Panama Tax Rates

Income Tax Brackets

Panama imposes a progressive personal income tax on income sourced within Panama only (territorial system). The first USD 11,000 is exempt. Income from USD 11,000 to USD 50,000 is taxed at 15%, and income above USD 50,000 is taxed at 25%. Foreign-source income is completely exempt from Panamanian taxation, regardless of whether it is remitted to Panama. Employment income is subject to withholding by employers. Self-employed individuals and professionals must file annual returns. Deductions include mortgage interest, medical expenses, donations, and social security contributions.

Corporate Tax

Panama imposes a 25% corporate income tax on income derived from Panamanian sources. Foreign-source income is exempt. Companies operating in free trade zones (such as the Colón Free Zone) enjoy significant tax incentives, including exemptions from income tax on certain activities. Multinational companies may benefit from Panama's Multinational Enterprise Headquarters (SEM) regime, which provides tax benefits for regional headquarters. Companies must make estimated tax payments and file an annual return. Panama does not have CFC rules or thin capitalization rules in the traditional sense, reflecting its territorial approach.

Capital Gains Tax

Capital gains in Panama are taxed at a flat rate of 10% on the net gain. For real estate transactions, a 3% advance tax is withheld on the gross sale price, which can be credited against the final 10% capital gains tax. If the 3% withholding exceeds the actual tax due, the taxpayer can request a refund. Sales of shares of Panamanian companies are subject to a 5% or 10% capital gains tax depending on whether the shares are registered with the Panama Stock Exchange. Gains from foreign-source assets are exempt under the territorial system.

VAT / Sales Tax

Panama levies a 7% transfer of movable goods and services tax (ITBMS, similar to VAT) on most goods and services. Higher rates of 10% apply to alcoholic beverages and hotel accommodations, and 15% to tobacco products. Essential goods including basic foods, medicines, and educational materials are exempt. Professional services, financial services, and residential rental are also exempt. The ITBMS threshold for mandatory registration is relatively low, and monthly returns are required for registered taxpayers.

Cryptocurrency Tax

Panama does not have specific cryptocurrency tax legislation. Under the territorial tax system, income from crypto trading would only be taxable if it is considered Panamanian-source income. Crypto gains from international trading platforms would generally be considered foreign-source and thus exempt. A bill to regulate cryptocurrencies was vetoed by the President in 2022, and the regulatory framework remains unclear. Taxpayers should consider the source of crypto income in determining tax obligations.

Tax Treaties

Panama has approximately 18 double taxation agreements in force. Notably, Panama does not have a comprehensive tax treaty with the United States, though information exchange agreements exist. Panama's treaties typically provide reduced withholding rates on dividends, interest, and royalties. Panama has signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and participates in the Global Forum on Transparency and Exchange of Information for Tax Purposes.

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