Panama Is Famous for Its Light Tax Burdens on Residents
You are only liable for Panama income tax if you earn income here, on Panamanian territory. You don’t need to report (or pay taxes) to the Panamanian government on your foreign-earned income, though you may be liable in your home country and any other country or countries of residence. If you do earn an income here, personal income tax is assessed by the Panamanian government as follows:
- Annual income up to $11,000 = 0%
- Over $11,000, up to $50,000 = 15% on the amount over $11,000
- Over $50,000 = 15% on the first $50,000 and 25% on the remainder
Here in Panama taxable income includes local wages/salaries, business profits, pensions/bonuses, royalties, and profit from stock sales. Deductions may be made on medical expenses incurred here, as well as local donations, education expenses, certain office expenses, and loans for home improvements.
Panama’s special tax incentive zones—like Panamá Pacífico, Ciudad del Saber, and la Zona Libre de Colón—offer tax exemptions and discounts for qualifying businesses. Interest earned on accounts (savings, time deposits, etc.) from licensed Panama banks are also exempt from local taxes.
Obtain residence via Panama’s Pensionado program and you’ll be entitled to a one-time exemption of duties on the importation of household goods (up to $10,000). If you buy or build a new house, you may also be entitled to a property tax exemption of three years or more.
Property Taxes in Panama
Panama’s property tax rates are among the lowest in the region. Family/primary residences pay 0.5% to 0.7%, unless valued at $120,000 or less, in which case the property is tax free.
For all others (such as vacant lots, commercial property, and vacation homes) the rates are 0.6% to 1%, unless valued at $30,000 or less, in which case the property is tax free.
Transfer Tax
Real estate transfer taxes in Panama are paid by the seller, and are 2% of either the updated registered value of the property or the sale price–whichever is higher. If a property is bought by a corporation, it is customary for the shares of the company to be sold (instead of the property), thus eliminating the need to pay transfer tax.
Capital Gains Tax
Capital gains tax in Panama is a flat 10% of gross sale profit, provided you do not buy and sell real estate for a living. If you sell more than one property a year, any profits must be included in your Panamanian tax return. In this case you would pay income tax on these profits but no additional capital gains tax.
Additional Taxes
Sales tax, known as ITBMS, is 7% on most goods and services, though necessary items like food and medicine are exempt. Tax on luxuries like hotel stays and alcohol is 10% and tobacco is taxed at 15%.