Taxes and Tax Schemes in Panama | What You Need to Know in 2025

Panama, strategically located between North and South America, operates one of the world's most favorable tax systems for international residents and businesses. The country's position as a major global logistics hub, home to the Panama Canal, has helped establish it as a significant financial center with attractive tax policies designed to draw foreign investment and residents.

Panama's economy has demonstrated remarkable stability and growth, powered by its service sector, logistics operations, and banking industry. The country has successfully maintained its position as a leading offshore financial center while implementing international transparency standards and anti-money laundering regulations.

The expat community in Panama is large and diverse, with many drawn to its territorial tax system, retirement benefits, and business-friendly environment. Major sectors like banking, shipping, real estate, and tourism provide numerous opportunities for foreign professionals seeking tax-efficient employment or business ventures.

‍

Panama Income Tax

Panama operates on a territorial tax system, meaning that only income earned within Panama is subject to taxation. Income tax rates are progressive, ranging from 0% to 25% for income earned within Panama. The first 11,000 PAB of taxable income is exempt, with rates then progressing through various brackets.

For local employment and business income, the tax brackets are structured to remain competitive while ensuring contribution from higher earners. Significant deductions are available for mortgage interest, medical expenses, and educational costs, making the effective tax rate often lower than the nominal rate.

A key advantage for international residents is that foreign-sourced income is completely exempt from Panama taxation, creating substantial opportunities for digital nomads, international business owners, and retirees.

If you want to have a better understanding of the taxes you should pay on personal income in Panama, you can use the personal tax calculator in the Taxation section of the Panama page.

‍

Panama Tax on Overseas Income

Under Panama's territorial tax system, income earned from foreign sources is not subject to taxation in Panama. This creates significant advantages for:

• Digital nomads serving overseas clients
• Retirees receiving pensions from abroad
• International investors with foreign investment income
• Business owners operating international companies
• Professionals providing services to foreign clients

The territorial system requires careful documentation of income sources but offers substantial benefits for those structuring their affairs appropriately.‍

‍

Panama Tax on Investments‍

Investment taxation in Panama is highly favorable, with several key advantages:

• No capital gains tax on foreign investments
• No tax on foreign-earned interest or dividends
• No inheritance or estate tax
• No wealth tax
• Property tax exemptions available for primary residences

Local investments may be subject to specific regulations, with a 10% capital gains tax on local property sales and varying rates for local dividend income.

‍

‍Panama Corporate Taxation

‍Corporate taxation in Panama reflects its territorial system, with only income from Panamanian sources being taxable. The standard corporate tax rate is 25%. Companies operating in Panama's various free trade zones may qualify for significant tax incentives and exemptions.Companies can benefit from:

• No tax on foreign-sourced income
• No withholding tax on foreign payments
• Extensive double taxation treaties
• Special economic zone benefits
• Simplified tax compliance for small businesses

‍

Special Tax Regimes

‍Panama offers several special visa and tax programs designed to attract foreign residents:The Pensionado Visa program provides retirees with various tax benefits and discounts, requiring only a verified pension income of $1,000 per month. Benefits include import tax exemptions for household goods and a new car every two years.The Friendly Nations Visa program, while primarily an immigration pathway, offers simplified access to Panama's territorial tax benefits for citizens of specific countries, requiring only minimal investment or employment in Panama.The Panama Pacifico Special Economic Area offers additional tax benefits for businesses operating within this designated zone, including exemptions from various taxes and simplified immigration procedures for foreign employees.‍

‍

Regional Comparison

Tax Planning for Panama

‍Effective tax planning in Panama requires careful consideration of income sources and structure. Key considerations include:

• Proper documentation of foreign income sources
• Structuring of local versus international operations
• Real estate investment planning
• Business entity selection
• Banking relationships and reporting requirements

Regular review of tax positions and structures ensures continued optimization while maintaining compliance with both Panamanian and international regulations.