Panama not only stands out as a place of natural and cultural wonder but also as a country where preferential taxation, financial security, and economic stability prevail. Its moderate and well-structured tax regime for corporations and individuals makes it particularly attractive to residents, investors, and companies worldwide.
Panama's tax system is mainly based on the principle of territoriality, where only income generated on national territory is taxed. This peculiarity has allowed Panama to stand out as an attractive destination for foreign investments.
Direct Taxes Applicable to Corporations
Income Tax: Equivalent to corporate tax, levied on profits earned by tax-resident companies in Panama. The tax rate is 25%, although it can reach 30% for some public or semi-public entities. There is a minimum effective tax rate for entities with revenues exceeding $1.5 million USD, where the higher of the following two rates applies: either the tax rate on taxable profits or 4.67% of the company's global turnover.
The "tasa única" tax: An annual flat tax levied on various entities established in Panama, with an amount of $300 USD, except for private interest foundations, which contribute $350 USD.
Resident agent's sworn declaration: Since 2022, lawyers representing companies must file a sworn declaration of the companies' accounts annually. This measure — a consequence of the Panama Papers affair — aims to combat money laundering in the country. This fee of $350 USD is paid by the lawyer and passed on to their client. Although this obligation is not presented as a tax, it is mandatory and paid to the DGI (Dirección General de Impuestos).
Complementary Tax: An advance payment of the dividend tax payable by shareholders who receive them. It only applies to entities that distribute less than 40% of their net after-tax profits. The applicable rate is 10% of the difference between the undistributed net profits and 40% of the same net profit.
Direct Taxes Applicable to Individuals
Income Tax: Panama has a relatively simple, progressive income tax system for individuals: 0% for incomes between $0 and $11,000 USD; 15% for incomes between $11,000 and $50,000 USD (only the portion between $11,000 and $50,000 is taxed); and 25% for incomes over $50,000 USD (taxpayers pay 15% on incomes up to $50,000, and only incomes above $50,000 are taxed at 25%).
Dividend Tax: A withholding tax for individuals on shares held in both Panamanian and foreign entities. The rate is 10% for dividends from Panamanian sources and 5% for dividends from foreign sources.
Capital Gains Tax: Imposed at a rate of 15% on the profits made from the sale of shares and real estate.
These tax regulations demonstrate Panama's commitment to creating a stable and safe economic environment. The moderation of tax pressure attracts a wide range of investors and companies, thereby enhancing the country's status as a financial hub.
Efficiency and transparency in Panama's tax system have been strengthened over time, especially following the Panama Papers affair. Recent reforms reflect the country's intention to align with international standards while retaining its unique appeal in terms of taxation.
In summary, Panama represents a land of tax opportunities and innovation, where financial stability and security are at the heart of its prosperity. Its clear tax legislation and competitive tax rates make it a preferred destination for entrepreneurs, investors, and individuals seeking growth and asset protection.
