Taxes and Tax Residency

How to do your taxes in the land of birds and butterflies: essential info on tax return in Panama

2/8/2024 8:00:00 AM
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The question of “how to do your taxes” is important if you want to be in full compliance both at a personal and corporate level. “How to file your taxes” is a topic that concerns both individuals and entities. Luckily, we are in contact with best-in-class experts in Panama who have agreed to explain the essence of personal tax in this business-oriented country. 

How to do your taxes in Panama and why you should do it 

If you’re looking for an advanced jurisdiction where to bank, incorporate a company, develop a project, or protect your assets, Panama has it all. Starting from a healthy corporate environment which includes free zone benefits to a client-oriented and solid banking sector, we can say that this country ticks all the boxes when it comes to perpetual traveler and nomad capitalist services. 

One of its most peculiar characteristics, which happens to draw the attention of several international players, is the country’s wide assortment of residency programs. Before even starting to wonder when to file taxes in Panama, there’s the question of how to get residency easily and affordably. 

Lots of foreigners decide to start their lives over in Panama because of the country’s amazing commercial activity, business-friendly policies, and good predisposition toward expats. 

In Panama, it’s possible to get residency by investing 300,000 USD in real estate (until October 2024) or simply 100,000 in teak land. For citizens of the friendly nations, there are less expensive options if they are willing to wait two years for permanent residency. Thus, they can access a 2-year permit by getting a legal job contract with a local company or by establishing their own company and hiring themselves. Unlike the Qualified Investor permit, the friendly nations visa also contemplates the option of getting residency through a minimum investment of 220,000 USD. 

Note: we have described the differences between the friendly nations visa and the qualified investor permit in this article. 

All in all, access to Panama is relatively easy through these programs, but this article is not about residency but what you do when you are already living here. When are taxes due? How to do my tax return? What can I deduct? These are some of the questions that we address next. 

How to do your taxes: tax rates in Panama

Another reason why international businesspeople choose Panama as their relocation place is taxes. Besides the fact that it has territorial taxation, Panama’s domestic tax system is quite straightforward. 

More info here

How to do your taxes: personal income 

Before wondering how to file your taxes it’s a good idea to know how much you’ll pay. Individuals pay from 15% to 25% for their annual income. If a person makes from 0 to 11,000 dollars a year, he or she is exempt from income tax. From 11,000 to 50,000 dollars a year, income tax is 15%. Thus, when a person exceeds 50,000 dollars a year of income, they will be taxed at a 25% rate (only on the surplus). 

How to do your taxes: corporate income 

Regular companies pay 2% on their annual equity, while free zone registered companies pay only 1%. 

How to do your taxes: for employers and employees

Each month, both employer and employee must make contributions for social security, medical care, and retirement plans. In Panama, this is called “Caja de Seguro social”. The employee pays 9,75% of their monthly salary while the employer pays 12.25%. Other contributions include the “educational insurance”, a fund that’s destined for national educational institutions, and it constitutes 1,25% of the employee’s salary (for the employee) and 1.5% (for the employer). 

When are taxes due in Panama for individuals and corporations 

When to file taxes? Taxes are due during the first term and have different dates for personal and corporate cases. 

  • Filing tax date for personal income: 15 March
  • Filing tax date for corporate income: 31 March

How to do my tax return: deductions 

In Panama, a person can deduct those costs that are necessary in order to generate the income in question, and also those costs focused on education and healthcare. Contributions to private retirement funds are also tax deductible. 

How to do my taxes in Panama: foreign income 

The reader should pay special attention to this point. There may be cases in which foreign income is taxed if, for example, the person sells real estate that is located abroad but somehow linked to Panama. 

Disclaimer: the information in this article is general. Hence, this article does not replace a professional consultation. Before making any important decisions make sure to consult with a certified advisor. 

Figure out how to file your taxes with Mundo’s help

The tax return doesn’t have to be an ominous process. With the help of Mundo experts, you can make sure you know how to do your taxes. To simplify the process, we pay attention to all permits your business may need and to every aspect of legal reporting and accounting. Our first step is to meet with the person and conduct previous research to understand the case. Then, the accountant analyses the specific aspects to file the tax return optimally and most efficiently.

Are you wondering when are taxes due? Do you want to spend the rest of the year at ease because you are 100% compliant and free of fines? One month from now, taxes are due in Panama, so take the way that simplifies things and contact our Mundo experts. They will be happy to help you with your taxes and other financial affairs in the Republic of Panama. 

Do your taxes safely in Panama

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