Tax & International Structuring in Panama

Essentials guide · Source-checked research64% of statements checked against a source5 checked against an official source27 checked against a secondary sourceChecked 2026-10-194 held back until checked against an official source9 topics include AI-written statements, not source-checkedNot yet professionally reviewed

• Panama applies a territorial tax system: only income from Panamanian sources is subject to income tax.

  Foreign-source income is generally not taxed. Panamanian entities of multinational groups earning foreign-source passive income must meet economic substance tests to keep the 0% rate (see pa-tax-007).PwC Worldwide Tax Summaries · checked 2026-10-19

• The corporate income tax rate is 25%.

  Companies with Panama-source taxable income.PwC Worldwide Tax Summaries · checked 2026-10-19

• Companies with taxable income above USD 1.5 million pay tax on the higher of net taxable income and a presumptive base of 4.67% of gross taxable income (CAIR).

  Taxpayers can ask the tax administration not to apply the CAIR where it produces a loss or an effective rate above 25%; the DGI has six months to decide and silence counts as approval.PwC Worldwide Tax Summaries · checked 2026-10-19

• Dividends are subject to a 10% tax when paid from Panama-source profits and 5% when paid from foreign-source or export profits.

  Entities that need an operation permit, operate in a free or special zone or earn Panama-source taxable income. Bearer-share issuers pay 20%. A complementary tax applies where less than 40% of net profits is distributed and is credited against the later dividend tax.PwC Worldwide Tax Summaries · checked 2026-10-19

• The general rate of ITBMS (the Panamanian VAT) is 7%.

  Alcoholic beverages and hotel accommodation are taxed at 10%, and tobacco products at 15%.PwC Worldwide Tax Summaries · checked 2026-10-19

• Payments to non-residents for services, royalties and interest that are Panama-source income are subject to withholding at an effective 12.5%.

  Calculated as 25% on 50% of the payment; no withholding where the recipient is registered as a Panamanian taxpayer. Treaty relief may apply.PwC Worldwide Tax Summaries · checked 2026-10-19

• Law 526 of 28 May 2026 sets economic substance requirements for Panamanian entities of multinational groups earning foreign-source passive income; entities that fail them pay a definitive 15% tax on that net income instead of 0%.

  Applies from fiscal year 2027; substance must be shown annually for each income stream.PwC Worldwide Tax Summaries · checked 2026-10-19

• The Multinational Company Headquarters regime (SEM) gives qualifying headquarters a fixed 5% income tax rate, VAT exemption for services to group companies, and immigration and labour benefits.

  Groups with assets of at least USD 200 million or serving at least seven subsidiaries.Chambers and Partners (BDO Legal Panama) · checked 2026-10-19

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