Tax authorities
Edificio OGAWA, Vía España y Calle 52 Este
(Calle del Santuario Nacional)
Tel: (+507) 507-7000 to 7008
Website: www.mef.gob.pa
Tax rates at a glance
(As of September 1 2011)
| Corporate income tax rate |
30% |
| Capital gains tax rate (Flat) |
10% |
| Branch tax rate |
30% |
Withholding tax |
|
| Dividends |
10% |
| On Bearer Shares |
20% |
| To Panamanian holding companies |
0% |
| Interest |
15% |
| Royalties from patents and licences |
15% |
| Branch remittance tax |
0%/10% |
Net operating losses (years) |
|
| Carryback |
N/A |
| Carryforward |
5 |
- Panama operates a territorial tax system. Residents and non-residents are taxed only on Panama-source income. Income that does not arise in or is not derived from Panamanian sources is not subject to tax in Panama. Tax liability is calculated on the greater of a flat rate of 30% on net income or 1.401% of gross taxable income.
- A 10% tax is levied on dividends paid out of domestic profits. The rate is 5% on dividends paid out of foreign source profits and dividends paid out of exports profits (20% in the case of bearer shares). Companies located in Panamanian free trade zones, except for companies in the Howard (Panama-Pacific) Special Economic Area and licensed multinational headquarters companies, must pay a 5% dividend tax on the distributions of profits, regardless of where the dividends are sourced, The subsequent distribution of such dividends will not be taxed if tax already has been withheld at the 10% or 5% rate. If a corporation does nor declare dividends in a particular year, it must pay a retained earnings tax or minimum dividend tax, amounting to 10% (20% in case of bearer shares) of 40% of its after-tax income. A 2% retained earnings tax is imposed on profits distributed by companies established in a free trade zone or related to foreing-source income that is taxed at the 5% rate.
- Certain interest is exempt from tax.
- Branches of foreign corporations pay the 10% deemed dividend tax on its after tax income as complementary tax.
- Commercial enterprises incurring a net operating loss in a fiscal year may deduct 20% of the loss in each of the five years. However, the deduction is limited to 50% of the taxable income in each subsequent fiscal year. Any portion of a net operating loss not deducted because of this limitation may not be deducted in a later fiscal year.
Source: Professionals from Taxand Panama