Tax laws Panama
Panama's taxation system is governed by the Fiscal Code and operates on a territorial basis, meaning taxes apply only to income or gains derived from business activities conducted within Panama. Income earned outside of Panama is generally not subject to Panamanian taxation.
Key Aspects of Panama's Tax System:
Corporate Tax Rate: The standard corporate tax rate is 25%.
Value-Added Tax (VAT): Panama imposes a VAT with varying rates depending on the type of goods or services:
Standard Rate: 7%
Tobacco Products: 15%
Alcohol and Hotels: 10%
Essential Goods: 5%
Financial Secrecy: Panama has historically been known for its strict banking secrecy laws, which protect the confidentiality of account holders. However, these laws have faced criticism for facilitating tax evasion and money laundering. In response to international pressure, Panama has taken steps to improve transparency, including signing agreements for the exchange of financial information with countries like the United States.
Real Estate Taxes: Property taxes in Panama are based on the value of land and its improvements, with a maximum annual rate of 2.1% of the total value. Exemptions and reductions may apply under certain conditions, such as for residential properties valued up to specific thresholds.
Offshore Business Entities: Panama offers favorable conditions for offshore companies, including exemptions from various taxes for entities conducting business exclusively outside of Panama. However, businesses operating within Panama are subject to local taxes.
Recent Developments:
Shipping Emissions Tax Proposal: In December 2024, Panama, along with other major shipping nations, supported a proposal for a flat tax on greenhouse gas emissions from the shipping industry. This initiative aims to promote energy efficiency and generate revenue for clean energy technologies.
Economic Forecasts Amid Budgetary Challenges: In October 2024, Panama's Economy and Finance Minister reaffirmed the government's commitment to its economic targets, including a real GDP growth estimate of 3%, despite retracting a budget proposal due to congressional opposition. The government is considering adjustments, such as higher royalty fees, to address fiscal challenges and maintain investor confidence.
Note: Tax laws and regulations are subject to change. It is advisable to consult with tax professionals or the Panamanian tax authorities for the most current information.
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