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Panama Tax Rate for 2016-2017, 2015-2016, 2014-2015

Panama Individual Income Tax Rate

Monthly Employment Income ($)

Tax Rate %

 

0 - 11,000

 

0%

 

11,000 - 50,000

 

15%

 

50,000 above

 

25%

 

 

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.

Foreign Residents

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.

Annual Returns

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.

Income Tax

Taxable income is derived from subtracting foreign source income and tax exempt income from the gross income.

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.

Calculation

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.

Educational Tax

An additional 1.25% of an employee's wages are withheld as an educational tax? while the employer pays 1.5%.

Non-Residents

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 authorities.

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 source income.

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 (ITBMS?)

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 Payers

Lowest Individual Tax Rate in Panama is 15% and Highest Rate is 25%

Monthly Employment Income ($)

Tax Rate %

 

0 - 10,000

 

0%

 

10,000 - 50,000

 

15%

 

50,000 above

 

25%

 

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 percent.

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.

 

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