Panama Tax Rates 2026: Income Tax, Corporate Tax, ITBMS & Capital Gains

Panama territorial income tax system

Panama's income tax is principally territorial. Income produced from activities carried out in Panama is subject to income tax regardless of the taxpayer's nationality, domicile or residence. Foreign-source income is generally outside the Panamanian income-tax base, subject to the detailed source rules and special regimes in the Fiscal Code.

Panama individual income tax rates

For individuals, income tax is calculated on annual net taxable income using the following progressive schedule:

Important: These are annual taxable-income brackets, not monthly employment-income brackets.

Common individual income-tax deductions

Available deductions depend on the taxpayer's facts and supporting records. Common deductions recognized by the DGI include medical expenses, qualifying school expenses, qualifying mortgage interest, educational-loan interest and qualifying private retirement-fund contributions.

Panama corporate income tax

The general corporate income-tax rate is 25% of net taxable income. The DGI also lists 25% for specified regulated or major sectors, including banking, insurance and reinsurance, telecommunications, power generation and distribution, cement manufacturing, gaming and mining. Companies in which the Panamanian State owns more than 40% of the shares are subject to a 30% rate.

Deductible business costs and expenses generally must be connected with producing taxable Panamanian-source income or preserving its source and must satisfy the documentation and other requirements of Panamanian tax law.

Alternative Calculation of Income Tax (CAIR)

Legal entities with annual taxable revenue above B/.1.5 million are generally required to compare the traditional income-tax method with the Alternative Calculation of Income Tax (CAIR). Under the CAIR mechanism, the alternative taxable base is generally 4.67% of total taxable revenue, to which the applicable corporate rate is then applied. The Fiscal Code and regulations provide procedures for seeking non-application of CAIR in qualifying loss or excessive-effective-rate cases.

Non-residents and Panama-source remittances

Payments or credits of Panama-source income to persons established outside Panama can trigger withholding and remittance obligations. The applicable treatment depends on the nature of the payment, the Fiscal Code, the recipient's tax status and any applicable double-tax treaty. DGI Form 05 is used for specified remittances abroad, and the DGI states that the related declaration generally must be filed within 10 days after payment or crediting, as applicable.

Panama capital gains tax

Capital-gain treatment depends on the asset and whether the disposal forms part of the taxpayer's ordinary business. For a real-estate sale outside the ordinary course of business, the Fiscal Code provides a 10% tax on the taxable gain together with an advance payment equal to 3% of the higher of the transfer value or cadastral value. The taxpayer may, in the circumstances provided by law, elect to treat the 3% advance as the final income tax on the gain.

Real-estate transfers also involve the separate real-estate transfer tax rules. DGI guidance identifies Forms 106 and 107 for a property sale, with Form 107 covering the capital-gain declaration.

Panama dividend tax and complementary tax

Entities within the statutory dividend-withholding regime generally withhold 10% on distributions from Panamanian-source profits and 5% on qualifying foreign-source, export or exempt profits. Special rules apply to free-zone entities, bearer shares, branches and treaty situations.

Where required distributions are not made, the complementary-tax mechanism can apply. Under the DGI rules, the calculation generally refers to 40% of net after-tax Panamanian-source profits for income subject to the 10% dividend rate, and 20% where the 5% dividend rate applies.

Panama ITBMS (sales / value-added tax)

The general ITBMS rate is 7%. The DGI states that businesses selling goods or services generally must charge ITBMS once annual billing exceeds B/.36,000, subject to the detailed registration, exemption and sector rules.

Important exemptions and non-taxable transactions exist, including specified medicines, basic school supplies, food and agricultural products, public utilities and medical/laboratory services. Special economic zones have their own rules.

Panama social security contributions

Following Law 462 of 18 March 2025, the employee contribution remains 9.75%. The employer contribution increased in stages and is 13.25% for contribution months from April 2025 through February 2027. It is scheduled to rise to 14.25% from March 2027 through February 2029 and to 15.25% from March 2029.

These percentages concern CSS social-security contributions. Other payroll charges, including educational insurance and occupational-risk contributions where applicable, are separate and depend on the relevant rules and employment circumstances.

Annual income-tax return deadlines

A filing extension does not necessarily extend the statutory payment date. Taxpayers with special authorized fiscal periods should follow the DGI rules applicable to those periods.

Business operation notice tax

Under the current Fiscal Code rule reflected in DGI-published legislation, the annual tax relating to an Aviso de Operación is generally 2% of the company's capital, subject to a B/.100 minimum and B/.60,000 maximum, with an exemption for persons or entities whose invested capital is below B/.10,000. Special free-zone and economic-area rules can apply.