INDIVIDUAL TAXATION

Non-residents are only taxed on their Panamian-sourced income. Married couples are generally taxed separately but they may opt for joint taxation.

INCOME TAX (Impuesto sobre la renta a Personals Naturales)

Income earned by non-residents is taxed at progressive rates.

RENTAL INCOME
Rental income is taxed at progressive rates. Individuals who earn rental income can deduct the following from their gross rent: municipal and national taxes, maintenance and repairs, administrative expenses, and depreciation of the property.

CAPITAL GAINS
Taxable capital gains are calculated by deducting the following from the property value at the time of disposal (selling price or market value): acquisition costs, improvement costs, and transaction costs.

Capital gains realized from transactions that are part of ordinary business activities are taxed at the standard progressive income tax rates.

Capital gains realized from transactions not part of ordinary business activities are taxed at a special flat rate of 10%.

A reduced tax rate of 5% is applicable for capital gains realized from properties dedicated to farming or properties for accommodation located in rural areas, provided that the property’s registered value is less than US$10,000.

VALUE ADDED TAX (Impuesto a la
transferencia de bienes corporales muebles con crédito fiscal)

Leasing immovable property in Panamá is subject to VAT, levied at a flat rate of 5% on the gross rent.

Entities with an average monthly turnover less than US$3,000 (during the previous tax year) and an average yearly turnover of US$36,000 are exempted from VAT.

PROPERTY TAX

Property Tax (Impuesto de Inmuebles)

Real estate located in Panamá , whether urban or rural, is subject to property taxes. The tax base depends on the total value of the land, plus all improvements, as appraised by Land Commission (Oficina de Catastro). Real estate transactions at prices above the appraisal value automatically increase their value for tax purposes.

The property tax is imposed at progressive rates.

Alternative progressive tax rates are available in case of voluntary property value declarations, provided that the property value is accepted by the tax authorities following certain requirements.