Ferguson & Ferguson

Panama Corporate Tax

Table of Contents

About the Panama Corporate Tax

The corporate tax in Panama is only applied to income produced inside Panama. This is because the system is territorial.

When applicable is as follows:

  • Income tax, direct tax or as a withholding tax.
  • Dividend tax and complementary tax.
  • Busienss License Tax.
  • Franchise tax.
  • ITBMS (tax on transfers of movable goods and rendering of service

Corporations are subject to an income tax of 25% on net taxable income.

Incorporated businesses with an annual taxable income larger than USD 1.5 million have two different calculations and the payable tax will be the net taxable income calculated on the normal basis at 25%, or 4.67% over the gross taxable income, whichever is the higher quantity. Professional services fees, interest, and royalties paid to a non-resident entity are subject to a withholding tax of 25% on 50% of the amount remitted abroad.

Dividends paid out of local taxable income get a 10% dividend tax, withheld at source.

If dividends are not distributed during a fiscal year, the company must pay a complementary tax.

This complementary tax must be withheld over 40% of the net income, after taxes, as an advance on dividend tax if total period earnings are not distributed or if the total period earnings distributed are less than 40% of net income. This results in an effective rate of 4% over the total net income, after taxes.

When these dividends or profits are divided, the remaining six percent (6%) will be paid.

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