Panama Taxation: What You Need to Know
Panama, located in Central America, is known for its strategic geographical position, which has made it a hub for international trade and finance. The country offers numerous advantages for businesses and investors, including a favorable tax regime.
1. Territorial Tax System
Panama operates on a territorial tax system. This means that only income generated within the country is subject to taxation. Income earned outside of Panama is not taxed, regardless of the nationality of the individual or company earning it.
2. Corporate Tax Rate
Companies registered in Panama are subject to a corporate tax rate of 25%. However, there are some exceptions. For instance, companies operating in the Panama-Pacific Special Economic Area are taxed at a reduced rate.
3. Personal Income Tax
Individuals residing in Panama are taxed based on a progressive scale:
- Up to $11,000: No tax
- From $11,001 to $50,000: 15%
- Over $50,000: 25%
4. Value Added Tax (VAT)
Panama has a Value Added Tax (VAT) of 7%. However, some goods and services, such as basic food items and educational services, are exempt from VAT.
5. Tax Treaties
Panama has signed double taxation treaties with several countries. These agreements prevent individuals and companies from being taxed twice on the same income.
6. Offshore Companies
Panama is renowned for its offshore sector. Offshore companies registered in Panama benefit from numerous advantages, including:
- No taxation on foreign-sourced income
- No capital gains tax
- No inheritance tax
- No wealth tax
7. Real Estate Tax
Real estate in Panama is subject to a progressive tax rate based on the property's value:
- Up to $30,000: Exempt
- From $30,001 to $250,000: 0.6%
- From $250,001 to $500,000: 0.8%
- Over $500,000: 1.0%
8. Tax Incentives
Panama offers various tax incentives to attract foreign investment. These incentives include tax holidays, reduced tax rates, and exemptions for specific sectors, such as tourism and agriculture.
Conclusion
Panama's tax system is designed to attract foreign investors and businesses. With its territorial tax system, competitive tax rates, and various incentives, Panama remains a top destination for international business operations.
Disclaimer: Always speak directly to an attorney; blog posts are not a sufficient source of information to make decisions, may not be appropriate for your situation, may not be well researched, and may not be current at the time you read them, always speak directly with an attorney.
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