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EY
Street address:
Mail address: International Business Park, P.O. Box 0832-1575 Edificio 3855, Piso 2 World Trade Center Oficina #210 Panama City Panama Pacifico Boulevard Republic of Panama Panama City Republic of Panama
Executive and immigration contacts
Luis Ocando
Rafael Sayagués
+507 208-0100
Email: luis.ocando@pa.ey.com
+506 2208-9880 (resident in San José, Fax: +506 2208-9999 Costa Rica)
Email: rafael.sayagues@cr.ey.com
Immigration contacts
Fernando Vargas
+506 2505-0900 (resident in San José, Fax: +506 2208-9999 Costa Rica)
Ana Josefina Clement
A. Income tax
Email: fernando.vargas.winiker@cr.ey.com
+507 208-0100 Fax: +507 214-4301
Email: ana.clement@pa.ey.com
Who is liable. Resident and nonresident individuals are taxed on their Panamanian-source income regardless of the nationality of the individual and the location of the payment of the income. For tax purposes, the nationality of the individual is irrelevant. Individuals are considered resident for tax purposes if they reside or remain in Panama for more than 183 continuous or noncontinuous days in the calendar year or in the immediate preceding year or if they have established their permanent residence in Panama.
Income subject to tax. The taxation of various types of income is described below.
Employment income. Taxable income includes wages, salaries (including salaries in kind), bonuses, pensions, directors’ fees, profit sharing, severance payments, seniority premium payments and other remuneration for personal services.
Education allowances are considered to be taxable salary and, consequently, they are subject to income tax and social security contributions.
Amounts received by the taxpayer for representation expenses are subject to a flat 10% withholding tax rate on amounts up to PAB25,000. Representation expenses in excess of PAB25,000 are subject to withholding tax at a rate of 10% on the first PAB25,000 and 15% on the excess. All representation expenses are subject to social security contributions.
Rates. Employment income and self-employment income are taxable at the following rates.
Withholding tax is levied on the income of nonresidents at a rate of 15% plus the educational tax at a rate of 2.75%.
Relief for losses. Self-employed individuals incurring a loss in a tax year may deduct 20% of the loss in each of the five subsequent tax years. However, the deduction is limited to 50% of taxable income in each subsequent tax year, and any nondeductible amount may not be carried forward.
B. Other taxes
Estate or gift taxes. Panama does not tax estates or gifts.
Real property tax. A real property tax applies to land, buildings and other permanent structures located in Panama. These properties are subject to tax at progressive rates, which are shown below.
The following are the tax rates if the property is considered a Tributary Family Patrimony (Patrimonio Familiar Tributario) or a Primary Residence (Vivienda Principal).
A Tributary Family Patrimony is a property that is destined for permanent family habitation use by its owner(s), in accordance with the Article 476 of the Family Code.
A Primary Residence is a property that is destined for permanent residential habitation use by its owner (whether it is a natural person or juridical person) and that does not constitute a Tributary Family Patrimony.
The following are the tax rates for Secondary Residences and commercial and industrial properties.
Horizontal Properties (condominiums) that have an existing property tax exemption will continue to receive the benefits of
• Authorized tourism card or visa, if applicable according to the nationality of the tourist
• Proof of payment from the hotel where the individual will be staying, if applicable
Passport holders from the following jurisdictions must apply for a Panama authorized tourist visa before coming to Panama.
Afghanistan Guinea Palau
Albania Guinea-Bissau Palestinian
Algeria India Authority
Angola Indonesia Papua New
Anguilla Iran Guinea
Armenia Iraq Qatar
Azerbaijan Jordan Romania
Bahrain Kazakhstan Rwanda
Bangladesh Kenya Saudi Arabia
Belarus Kiribati Senegal
Benin Korea (North) Seychelles
Bhutan Kuwait Sierra Leone
Bosnia and Kyrgyzstan
Slovak Republic
Herzegovina Laos Slovenia
Brunei Darussalam Lebanon Solomon Islands
Bulgaria Lesotho Somalia
Burkina Faso Liberia South Africa
Burundi Libya Sri Lanka
Cambodia Madagascar Sudan
Cameroon Malaysia Swaziland
Cape Verde Malawi Syria
Central African Maldives Tanzania
Republic Mali Tajikistan
China Mainland Marshall Islands Togo
Comoros Mauritania Tonga
Congo (Democratic Mauritius Tunisia Republic of) Micronesia Türkiye
Côte d’Ivoire Moldova Turkmenistan
Cuba Mongolia Tuvalu
Dominican Morocco Ukraine
Republic Mozambique United Arab
Equatorial Guinea Myanmar Emirates
Eritrea Namibia Uzbekistan
Ethiopia Nauru Vanuatu
Fiji Nepal Vietnam
Gabon Niger Yemen
Gambia Nigeria Zambia
Georgia North Macedonia Zimbabwe
Ghana Oman
Executive Decree No. 248 of 2009 allows citizens of any of the above-mentioned jurisdictions to be granted a visa to enter Panama if they possess a visa to enter Australia, any European Union (EU) Member State, Canada or the United States.
Foreigners may stay in Panama as tourists for up to 90 days. Foreigners from certain jurisdictions are only allowed to stay in Panama for 15 days subject to the discretion of the immigration authorities and on a case-by-case basis.
and their dependents may obtain an MHQ Permanent Personnel Visa or a Dependent of MHQ Permanent Personnel Visa. Under Article 26 of the Law 41 of 2007 and its amendments, salary and other labor remuneration, including salary in kind, received by employees who hold an MHQ Permanent Personnel Visa are exempt from income tax, social security contributions and educational insurance tax, provided that such salary and other labor remunerations are assumed, paid and recognized as payroll expenses in the MHQ company’s accounting.
Migratory and labor options for a company hiring a foreigner. The migratory and labor options for a company hiring a foreigner include, among others, the following:
• 10% of the ordinary personnel (10% category).
• 15% of the specialized personnel (15% category).
• Marrakesh Agreement. The residence and work permit under this agreement applies to foreigners who enter the country to work in a company with less than 10 Panamanian employees.
The 10% category can be requested by foreigners who will be hired by private companies in Panama and who earn a monthly salary not less than USD850. Foreigners hired under the 10% category must hold ordinary positions, which do not denote hierarchy, command or specialization within the company, and their hiring must not exceed the percentage established by the labor legislation in relation to national workers, according to the detail of the payroll reported to the Social Security Authority.
The 15% category may be requested by foreigners who will be hired by private companies in Panama and who earn a monthly salary not less than USD850. Foreigners hired in the 15% category must hold a position of technician, expert or manager, and/ or be considered trustworthy personnel (as defined in Article 84 of the Labor Code) within the company, and their hiring must not exceed the percentage established by the labor legislation in relation to national workers, according to the detail of the payroll reported to the Social Security Authority.
After the term of two years of the provisional residence permit, the foreigner can apply for permanent residence.
Amendments to Labor Code. Executive Decree No. 6, which was implemented on 13 April 2023, amended Articles 17, 18 and 19 of the Labor Code. The amendments included a restructuring of work permit categories through the introduction of six new categories of work permits (that is, Local Workforce, Labor Code Quotas, Special Laws, Humanitarian Protection, Special Conditions and Temporary Workers), updated application processing times and new conditions for filing extension applications.
Temporary Workers. The Temporary Workers work permit allows a Panama-based company to hire foreign nationals or visitors who will perform, on a temporary basis, technical work for a Panamanian company for a specific work or project, provided both the company and the visitor meet all requirements and responsibilities regulated by the National Immigration Service and the Panamanian Ministry of Labor and Workforce Development
• Psychology
• Chemistry
• Chiropractor
• Radiology
• Public relations
• Sociology
• Laboratory technician
• Speech therapist
• Social work
• Veterinary
Treaty of friendship, trade and navigation between Panama and Italy. Under a treaty between Panama and Italy, citizens of each of the contracting parties are allowed to enjoy in the territory of the other national treatment with respect to the admission to economic or professional activities of any kind and the exercise of such activities with the exception of the exercise of retail trade.
Based on the treaty, Panama has developed a special category of migration and labor for Italian nationals so that they can obtain a permanent residence permit, foreign certificate and indefinite work permit, if the Italian nationals fulfill the requirements for these items.
Permanent resident permit for qualified investors. Executive Decree No. 722 of 15 October 2020 created the category of permanent resident as a qualified investor, which offers international investors the opportunity to obtain permanent legal residence status in Panama in an expedited manner through a procedure at a special window. After five years of permanent residence have elapsed, the investor may choose to naturalize and obtain citizenship in Panama.
Among the benefits of this residence permit is that the investor’s physical presence in the country is not necessarily required to submit the initial application. The application may be filed through a special power of attorney, which must be apostilled or authenticated by the Panamanian consulate in the country where it was signed.
To obtain this permit, the investor must make an investment in Panama through one of the following methods:
• Real estate investment: On 15 October 2024, Decree 193 was published, modifying Executive Decree No. 722 of 2020. It confirmed that the investment amount in real estate is permanently set at USD300,000. This investment must be free of liens up to that amount, from foreign sources, which may be done personally or through a legal entity of which the applicant is the final beneficiary of the shares.
• Investments made through a brokerage house with license approved by the Superintendence of the Panama Stock Exchange: The minimum investment is USD500,000 in securities of issuers whose businesses are conducted in the country, through the Panama Stock Exchange.
• Fixed-term deposits: The minimum investment amount is USD750,000, free of liens.
To maintain permanent residence as a qualified investor, the investment must be maintained for a minimum of five years, counted from the date of the resolution of approval.
I. Family and personal considerations
Family members. By law, only family members or dependents in the following categories can apply as dependents of the applicant:
• Spouses (formally married).
• Children under 18. If the dependent is older than 18 but younger than 25, single and a student in an authorized academic institution in Panama, he or she can also apply as a dependent of the applicant.
• Parents of the applicant.
Executive Decree No. 6 of 13 April 2023 allows dependents to apply for a work permit that authorizes them to work legally in the country, under the category of Family Reunification Work Permit for Dependents.
Marital property regime. Agreement regarding the matrimonial regime can be reached before the marriage ceremony. The agreements to establish the matrimonial regime are called matrimonial capitulations. The Family Code recognizes the following three matrimonial regimes:
• Profit-sharing regime
• Separation of property regime
• Partnership regime
The spouses choose the matrimonial regime that will govern their marriage. In Panama, if the spouses do not expressly establish the matrimonial regime that will govern the marriage, the law indicates that the profit-sharing regime applies automatically to all marriages entered into after 1995.
Forced heirship. If an individual dies without leaving a will, the beneficiaries of the individual’s assets and patrimony according to the law are descendants, ascendants, the spouse, father and mother, collaterals, and brothers. The priority order is set by the Civil Code, according to a series of different combinations. Amounts to pay maintenance and other obligations of the deceased are removed from the deceased’s estate before the estate is distributed among the beneficiaries.
Driver’s permits. The Authority of Transit and Land Transport allows tourists (individuals who do not have an approved residence permit and are visiting Panama) to drive vehicles with their current license from their country of origin. Tourists are allowed to drive with the current license from their country of origin up to a period of 90 days. Once the foreigner changes his or her immigratory status that allows him or her to reside in Panama, he or she must apply to the Panamanian authorities for a local driver’s license.