🇵🇦 Corporate Tax in Panama

Headline rate: 25% (domestic income only — foreign-source income 0%)

Anonymous Society (Corporation) (SA)

Panama operates a territorial tax system — only income sourced from within Panama is subject to Panamanian income tax at 25%. Foreign-source income (income earned from activities conducted entirely outside Panama) is completely exempt, regardless of whether the funds are remitted to Panama. There is no capital gains tax on foreign-source gains. Dividends paid from foreign-source income are subject to a reduced 5% withholding tax (10% if from domestic-source income). VAT (ITBMS) applies at 7% on domestic goods and services. There is an annual franchise tax (Tasa Única) of $300 for all corporations.

International Business Company (IBC)

A Panama SA used exclusively for foreign operations pays no Panamanian income tax under the territorial system. It must still pay the annual franchise tax of $300. No tax returns are required if there is no Panama-source income, though the company should maintain records demonstrating that all income is foreign-sourced. If the company inadvertently earns Panama-source income, it becomes subject to the standard 25% corporate tax on that income.

Key Facts

Double tax treaties: 18
Memberships: WTO, UN, OAS, SICA, OECD Global Forum
Legal system: Civil law (based on Colombian and Spanish codes)
Fiscal year: January – December

This content is educational and does not constitute legal or tax advice. Always consult a qualified professional for your specific situation. Data last verified March 2026.