund of 4,000. If the gain is 150,000, the tax would be 15,000, and stopping at the advance is cheaper.

On a sale of shares in Panamanian companies the buyer withholds 5% of the price as an advance; the final rate is the same 10% of the gain. A sale of foreign assets - foreign shares, real estate abroad - is outside Panamanian tax.

Cryptocurrency

Panama has no separate law on cryptocurrency. Bill 697 was passed by parliament in April 2022, partly vetoed by the president and then referred by him to the Supreme Court, which declared it unconstitutional in July 2023. The general rules apply: only income from Panamanian sources is taxed. A sale of crypto on a foreign exchange usually does not meet that test, but tax law has no separate rules for crypto and the interpretation is left to the tax office - a risk worth factoring in.

Cars, inheritance, gifts

Panama has no car tax based on value or engine power. Once a year the owner pays a municipal circulation fee when renewing the licence plate: in Panama City it is about $29 for an ordinary passenger car.

There are no taxes on inheritance, gifts or wealth. For families planning to give birth in Panama or to move with capital, this means that passing property on to children creates no Panamanian tax.

Which countries have a double tax treaty with Panama and what do non-residents pay

Panama has 17 double tax treaties in force, according to the tax office: with Barbados, the Czech Republic, France, Ireland, Israel, Italy, Luxembourg, Mexico, the Netherlands, Portugal, Qatar, Singapore, South Korea, Spain, the United Arab Emirates, the United Kingdom and Vietnam. With other countries, including the United States, each side applies its own domestic rules.

Because Panama does not tax foreign income, the treaties matter mainly for income from Panama itself: salary, rent, interest and dividends from Panamanian sources. Without a treaty, the country of residence decides whether Panamanian tax on such income is credited; many countries credit foreign tax under their own law. Some countries keep national lists of low-tax jurisdictions, and dividends from a Panamanian subsidiary may not get the usual exemption there.

Panama takes part in the automatic exchange of account data under the international reporting standard. Decree 21 of 27 May 2026 approved a list of 91 jurisdictions for which Panamanian banks collect data for 2025. Which countries stay outside the exchange is covered in the article accounts outside the Common Reporting Standard.

The European Union list of non-cooperative jurisdictions

On 9 October 2026 the Council of the European Union removed Panama from the list of non-cooperative jurisdictions for tax purposes. It moved to the European Union list of cooperating jurisdictions that still have commitments to meet, pending an international review of how it exchanges tax information. Law 526 removed the reason Panama had been listed: the exemption of foreign income for companies with no real presence in the country. European Union countries lift their defensive measures on payments to Panama - from refusing to deduct expenses to higher withholding taxes - each under its own rules, so check the rules of your counterparty's country before a large payment.

Withholding taxes for non-residents

A non-resident pays only on Panamanian income, and the tax is withheld by whoever pays.

Treaties reduce these rates for residents of the 17 partner countries. To use the treaty with Spain or the United Arab Emirates, a Panamanian resident needs a tax residency certificate from the tax office - the same one issued under the 183-day rule.

When to file returns and pay taxes in Panama: deadlines and penalties

A late annual return costs an individual $100 and a company $500, even if the tax due is zero. The fine is fixed and set by Article 293 of the Tax Procedure Code; on tax not paid on time a surcharge and daily interest are added.

The fiscal year matches the calendar year. Everything is filed through the tax office's online portal e-Tax 2.0, and logging in requires the taxpayer number.

An extension of the filing deadline does not move the payment deadline: the tax still has to be paid by the original date.

What happens if the annual fee is not paid

A late annual fee adds $50. Three years of non-payment in a row and the company's rights are suspended: it cannot do business, dispose of assets or register documents in the registry. Reinstatement costs a $1,000 fine on top of all arrears. Forgotten Panamanian companies that nobody pays for are eventually struck off the register.

Limitation periods

The tax authority can collect assessed tax and fines within 5 years. It has 3 years for additional assessments and sanctions. The taxpayer may correct his own return within 18 months. Tax office audits most often concern non-deductible expenses, withholding taxes and value added tax.

Accounting documents should be kept for at least five years - as long as the limitation period runs. This also applies to companies with no Panamanian income: their resident agent must produce the records at the request of the authorities.

What Panama's taxes mean for someone relocating: who it suits and who it does not

Panama pays off for those whose income stays abroad and is unremarkable for those who earn inside the country. A scale of up to 25%, contributions of 11% from the employee and almost 15% from the employer - an ordinary Latin American burden with no discounts for newcomers. The whole benefit is the zero on foreign income.

Who it suits

Remote employees of foreign companies, owners of businesses abroad, investors with dividends and coupons, retirees. Panama does not tax their income, and the country has no inheritance or gift taxes. Add the dollar in circulation and real estate with zero tax on a main home worth up to $120,000.

Trading and service companies with customers outside Panama: 0% on profit and $300 a year in fees. A bank account for such a company is a separate task, covered on the page business account for a Panamanian company.

Who it does not suit

Holdings without staff: from 2027 Law 526 requires people and decisions in Panama or 15% on passive income. Those who want to move tax residence on paper: the tax office issues the certificate for 183 days or a genuinely lived-in home, and without it there is nothing to show the previous country. And those who plan to earn in Panama itself: a local business pays 25% on profit, 10% on dividends, 7% value added tax and contributions with no ceiling.

The three most expensive mistakes

The first is to assume that a company with no tax needs no upkeep. The annual fee, the accounting records held by the agent and the data on ultimate owners are mandatory, and after three missed years the company is frozen.

The second is to confuse a residence permit with tax residence. A residence permit by investment gives the right to live in the country, not a certificate for another country's tax authority.

The third is to work for Panamanian customers while treating all income as foreign. The tax office determines the source of income by where the service is performed and who uses it, not by which account the money landed in.

Where to start

First - where the income comes from and where it will be taxed after the move, then - the immigration status: the options are collected on the page Panama: programmes and statuses. Murblz specialists, together with partners holding a Panamanian licence, review the income structure, select the status and prepare the documents for the residency certificate. If a company is needed, the company formation section helps to compare jurisdictions, and questions on taxes and documents can be raised through the legal support page.

FAQ