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Personal Taxation in Panama
 
 
 

General

Individual income tax rates in Panama are progressive to 27%. Individuals with annual taxable income exceeding $60,000 may be required to compute an alternative minimum tax of 6%.

The larger amount arising from the current calculation method and the alternative method will be the income tax to be paid. In the case of individuals who are merchants, they will apply the alternative calculation established for corporations.

If, after applying the alternative method, the individual incurs losses due to the payment of the tax, the individual can request the Tax Department not to apply the alternative calculation.

Non-resident individuals hired or otherwise rendering services to Panamanian residents for periods of less than 180 days in a calendar year are subject to withholding tax at source at a rate of 15% of their gross income. If the individual stays for more than 180 calendar days, the Panamanian resident will have to withhold at the above statutory tax rates. Joint tax returns are permitted.

Taxable Income

Individuals are taxed on wages and salaries, income from the carrying on of a commercial or an agricultural business and investment income.

Capital Gains

Taxpayers pay a flat 10% rate on capital gains. Gains derived from the sale or transfer of real property are considered capital gains. Taxpayers that do not engage in business activities involving the transfer of real property are subject to a final 10% tax on capital gains derived from the disposition of real estate; however, a 3% withholding tax, which operates as an advance payment of the capital gains tax, will be levied on the higher of the sales price or the value of the property. If the gain on the transfer is higher than the advance tax paid, the taxpayer may set that amount off against other taxes due.

Tax Deductions & Allowances

Individuals are entitled to: a basic deduction of $800; $250 for each dependent; mortgage interest (up to $15,000 per year); donations to non-profit organisations (up to $50,000 per year); political contributions (up to $10,000); medical expenses incurred in Panama and not covered by insurance; and educational tax payments.

Other Taxes

Stamp Duty

Revenue stamps must be attached to all invoices and other official accounting documents evidencing the transfer of goods or rendering of services not subject to VAT. Accounts receivables, checks, bank drafts, notes and similar documents also are subject to this tax. Stamp duty generally is 0.001 per PAB or fraction thereof.


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