Panama's Taxes for Retirees, Expats and Digital Nomads
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Panama Is Known for Having Low Taxes for Residents
Only if you make money here, on Panamanian soil, are you subject to the country’s income tax.
Although you may be required to pay taxes in your home country and any additional country or countries of residency, the Panamanian government does not require you to record or pay taxes on the income that you have earned abroad.
If you do make money here, the Panamanian government will calculate your personal income tax as follows:
Annual Income of $11,000 or less = 0%.
Annual Income of $11,001- $50,000 = 15% on the amount above $11,000
Annual Income over $50,000 = 15% on the first $50,000 and 25% on the amount over $50,000
What is Taxable income in Panama?
Taxable income in Panama consists of local wages/salaries, company earnings, pensions/bonuses, royalties, and stock sale profit. Medical costs spent locally, as well as gifts given locally, educational costs, specific office costs, and loans for home construction and restoration, are all deductible.
Tax incentive zones in Panama
Special tax incentive zones in Panama, such as Panama Pacific, Ciudad del Saber, and Colón’s Zona Libre, provide tax exemptions and discounts to enterprises that meet the requirements. Additionally free from local taxes is interest received on accounts (savings, time deposits, etc.) with authorized Panamanian banks.
When you become a resident of Panama via the Pensionado program, you are eligible for a one-time duty exemption on the importation of home items up to $10,000. You can also be eligible for a three-year or longer property tax exemption if you purchase or construct a new home.
Panama Property Taxes
One of the lowest property tax rates in the area is in Panama. Unless the property is valued at $120,000 or less, in which case it is exempt from taxes, family/primary homes pay 0.5% to 0.7%.
The rates range from 0.6% to 1% for anything else (including empty lots, businesses, and vacation houses), unless the property is valued at $30,000 or less in which case it is tax-free.
In Panama, real estate transfer taxes are 2% of the higher of the selling price or the property’s latest registered value, which is paid by the seller. It is typical for the shares of the firm to be sold (instead of the property) when a corporation purchases real estate. This eliminates the requirement to pay transfer tax.
Tax on Capital Gains
If you don’t acquire and sell real estate as a source of income, Panama’s capital gains tax is a flat 10% of the gross selling profit. Any earnings from the sale of more than one property per year must be reported on your tax return in Panama. In this scenario, your earnings would be subject to income tax but not further capital gains tax.
ITBMS, often known as sales tax, is 7% on the majority of goods and services, with the exception of necessities like food and medication. 10% tax is levied on luxuries including hotel stays and wine, while 15% is levied on cigarettes.
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