Panama
Top Income Tax
25%
Marginal rate
Corporate Tax
25%
Standard rate
VAT / Sales Tax
7%
Standard rate
Capital Gains
10%
Standard rate
Overview
Panama offers territorial taxation with zero tax on foreign-source income, making it ideal for international entrepreneurs. The USD currency, Friendly Nations Visa, and strategic location as the Americas' business hub add to its appeal. Panama City is a modern financial center.
Income Tax Brackets
| Income Range (USD) | Tax Rate |
|---|---|
| 0 - 11,000 | 0% |
| 11,000 - 50,000 | 15% |
| 50,000+ | 25% |
Territorial taxation. Only Panama-source income taxed. Foreign-source income exempt.
Corporate Tax
Standard Rate
25%
25% on net taxable income. Special rates for Panama Pacific Area and free zones.
VAT / Sales Tax
Standard Rate
7%
ITBMS (similar to VAT) at 7%. 10% on alcohol/tobacco. 15% on accommodation.
Capital Gains Tax
Standard Rate
10%
10% on capital gains. 5% on sale of securities.
Social Security Contributions
Employee
9.75%
Employer
12.25%
Self-Employed
9.75%
CSS contributions covering health, maternity, disability, old age.
Special Tax Regimes
Friendly Nations Visa
Fast-track permanent residency for citizens of 50+ 'friendly' nations.
Eligibility: Must establish economic/professional tie to Panama (employment, business, or bank deposit of USD 5,000).
Multinational Headquarters (SEM)
Tax incentives for regional headquarters including exemptions on foreign-source income.
Eligibility: Must serve as regional headquarters for multinational operations. Minimum employees required.
Digital Nomad Visa
Remote Worker Visa. Must earn at least USD 3,000/month from foreign employer. Valid 9 months, renewable up to 18 months.
Pros & Cons
Pros
- Territorial taxation (no tax on foreign income)
- US dollar currency
- Friendly Nations Visa
- Strategic Americas hub
- Digital nomad visa
Cons
- FATF grey list concerns
- Limited English outside business
- 25% income tax on local income
- Hot humid climate
Living Indicators
Cost of Living Index
Very affordable
Quality of Life Index
Average
Best For
Data Sources
Tax rate data for Panama is compiled from the following authoritative sources:
- OECD Tax Database
- Tax Foundation International Tax Competitiveness Index
- World Bank Business Enabling Environment
- Panama government tax authority publications
- PwC Worldwide Tax Summaries
Last verified: 2024-01
Disclaimer: This content is for informational purposes only and does not constitute tax advice. Tax laws change frequently. Always consult a qualified tax professional before making decisions about your tax residency or obligations.