Accounting and tax

Panama accounting and tax planning

  1. In Panama, onshore companies with annual revenue less than US$1.5 million will pay corporate income tax at 25%. All other onshore companies will be taxed at 28%. Please note, only income earnt within the territorial boundary of Panama will be taxed;
  2. Offshore companies will only pay an annual tax of US$300;
  3. Branches will pay an additional dividend tax of 10% on their after-tax income;
  4. All resident companies with annual turnover exceeding US$36,000 must pay VAT at the standard rate of 7%. Companies will be required to file monthly VAT returns;
  5. Dividend payments from domestic income will be subject to withholding tax of 10%. Dividend payments from abroad and from export income suffer a reduced withholding tax of 5%;
  6. Capital gains derived from the sale of securities will be subject to withholding tax of 10%. Please note the company making the sale must withhold 5% of the price for making an advance income tax payment to the government;
  7. Panama imposes 13% withholding tax on interest payments and royalty payments to a non-resident;
  8. All resident companies can carry forward up to 20% of their business losses for a maximum period of 5 years;
  9. Resident companies must file their tax returns within 3 months after the end of the fiscal year. Please note, that the Panamanian tax law does not permit the filing of consolidated tax returns;
  10. Companies will also be required to pay property taxes annually at an average rate of 2% on real estate;
  11. Transfer tax of 2% will be levied on the real value of property in Panama;
  12. Panama has signed DTAs with 10 countries including Holland, Luxembourg, Singapore, South Korea and Spain to reduce withholding tax on payments abroad. Additionally, Panama has signed FTAs with 11 countries including Chile, Mexico, Singapore, Taiwan and USA;
  13. In February 2020, Panama was added to the European Union’s (EU) tax havens blacklist for its failure to implement ‘economic substance’ requirements on local companies, in order to crack down on tax evasion;
  14. Healy Consultants Compliance Department will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records and iv) preparing forecasts, budgets and sensitivity analysis;
  15. It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.

Legal and compliance

Healy Consultants Compliance Department assists our Clients efficiently and completely discharge their Panama legal and tax obligations.

  1. A Panamanian Corporation and LLC will be setup with at least 3 directors and 1 shareholder. Please note that while corporate entities can act as shareholders, they cannot be appointed as company directors;
  2. Panamanian law mandates the minimum initial share capital for incorporating a corporation and LLC to be only US$1. However, foreign entrepreneurs can only be granted an investor visa if they deposit an initial capital of at least US$160,000;
  3. All resident companies must register with the tax agency in order to obtain a Tax Identification Number (RUC). Also, it is mandatory to register with the district tax authorities for the payment of local taxes;
  4. Foreign entrepreneurs are not permitted to pursue retail businesses in Panama;
  5. Employees can work for a maximum of 8 hours a day and 48 hours a week. Any overtime must be compensated with an extra 25% of regular salary per hour;
  6. Resident companies will be required to submit annual audited financial statements if the i) initial capital exceeds US$100,000 or ii) annual gross income exceeds US$50,000;
  7. All employers are required to contribute 12% of their employee’s salary to the latter’s social security account;
  8. All companies will provide their employees paid vacation of 30 days after continuous work of 11 months;
  9. Foreign employees cannot comprise more than 10% of the company’s total work force. Furthermore, monthly payroll of the foreign employees cannot be higher than 10% of the total;
  10. Panamanian banks can request affidavits if a transaction worth US$10,000 has been concluded by a Client. This is done to disrupt potential money laundering operations.

Contact us

For additional information on our accounting and legal services in Panama, please contact our in-house country expert, Mr. Petar Chakarov, directly:
client relationship officer - Petar
  • Mr. Petar Chakarov
  • Client Engagements Manager
  • Contact me!
ministry of foreign affairs ministry of economy and finance panama tourism sumarse - corporate social responsibility tourism authority of Panama ministry of commerce and industry