Tax system in Panama
Panama taxes individuals and companies on Panama-source income, not foreign-source income. For expats and founders, that territorial rule is the headline feature.
The main direct taxes to model are 25% corporate income tax on Panama-source profits, 0-25% personal income tax on Panama-source income, 5%/10%/20% dividend withholding, and 10% capital gains tax in the ordinary case.
Panama also has 7% ITBMS, special ITBMS rates on some goods and services, payroll social security and educational insurance, and a minimum corporate tax calculation for larger companies above USD 1.5 million of taxable income.
Tax rates at a glance
- Income tax
- 0-25%Territorial
- Wealth tax
- 0%
- Inheritance tax
- 0%
- Capital gains tax
- 10%
- Corporate tax
- 25%
- Dividend tax
- 5% / 10% / 20%
- VAT / ITBMS
- 7%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
Remote foundersInvestorsExpatsHolding companiesRegional operators
Watch out for
- Panama remains on the EU list of non-cooperative jurisdictions in tax matters in 2026, so cross-border banking and treaty paperwork can be stricter than the headline rates suggest.
- Employer social security contributions step up from 13.25% in 2025 to 14.25% from 1 March 2027 and 15.25% from 1 March 2029, so payroll planning should model the increase early.
- ITBMS registration and filing still matter for operating businesses; the general rate is 7%, and businesses usually need to register once annual taxable sales exceed USD 36,000.
Frequently asked questions
Is Panama a low-tax country?
Panama is low-tax for foreign-source income because of its territorial system, but it is not tax-free. Panama-source income can face personal income tax up to 25%, corporate tax is 25%, dividends are taxed, and VAT and payroll costs still apply.
Does Panama tax foreign income?
Generally no. Panama taxes foreign-source income only in limited special cases; the ordinary rule is that individuals and companies are taxed on Panama-source income.
Is Panama good for founders and investors?
It can be, especially if your income and operations are outside Panama. The main tradeoff is that banking, compliance, dividend withholding and foreign tax rules still need careful planning.