Income Tax in Panama
Information about taxation on personal income in Panama.
Taxation in Panama is jurisdiction based, which means that taxes are only owed on income earned in Panama, regardless of whether the person is resident or non-resident.
Panama has no wealth, inheritance or gift taxes.
For tax purposes anyone who spends more than 183 days in Panama in a calendar year is considered a resident.
Tax Rates: Tax bands are fairly simple and are as follows:
|Up to US$11,000||0%|
|US$11,000 to US$50,000||15%|
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.
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.
The website of the Panama Tax Agency (Dirección General de Ingresos) has a program to help fill in tax returns.
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
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.
- Information on tax for companies and individuals from Deloitte: Click here
- Information on income tax for executives from KPMG: Click here
Property Tax in Panama
An overview of the taxes levied on the purchase of real estate in Panama.
Property taxes in Panama are charged at between 1.75 percent and 2.10 percent of the registered value of the property. There are numerous property tax exemptions but these apply to the value of the construction only – the land may still be subject to tax.
Properties valued at $30,000 or less (including land value) have a zero percent tax rate. The 2.10 percent band is reached at $75,000.
The maximum annual percentage of assessment of 2.10 percent is based upon two criteria:
- The value of the land
- The declared value of the improvements built
The taxable base depends on the total value of the land and all improvements. If a home is sold for more than its appraisal value, then the new value becomes the selling price for tax purposes.
Taxes can be paid in instalments three times a year; at the end of April, August and December. Certification of tax clearance is necessary for the completion of any real estate transaction regarding a property. Property taxes have primary status over any other encumbrances.
Property tax exemption
If a property in Panama was bought before 2009, the taxes are not due for 20 years. However, many of the newer construction projects in Panama still fall under the 20-year exemption, and there are new, shorter exemptions in place for future construction.
In the future, property tax exemptions will be based on a new scale:
- Up to $100,000 value, 15 years exemption
- From $100,000 to $250,000, 10 years exemption
- Value above $250,000, 5 years exemption
Commercial properties are exempt from property taxes for 10 years.
- For more details on property tax exemptions and other fees levied on buying a house or apartment, see Property Taxes in Panama
Any statements concerning taxation are based upon our understanding of current taxation laws and practices in Panama which are subject to change. While every effort has been made to offer information that is current, correct and clearly expressed the publisher is not responsible for the results of actions taken on the basis of information contained in this summary, nor for any errors or omissions. Readers are encouraged to seek professional advice concerning specific matters before making any decision.
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