Panama located in Central America is one of the most popular and well-organized tax havens. The tax advantages found in Panama are comparable by the tax advantages that offshore jurisdictions offer.
Over the recent years, Panama has also been increasingly popular with immigrants who obtain temporary and permanent residence permits there. The crime rates are rather low while the cost of living is lower than that in most European countries and North America. Foreign entrepreneurs are tempted by the Panamanian territorial taxation system. This system allows international companies domiciled in Panama to pay nothing in taxes on their global incomes.
Another attractive quality about Panama is the ease of acquiring legal residence in the country. You can become a legal resident of Panama by investment, for example, or by making use of an immigration program whose number is impressive in the country. Let us discuss why Panama is attractive in fiscal terms and how you can acquire a residence card in the country.
Panama, a Caribbean offshore, European tax havens or Asian countries? What would be the best choice for an international investor wishing to relocate to a different part of the world? Where should you put your international corporation? Our experts will be delighted to answer these and other related questions.
Discuss the details with an expert
Check the list of required documents, and get the details of the process, terms, and costs.
Contact a consultantLet’s talk via messenger
Taxes in Panama
The territorial taxation system applies not only to individuals in Panama but to the corporations as well. Only locally operating companies and hired personnel pay income taxes in the country.
Obviously, such a tax system is highly beneficial. If you or your company derives incomes from business operations abroad, you don’t have to pay any taxes in Panama. If you are a freelancer or you work remotely, relocating to Panama is certainly an opportunity to consider. You can live in a warm country and pay nothing in taxes there!
Please read about digital nomads and learn where they should pay their taxes.
How does the Panamanian tax system work? What taxes are due in 2023 and who is tax-exempt in Panama?
- Personal income tax for residents and non-residents is levied on locally made income and the rates are as follows in Panama:
- Income of 0 to 11,000 dollars per year – 0%;
- Income of 11,001 to 50,000 dollars per year – 15%;
- Income of more than 50,000 dollars is taxed at 25%.
- Corporate tax in Panama is flat and the rate is 25% in 2023. Tax cuts are available to manufacturers of certain types of goods. Corporate tax rate for Panamanian-based companies earning profits abroad is 0%.
- VAT – 7%.
- Wealth tax – 0%.
- Inheritance tax – 0%.
- Property tax depends on the price of the property in Panama:
- If the property is worth less than 120,000 US dollars, it is tax-free;
- If it is worth more than 120,000 dollars, the tax is from 0.5% to 0.7%.
- Capital gains taxes are payable at the following rates:
- 5% for fiscal residents of Panama and 10% for non-residents;
- Tax on capital gains from sale of non-issued shares and real estate is – 10%;
- Tax on royalties and interests paid to a non-resident is – 12.5%.
- Social security tax in Panama is 9.75% of the salary for the employee and 12.25% for the employer.
The banking sector is well-developed in Panama. Both residents and non-residents of the country can open personal and corporate accounts in Panamanian banks. Please check out some of our offers. Our experts will gladly assist you in setting up a bank account in Panama!
Why is Panama so popular with international corporations?
A great number of international business corporations are domiciled in Panama and a lot of funds are registered there too. The main reason for that is the tax incentives available in the country.
However, there are other reasons why foreign entrepreneurs register companies in the tax haven of Panama. These include the following ones:
- A fast company registration process: a registration agent and a weathered lawyer will help you register a company in Panama.
- Free Economic Zones in the country allow engaging in duty-free trade and manufacturing activities. No taxes are payable if no business is done in the mainland.
- The company founder can qualify for legal residence in Panama.
- Nominee services are allowed in the country, which increases the level of the company owner’s confidentiality. The same goes for company shareholders.
- The political situation is stable in Panama and its economy is growing.
- Panama is strategically located between North and South Americas.
- Panama Canal: need we add any words?
- 100% foreign company ownership is allowed.
Please note that you have to hire an experienced lawyer if you would like to register a company in Panama. Unfortunately, you might run into a fraudster. Offshore Pro Group has a back office in Panama and our experts there will gladly assist you in registering a company in the country.
Our experts will gladly help you register a company in Panama and open a bank account there. We specialize in setting up foreign bank accounts for our clients.
FREE EXPERT CONSULTATION
with seasoned professionals on international
banking
and where it is best to open
non-resident corporate accounts.
with seasoned professionals on international banking and where it is best to open non-resident corporate accounts.
Life in Panama
In addition to tax incentives, Panama attracts immigrants by a wonderful climate and an affordable cost of living. American retirees in particular love to spend their golden years in Panama. We do not mean to say that it costs nothing to relocate to Panama: of course, you have to have a financial cushion because relocation requires some investments.
What monthly income do you have to have to live in Panama in 2023? Please find out about the main costs from the table below.
| Cost of living in Panama in 2023 | 1 adult per month | Family of 4 per month |
| Rent and utilities | $588 | $944 |
| Food | $365 | $968 |
| Transport | $65.8 | $179 |
| Monthly salary after taxes | $868 | |
| Total: | ||
| With cost of rent | $1,112 | $2,587 |
| Without cost of rent | $524 | $1,643 |
Foreigners choose to relocate to Panama for the following additional reasons:
- Low crime rates;
- Possibilities to acquire legal residence in the country by purchasing property there or on other legal grounds;
- An advanced infrastructure and a high-speed Internet connection, which freelancers and digital nomads appreciate very much;
- The quality of healthcare services is high in Panama.
At the same time, there are some downsides too and you have to bear them in mind when deliberating relocation to Panama. For example, hurricanes hit Panama rather often. Besides, sidewalks are simply unavailable in some locations in the country. Besides, you may find yourself in trouble if you do not speak Spanish: few people in the streets as well as in the government agencies speak English in Panama.
If you are looking for a country where you could relocate, please check out our catalog and learn about the available options.
How can you become a legal resident of Panama?
There are several immigration programs in Panama that allow establishing legal residence there. These include the following ones:
- Pensionado program for foreign pensioners whose pension is not less than 1 thousand USD per month. If the pensioner has dependents, an additional 250 USD per month is required for each dependent.
- Friendly Nations visa program. The visa is available to citizens of some foreign countries. It is valid for 2 years and it can be extended. An investment into real property of 200,000 US dollars is required or a bank deposit in the country of the same amount.
- Residence permit for wealthy foreigners is available to those foreign nationals whose passive income exceeds 850 US dollars.
- A golden visa to Panama will also legalize your prolonged stay in the country. You have to invest at least 300,000 US dollars in local assets such as real property or bonds, for example. Please note that the required investment amount is going to grow to 500,000 dollars in 2024.
Please apply for a free consultation on acquiring permanent residence in Panama. Our experts are at your service!
Real property in Panama
One of the legal opportunities to acquire legal residence in Panama is purchasing real property in the country that is worth 300,000 US dollars or more. However, this is not the most popular option with foreigners, as statistics shows. More often, they use other paths to residence in Panama.
This lack of popularity of this option is attributable to the growing property prices in Panama. While foreign investors could find affordable property in the country some ten years ago, the prices grew fast in the times of the recent pandemic and global economic crisis. Today, real property prices are significantly higher than they used to be several years ago.
On the other hand, if the tendency continues and the prices keep growing, you can sell your Panamanian property at a profit after several years if you buy it now. The average price of an apartment in Panama City exceeds 170,000 dollars and it is expected to exceed 180,000 dollars in five years or so.
The growth of real property prices in Panama is quite understandable, as a matter of fact. The economy is improving, people’s prosperity is increasing, and Panama is open to immigrants. Therefore, property prices have to grow together with the growing economy.
If you are looking to acquire foreign citizenship or legal residence in a foreign country by investing into property or by starting a business venture in the country, please apply for our professional assistance. We will help you choose the best tax haven! You are welcome to request a free consultation with our experts on the matter.
Is Panama a good tax haven?
Panama is probably the best tax haven for corporations, remote workers, and digital nomads deriving incomes from other countries. If this condition is satisfied, individuals and corporations do not have to pay any income taxes in Panama.
How to use Panama as a tax haven?
To be able to use the tax exemptions available in Panama, a foreign investor can open a company in the country and do no business on its territory at all. In this case, his/ her income made in other countries is not going to be taxed in Panama.
Why is Panama a tax haven?
Panama is referred to as a tax haven for the following main reasons:
— Territorial taxation system is applied in the country;
— 100% foreign ownership of property is allowed;
— The name of the real owner can be hidden behind a nominee whose name will be indicated in the property register: this is legal in Panama;
— No wealth nor inheritance tax is charges;
— Low taxes on dividends for residents and non-residents of Panama (5% and 10% correspondingly)
