Mexico vs Panama taxes (2026): territorial tax, income tax and VAT

Mexico vs Panama tax rates at a glance

Tax	🇲🇽 Mexico	🇵🇦 Panama
Income tax	Personal income tax: 1.92% - 35% Highest bracket tax: 35% Foreign income tax: Taxable for residents Salary withholding: Monthly Employee social security: Separate Tax return deadline: 30 April	Personal income tax: 0-25% Highest bracket tax: 25% Foreign income tax: 0% Salary withholding: Yes Employee social security: 9.75% Educational insurance: 1.25%
Corporate tax	Corporate income tax: 30% Dividend withholding: 10% VAT: 16% Border VAT: 8% Annual return deadline: 31 March	Corporate income tax: 25% CAIR minimum: 4.67% State-owned companies: 30% DMTT: 15% VAT / ITBMS: 7%
Capital gains tax	Capital gains tax: Up to 35% Listed share gains: 10% Property gains: Up to 35% Nonresident gross method: 25% Nonresident net method: 35%	Capital gains tax: 10% Securities WHT: 5% Real estate transfer tax: 2% Income tax advance: 3%
Dividend tax	Dividend withholding tax: 10% Domestic dividend tax: 10% Foreign dividend tax: Taxable	Standard dividend WHT: 10% Exempt / foreign-source: 5% Bearer shares: 20% Payment deadline: 10 days
Wealth tax	Net wealth tax: 0% Net worth tax: 0% Annual asset tax: 0%	Net wealth tax: 0% Net worth tax: 0% Annual asset tax: 0%
Inheritance / estate tax	Inheritance tax: 0% Estate tax: 0% Gift tax: 0% / limited Probate tax: 0%	Inheritance tax: 0% Estate tax: 0% Gift tax: 0% Probate tax: 0%
VAT / GST / sales tax	VAT: 16%	VAT / ITBMS: 7%
Standard VAT / ITBMS	16%	7%
Foreign-source income	Taxable for residents	Generally outside Panama tax; MNE passive-income exception

Who wins on each tax

Personal income taxPanama

Panama's territorial system is usually better for ordinary foreign-source income; specified passive income of multinational-group entities has a separate economic-substance regime. Mexico taxes residents on worldwide income up to 35%.

Corporate taxPanama

Panama's 25% corporate tax is below Mexico's 30% rate.

Capital gains taxPanama

Panama commonly uses a 10% capital gains rate, while Mexico can tax gains up to 35%.

VATPanama

Panama ITBMS is 7%, compared with Mexico VAT at 16%.

Large local marketMexico

Mexico wins when the business needs the Mexican consumer, hiring or manufacturing market.

The verdict

Panama wins for most mobile tax planning. Its territorial system generally taxes Panama-source income and leaves ordinary foreign-source income outside the local tax net. Specified passive foreign income of multinational-group entities is subject to a separate economic-substance regime. VAT is 7% and there is no wealth tax or inheritance tax.

Mexico is a full tax jurisdiction. Residents are generally taxed on worldwide income, personal rates can reach 35%, companies pay 30% corporate tax, VAT is 16% and dividends commonly face a 10% withholding layer.

Choose Panama for foreign-source income and territorial planning. Choose Mexico only when residence, customers, property, hiring or operations make a Mexican tax footprint unavoidable or commercially worthwhile.

How to read this comparison

Panama is the better tax base for foreign-source income. Mexico is a real operating-market choice, not a tax-minimisation choice.

Which one fits you

🇲🇽 Choose Mexico if you're a…

Businesses operating in Mexico
People with Mexican property, payroll or customers
Founders who need Mexico's market more than tax savings

🇵🇦 Choose Panama if you're a…

Mobile founders earning outside Panama
Investors seeking territorial income treatment
Residents prioritising lower VAT and lower corporate tax

Frequently asked questions

Is Mexico or Panama better for tax?

Panama is usually better for tax, especially for foreign-source income. Mexico is better only when the commercial or personal reason for being in Mexico outweighs the higher tax cost.

Does Mexico tax worldwide income?

Yes. Mexican tax residents are generally taxed on worldwide income, while nonresidents are taxed on Mexican-source income.

Does Panama tax foreign income?

Generally, Panama taxes Panama-source income rather than ordinary foreign-source income. However, Law 926 of 2026 applies an economic-substance regime to specified passive foreign income of multinational-group entities; source classification and documentation still matter.