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Paying Taxes in Panama

Even though the offshore companies are exempt from paying taxes in Panama

, the local companies or the one that performs commercial activities are not excluded from paying certain taxes.

For example, certain goods and services are taxed with a 7% VAT. The alcohol and the cigarettes are taxed with 10% and 15% VAT. The companies that have to register to VAT are making a monthly turnover above 3000 USD or an annual turnover above 36,000 USD.

The corporate incomes are taxed with 27.5% but certain industries and services are taxed with a higher rate. For example, the banking companies, insurance companies, mining companies, energy companies, telecom companies and financial companies must pay a 30 % tax rate until this year, 27.5 % until 2014 and then a corporate tax of 25%.

Dividends paid by the companies are taxed with 10% withholding tax on the usual shares and 20% on dividends on bearer shares.

The rates of taxes on the taxable incomes are depending on the amount of annual gains. Up to 11000 USD there is no tax, from the incomes between 11,001 and 50,000 there is a tax of 15% and for the incomes above 50000, an tax of 25% is applicable.

Social securities taxes must be paid by the employer and the employee. The rate of the tax paid by the employer is 12%, unlike the rate paid by the employee of 9%. It’s predicted that these rates will grow to 12.25 % and 9.5% after 2013.

The inheritance taxes are not required in Panama

, even though exists a certain tax on gifts of properties located in Panama

 with a value depending on various aspects such as the relationship between the grantor and the granted.

Being known as a holiday destination by many foreign and local investors, the government of Panama

 is supporting this sector by many initiatives. The tourism investments law is facilitating this sector by granting certain rights to the entrepreneurs that have invested more than 50,000 USD in it (not including the land). For example, for 20 year the company is excluded from paying taxes on equipment, vehicles, materials or real estate taxes. Also, no tax is asked for using the airports.

The real estate tax depends on the sum made year by year and starts with 1.75% from 30,000 USD to 50,000 USD, 1.95% from 50,001 USD to 75,000 USD and 2.10% on values above 50,000 USD.

The insurance premiums, air tickets, motorcycles, cars, cable television, pre-paid cellular phones are subject to an excise tax of 5%. If you need advice on the local taxes, as well as on the process to open a bank account in Panama, please contact us.  

Our team of accountants in Panama can help you with additiional information.

For foreign nationals who relocate to Panama, taxation advice and counsel can be an important service. If you also have other questions, such as the routes to acquire citizenship in Panama, our team can answer your questions. If you have lived in the country for long enough, you can be eligible for naturalization, however, you could also become a citizen through marriage (subject to conditions).

Tax matters can be seen in a different light by those who are interested in immigration to Panama. if you would like to know more about the individual income tax exemptions, the taxation of citizens and residents, and the difference between Panamanian-sourced income and income derived from abroad, our specialists can answer your questions. Please reach out to us if you need assistance. 

If you are interested in knowing more about the different programmes the Panamanian authorities have in place for residency in Panama, our team can give you complete details according to your situation. The country encourages foreign investments and has programmes supporting investors in different fields, however, qualifying retirees can also have the option to apply for residency.

Contact our specialists as needed.