Panama Expat Tax: Territorial System, Rates & Visas

Panama doesn't ask where you live. It asks where your income was earned. Income produced inside Panama is taxed. Income produced outside Panama isn't, even if you're tax resident.

This guide covers Panamanian personal tax for people moving to or living in Panama in the 2026 tax year, which is the calendar year. Panama uses the US dollar alongside the balboa at one to one, so every figure here is in dollars.

The key question is simple. Was the income earned in Panama or outside it?

What's changed: the income tax bands haven't moved since 2010, so 2026 uses the same 0%, 15% and 25% scale. The big recent change is the social security reform, Law 462 of 18 March 2025. It raised the employer's contribution to 13.25% of salary from April 2025 to February 2027 and changed how self-employed people register and pay. Law 546 of 31 August 2026 exempts the first US$120,000 of the first sale of a new home from property transfer tax, where the sale is completed within two years of the occupancy permit. Executive Decree 17 of 8 September 2026 rewrote the Qualified Investor residence rules. A crypto bill was struck down by the Supreme Court in June 2023 and never became law.

📋 Panama tax at a glance for 2026

The territorial system: Panama-source and foreign-source income

What does Panama actually tax? Article 694 of the Fiscal Code charges income tax on income produced inside the territory of Panama, wherever it's received. Income produced elsewhere is outside the tax altogether.

Image 1 — Panama only taxes income earned in Panama

That rule applies to everyone. Becoming tax resident doesn't widen what Panama taxes, and bringing foreign income into Panama doesn't create a charge.

Article 694 lists salaries, fees and other pay for personal work among the income it treats as Panama-source. It also lists activities that are not Panama-source, even though they're run from Panama:

• invoicing, from an office in Panama, the sale of goods that only move outside Panama

• directing, from an office in Panama, transactions that are completed or take effect abroad

👉 Law 1 of 2014: the text of Article 694 of the Fiscal Code, published by Panama's Judicial Branch (in Spanish)

Where does remote work fit?

If you sit in Panama City and work for clients or an employer abroad, is that foreign income?

The law doesn't give a clean answer. Article 694 treats pay for personal work as Panama-source, including pay to people engaged for their profession or trade. The tax authority puts it more simply: you pay income tax if you receive income from activities carried out in Panama, whatever your nationality, home or residence. On that reading, what matters is where you physically do the work, not where your client is.

The other reading relies on the exclusion for transactions directed from Panama that take effect abroad. Many remote workers take that position, but we couldn't find a published ruling from the tax authority that settles it.

So pensions, investment income and work you do outside Panama are clearly foreign-source. A Panama job or Panama clients are clearly Panama-source. Work you do while physically in Panama for people abroad sits in between. If your plan depends on it being untaxed, get written advice in Panama first.

👉 Dirección General de Ingresos: income tax questions and answers, including who has to pay (in Spanish)

When you become tax resident in Panama

Tax residence matters less in Panama than in most countries. It matters when you need a tax residence certificate, for example to use a double tax treaty or to show another country that you've moved.

Under Article 762-N of the Fiscal Code, as the tax authority's 2025 guidance describes it, you're tax resident in Panama if you meet either test:

• you stay in Panama for more than 183 days, in one stretch or added together, in the tax year or in the year immediately before it

• you've set up your permanent home in Panama

The look-back to the previous year means a long stay in one year can make you resident for the next year too. The guidance says the reason for your stay, whether tourism, work or business, doesn't matter.

A residence visa alone doesn't make you tax resident. To get a tax residence certificate you apply through the e-Tax 2.0 system with a copy of your passport, your entry and exit record from the immigration service, a property certificate or notarised lease, utility bills and other proof of your ties to Panama. The tax authority says a reply takes about three months.

How you stop being resident

The 2010 text of Article 762-N built a release into the home test. If your home is in Panama, you stop being treated as resident for a calendar year in which you spend more than 183 days in another country and can prove you became tax resident there. The proof is a certificate from that country's tax authority. The tax authority's 2025 guidance doesn't repeat this release, so check it still applies before you rely on it.

Leaving doesn't trigger a charge on your foreign assets, because Panama never taxed them.

👉 Dirección General de Ingresos: FATCA and CRS guide, section 5 on tax residence (in Spanish)

👉 Law 33 of 2010: the original text of Article 762-N on tax residence (in Spanish)

👉 Dirección General de Ingresos: how to apply for a tax residence certificate (in Spanish)

Income tax rates for 2026

Panama taxes salaries, self-employed profits and other Panama-source income of individuals on one scale.

Panama income tax rates for individuals in 2026

Source: Fiscal Code, Article 700, as published by the Dirección General de Ingresos.

Deductions are limited. They include mortgage interest on your main home up to US$15,000 a year, medical and school costs paid in Panama, and US$800 for a married couple filing jointly.

👉 Dirección General de Ingresos: income tax rates (in Spanish)

Worked example

• You're single and take a job in Panama City in 2026 paying US$100,000.

• Income tax is US$5,850 on the first US$50,000 plus 25% of the next US$50,000, which is US$18,350.

• Social security is 9.75% of your salary, US$9,750, and educational insurance is 1.25%, US$1,250.

Your all-in bill is about US$29,350, or 29% of your salary, before any personal deductions. Thirteenth-month pay carries a lower social security rate of 7.25%, so the exact figure depends on how your pay is structured.

Freelancing in Panama

Self-employed people pay income tax on the same scale, on net Panama-source income, plus educational insurance of 2.75% through the tax return. On US$100,000 of net Panama-source fees, that's US$18,350 of income tax and US$2,750 of educational insurance, which is US$21,100 or about 21%.

Social security comes on top. Independent workers have to register with the social security fund, and Law 462 of 2025 sets a US$100 fine for not registering. Since the reform, contributions are worked out on the income you declare to the fund and paid to it directly.

The fund's older guidance set the contribution at 13.5% of 52% of gross annual fees, but it pre-dates the reform. We couldn't confirm the new rate and contribution base from the fund's published guidance, so check both with the fund before you budget.

👉 Caja de Seguro Social: independent workers must register with the social security system (in Spanish)

👉 Caja de Seguro Social: consolidated text of the social security law after Law 462 of 2025 (in Spanish)

Crypto, investments and pensions

How is crypto taxed in Panama? There's no specific law. The National Assembly passed a bill on virtual assets, but on 6 June 2023 the Supreme Court declared the whole bill unenforceable.

That leaves crypto under the general rules. A gain on crypto held outside Panama is generally treated as foreign-source and not taxed. The tax authority hasn't published guidance confirming this, and regular trading run from Panama could be argued to be a business carried on there. A Panama-source gain would be taxed at 10%.

👉 Supreme Court ruling of 6 June 2023 on the virtual assets bill (in Spanish)

For investments, the split is the same:

• Foreign portfolio: dividends, interest and gains from investments held outside Panama aren't taxed.

• Panama assets: gains on Panama property and on shares in Panamanian companies are taxed at 10%. On a property sale you can choose to pay 3% of the sale value as your final tax.

• Dividends from a Panamanian company: the company withholds 10% where the profits are Panama-source and 5% where they come from foreign-source or export income.

A pension paid from outside Panama is foreign-source, so Panama doesn't tax it. The country that pays it may still tax it, so check its rules and any treaty.

The tax authority's list of the taxes it runs has no inheritance tax, no gift tax and no wealth tax for individuals. Gifts of property in Panama can still involve the property transfer tax.

Property tax is modest. A main home is exempt up to a registered value of US$120,000, then taxed at 0.5% up to US$700,000 and 0.7% above that.

👉 Ministry of Economy and Finance: Law 49 of 2009 on capital gains and dividends (in Spanish)

👉 Dirección General de Ingresos: property tax rates (in Spanish)

Social security

If you're employed in Panama, your employer deducts your share for the Caja de Seguro Social (CSS) from your pay:

• Social security: 9.75% of your salary, and 7.25% of your thirteenth-month pay.

• Educational insurance: 1.25% of your salary.

Your employer pays its own share on top. Under Law 462 of 2025 that share is 13.25% of salary from April 2025 to February 2027. The fund describes the increase as falling on employers.

👉 Caja de Seguro Social: general income regulations with contribution rates (in Spanish)

👉 Caja de Seguro Social: employer contribution increase under Law 462 of 2025 (in Spanish)

Double tax treaties

Does Panama have double tax treaties? Yes. The tax authority lists 17: Barbados, the Czech Republic, France, Ireland, Israel, Italy, Luxembourg, Mexico, the Netherlands, Portugal, Qatar, Singapore, South Korea, Spain, the United Arab Emirates, the United Kingdom and Vietnam.

The United States and Canada aren't on that list. Panama only has tax information exchange agreements with them.

👉 Dirección General de Ingresos: double tax conventions (in Spanish)

The remote worker visa and other residence routes

Panama's digital nomad route is the Short Stay Visa for Remote Workers, created by Executive Decree 198 of 7 May 2021. You need to:

• work for a foreign company or be self-employed, doing work that takes effect abroad

• earn at least US$36,000 a year, and show the income comes from outside Panama

The visa lasts nine months and can be extended once for the same period.

The immigration service's requirements say nothing about tax. There's no written exemption attached to the visa, so your position rests on Article 694 and the grey area above.

👉 Servicio Nacional de Migración: requirements for the Short Stay Visa for Remote Workers (in Spanish)

If you want to stay for good, three routes are more common:

Panama residence visas for expats in 2026

👉 Panamá Digital (government portal): permanent residence as a retiree or pensioner (in Spanish)

👉 Servicio Nacional de Migración: Friendly Nations residence requirements (in Spanish)

👉 Ministry of Commerce and Industries: changes to the Qualified Investor programme under Executive Decree 17 of 2026 (in Spanish)

Who is Panama good for?

Ratings are relative to the 150+ countries TaxPilot covers, based on 2026 rules and the all-in cost including social security and educational insurance.

☑️ Who is Panama good for? Tax ratings for expats in 2026

Filing and deadlines

The tax year is the calendar year. Individuals file the annual income tax return by 15 March of the following year, so the 2026 return is due by 15 March 2027. You can ask for an extension to 15 April. Filing late carries a US$100 penalty.

You don't have to file if your only income is one salary and your employer has withheld all the tax, or dividends that have already had tax withheld, or exempt interest. If you have more than one salary, or self-employed income, you file one return covering all of it.

Estimated tax for the current year is paid in three instalments, due on 30 June, 30 September and 31 December.

👉 Dirección General de Ingresos: income tax filing deadlines (in Spanish)

👉 Dirección General de Ingresos: income tax return basics and who doesn't need to file (in Spanish)

Frequently asked questions

Does Panama tax foreign income?

No. Panama taxes only income produced inside Panama, under Article 694 of the Fiscal Code. Income produced outside Panama isn't taxed, whether or not you're tax resident.

I work remotely from Panama for foreign clients. Is that foreign income?

Not automatically. Income from services carried out inside Panama can be treated as Panama-source, even if the client and the payment are abroad. It's a grey area, so get written advice before relying on it.

What are the income tax rates in Panama in 2026?

The first US$11,000 of net taxable income is tax free. Income from US$11,001 to US$50,000 is taxed at 15%, and income over US$50,000 at 25%. Employees also pay 9.75% social security and 1.25% educational insurance.

Is a foreign pension taxed in Panama?

No. A pension paid from outside Panama is foreign-source income, so Panama doesn't tax it. The country that pays the pension may still tax it, so check its rules and any double tax treaty.

How do you become tax resident in Panama?

You're tax resident if you stay in Panama for more than 183 days in the tax year or the year before, or if you've set up your permanent home there. A residence visa alone isn't enough, and a tax residence certificate takes about three months.

How many double tax treaties does Panama have?

Panama's tax authority lists 17 double tax treaties, including with the UK, Spain, France, Italy, the Netherlands, Portugal, Ireland, Mexico, Singapore and the UAE.