Panama taxation provisions:
Panama applies territorial taxation rules and if the company has no business within the country it is exempt from taxation:
- tax on profit, dividends, interest and royalties – 0%;
- capital gains tax – 0%;
- tax withholding at source on the above income – 0%;
- value added tax – 0%;
- wealth and inheritance tax – 0%.
Companies incorporated in Panama are exempt of any stamp duty.
Non-resident companies are eligible for just one tax – the fixed annual Corporate Franchise Tax:
- upon registration in the National Company Register – $250;
- in subsequent years – $300.
Failure to pay annual Corporate Franchise Tax incurs penalties and the company will be unable to receive operational documents from the National Company Register.
Taxation of resident companies
Companies operating within Panama must obtain a special permit (Aviso-de-Operation) at a cost equivalent to 2% of the total value of the company (maximum $60,000). If the company is domiciled in the special economic zone, the levy will reduce to 1% (maximum $50,000).
Generally the business of resident companies is subject to the following taxes:
- income tax – 25%;
- tax on dividends – 10% or 5%;
- tax on dividends at source:
- for companies in the free economic zones – 5%;
- on registered shares – 10%;
- on bearer shares – 20%;
- on interest and royalties – 6%;
- income tax on branches of foreign companies – 10%.
- capital gains tax – 10%;
- sales tax (VAT) – 7%.
Double Tax Treaties:
The Republic of Panama maintains a number of Double Tax Treaties with Costa Rica, Columbia, Canada, the USA, Singapore, Spain, Portugal, Ireland, Luxembourg, Qatar and others.