Panama Tax Rate for 2016-2017, 2015-2016, 2014-2015
Panama Individual Income Tax Rate
Employment Income ($)
Tax Rate %
0 - 11,000
Panama Income Tax Deductions:
Married couples are $800 with their joint tax return.
Mortgage interest paid on the primary home can be deducted
up to $15,000 yearly.
Student loans interest payments for the taxpayer's or
dependents' education in Panama is fully deductible.
Health insurance premiums are deductible.
Contributions to private pension plans not exceeding 10%
of the individual's gross yearly income to a maximum of
$15,000 yearly are deductible.
Foreigners who reside in Panama
for more than 183 days per year and earn income in
Panama will be taxed at the same rate as nationals.
Individuals must file their annual
income tax return before March 15th.
Individuals whose only source of income is single salary
are exempt of income tax because the employer withholds
the share of each salaries payment for taxes.
For ?bodies,? the business income tax rate is 30%.
For other taxpayers, the following is the progressive
rate table for annual business income
Panama Corporate Income Tax
The only income which is taxed is the one derived from
within Panama. The sale of products or services to
people, entities, or companies in Panama are considered
as Panama source income? and taxed.
The sales of products or services to persons, entities,
or companies located outside of Panama are not taxed.
Income derived from the leasing or sale of Panama real
estate is taxed.
Commissions and interest earned from the loans financing
business in Panama is taxed.
Call centers enjoy a special law exempting their
earnings from income tax.
Trading companies which invoice products which never
enter Panama are not taxed.
Companies in Panama who facilitate business activities
conducted outside of Panama are not taxed.
Interest from savings and CD bank accounts from licensed
Panama banks and Panama Credit Unions are tax exempt.
Interest from debt securities registered with the Panama
National Securities Commission and listed on the stock
exchange are tax exempt.
Non-resident financial institutions and lenders who
receive interest and commissions paid by Panama banks or
for the construction of public housing are also tax
exempt in Panama.
Taxable income is derived from subtracting
foreign source income and tax exempt income from the
Deductions: Business expenses used to generate taxable
income or to preserve the business are considered as
deductible from the income taxes and must be documented
and are only allowed in the same year they occurred.
Income Tax Rates
Corporate tax rate is 25%.
Companies involved in telecommunications, banking, power
generation, manufacturing cement, casino and gambling
activities, and insurance or reinsurance pay 25% tax.
If the government share in company's capital is 40% or
more than the company will pay the 30% rate. Companies
involved in agriculture and small businesses have a
special lower income tax rates.
The traditional calculation of income taxes
is to simply multiply the net taxable income by the tax
rate. Panama corporations with taxable income exceeding
$1.5 Million use a different tax scale. Their rate is
the higher between the traditional calculation and
multiplying the taxable income by 4.67%.
Panama Social Security Tax
Employers and employees pay social security taxes when
the employee is paid. Currently, employers pay 12.25%
and the employee pays 9.75%.
Employers are required to withhold a percentage from
each employee's pay for income tax and for social
security tax. Failure to withhold and make payments to
the Social Security Office will result in surcharges,
fines, and even criminal prosecution. There is also a
professional risk premium paid to the Social Security
Office corresponding to a perceived risk the work
entails which is withheld from an employee's salary.
An additional 1.25% of an employee's
wages are withheld as an educational tax? while the
employer pays 1.5%.
Employers are required to withhold income
taxes from non-residents who earn Panama source income.
The Panama Income Tax rate for individuals is used
without deductions. However, if the non-resident earns
income outside of Panama, but the Panama employer wants
to deduct these wages from his income tax, the
non-resident will only have 50% of the total amount paid
subject to the withholding tax.
The employer is required to pay the withheld amounts
within 10 days following the payment to the Panama tax
Panama Capital Gains Tax
The Panama Capital Gains Tax rate differs by the type of
property being transferred. Only properties located in
Panama are subject to the capital gains tax. The
standard rate is 10% of the realized gain from the sale.
Panama Dividends Tax
There is 10% Panama dividends tax imposed upon entities
that have commercial operations permit and have Panama
The Panama dividends tax is only 5% if the earnings come
from foreign sources, is export related, or other
specific laws exempting the income.
Companies located in the free trade zones pay a 5%
dividend tax for all income. The entity providing the
dividend withholds the tax and pays the tax authorities.
There is no income tax on those receiving dividends.
Panama dividends paid to holders of bearer shares must
pay a 20% Panama dividends tax.
Panama Retained Earnings Tax
If no Panama dividends are paid or paid Panama dividends
are less than 40% of the current Panama sources after
tax earnings; there is a 10% tax on the difference
between the 40% and what was paid. If no Panama
dividends are paid or paid dividends are less than 20%
of foreign source income or specific exempt income,
there is a 10% tax on the difference between the 20% and
what was actually paid.
This tax is known as the complimentary tax? (impuesto
complementario?) is credited towards future Panama
dividends and can be seen as an advance of the Panama
dividends tax in relation to the 40% or 20% of the
current earnings. Registered subsidiaries of foreign
corporations pay this tax on their total current
earnings without regard if any distribution was made.
Panama Commercial Permit Tax
All persons and entities doing business within the
Republic of Panama must get Panama Commercial Operation
Permit issued by the Ministry of Commerce and Industry.
The annual tax for this permit is 2% of the company's
net worth with a maximum payment amount of $60,000 USD.
Companies located in special economic or development
zones or within free trade zones pay at a rate of 1%
with maximum amount of $50,000 USD.
Panama Sales Tax
The Panama Sales Tax applies to the imported goods,
products or services sold inside of Panama. The
importer, seller, or service provider pays this tax. The
ITBMS is 7%.
Higher rates are levied for the sale of alcoholic drinks
(10%), tobacco products (15%), and specific services,
such as housing services (10%).
Exceptions to paying this tax include free trade zone
transactions, power generation & distribution services,
cargo and passenger transportation by sea, air, or land.
Most businesses pay this tax monthly.
Panama Income Tax Rates and Deductions 2014
Panama Income Tax Rate for Individual Tax
Lowest Individual Tax Rate in Panama is 15% and Highest Rate is
Employment Income ($)
Tax Rate %
0 - 10,000
Deductions are also minimal and include a basic deduction of
US$800, as well as deductions on mortgage interest, charitable
donations, political contributions and medical expenses that are
not reimbursed by insurance.
Corporate Tax Rates in Panama
The corporate tax rate is 25%. For entities in which the State
is the owner of more than 40% of the shares the corporate income
tax rate will be 30%.
Security Taxes in Panama
The amount of social security taxes paid by employees is nine
percent of their gross pay. The employer pays another 12
Capital Gains Tax in Panama
Capital gains taxes are paid at 10 percent of the calculated
gain. For real estate transactions, a 3 percent withholding is
made at the closing as an advance payment against the 10 percent
capital gains tax.
Panama Dates of filing Returns /
Reporting and Payment
The tax year ends on 31 December in Panama
and tax returns are due by 15 March of the following year. This
filing deadline can be extended until 15 May. However,
individuals whose only taxable income comes from employment
don't have to file a tax return at all. The amount of tax due is
withheld at source by the employer.