Paying Taxes in Panama

Even though the offshore companies are exempt from paying taxes in Panama, the local companies or the one that performs commercial activities are not excluded from paying certain taxes.

For example, certain goods and services are taxed with a 7% VAT. The alcohol and the cigarettes are taxed with 10% and 15% VAT. The companies that have to register to VAT are making a monthly turnover above 3000 USD or an annual turnover above 36,000 USD.

The corporate incomes are taxed with 27.5% but certain industries and services are taxed with a higher rate. For example, the banking companies, insurance companies, mining companies, energy companies, telecom companies and financial companies must pay a 30 % tax rate until this year, 27.5 % until 2014 and then a corporate tax of 25%.

Dividends paid by the companies are taxed with 10% withholding tax on the usual shares and 20% on dividends on bearer shares.

The rates of taxes on the taxable incomes are depending on the amount of annual gains. Up to 11000 USD there is no tax, from the incomes between 11,001 and 50,000 there is a tax of 15% and for the incomes above 50000, an tax of 25% is applicable.

Social securities taxes must be paid by the employer and the employee. The rate of the tax paid by the employer is 12%, unlike the rate paid by the employee of 9%. It’s predicted that these rates will grow to 12.25 % and 9.5% after 2013.

The inheritance taxes are not required in Panama, even though exists a certain tax on gifts of properties located in Panama with a value depending on various aspects such as the relationship between the grantor and the granted.

Being known as a holiday destination by many foreign and local investors, the government of Panama is supporting this sector by many initiatives. The tourism investments law is facilitating this sector by granting certain rights to the entrepreneurs that have invested more than 50,000 USD in it (not including the land). For example, for 20 year the company is excluded from paying taxes on equipment, vehicles, materials or real estate taxes. Also, no tax is asked for using the airports.

The real estate tax depends on the sum made year by year and starts with 1.75% from 30,000 USD to 50,000 USD, 1.95% from 50,001 USD to 75,000 USD and 2.10% on values above 50,000 USD.

The insurance premiums, air tickets, motorcycles, cars, cable television, pre-paid cellular phones are subject to an excise tax of 5%.

Our team of accountants in Panama can help you with additiional information.

Contact our specialists as needed.