Starting a business in
🇵🇦Panama
Checked November 4, 2026 · How we score
Corporate tax
25%
Top income tax
25%
Setup from
$1,200
all-in, first year
Time to form
5 days
can be done remotely
Taxes in Panama
| Corporate income tax | 25% 25% on Panama-source income; foreign-source income is not taxed (territorial principle). Group entities earning foreign passive income (dividends, interest, royalties, capital gains) keep 0% only if they meet economic substance requirements, otherwise 15% applies. Companies above USD 1.5M taxable income face the CAIR alternative minimum (4.67% of gross income). Annual Tasa Única of USD 300 for companies. |
|---|---|
| Personal income tax (top) | 25% Progressive 0%/15%/25% on Panama-source income (0% up to $11,000, 15% up to $50,000, 25% above). Foreign-source income of individuals is not taxed. Employees also pay social security and an education levy on salaries. |
| Tax system | Territorial (foreign income untaxed) |
| Capital gains tax | 10%10% on gains from Panama real estate (or 3% of sale price) and Panama-company shares; foreign-source gains are not taxed. |
| Dividend withholding (non-residents) | 10% |
| VAT / GST | 7% |
| Social security | ITBMS (VAT) 7% (10%/15% on alcohol, tobacco). Dividend WHT 10% on dividends from Panama-source profits (lower rates apply to some foreign-sourced dividends). Employer CSS contributions about 12%–13.5%. |
Forming a company in Panama
| Usual entity | S.A. (Sociedad Anónima) or LLC (Sociedad de Responsabilidad Limitada) |
|---|---|
| Minimum capital | None |
| Setup cost (all-in) | $1,200–$3,000 |
| Annual running cost | $800–$2,500 |
| Time to incorporate | 5 days |
| Form remotely as a foreigner | Yes |
| Local director required | No |
| Local address required | Yes |
| Owners on public register | No |
| Statutory audit for small companies | No |
| Business banking for non-residents | Hard |
Residency and visas
Panama offers the Friendly Nations Visa (nationals of about 50 countries; permanent residency with a local business or a US$200,000 real estate/bank deposit), the Qualified Investor visa (US$300,000 real estate) and the Short Stay Remote Worker visa (9 months renewable, about US$3,000 monthly income, tax exempt on foreign income). Requirements and fees change often, so verify with Migración Panamá.
| Digital nomad visa | Short Stay Remote Worker Visa, $3,000/month income |
|---|---|
| Golden visa | Yes, from $200k |
| Ease of residency for founders | 2/5 (1 = easiest) |
Special tax regimes
Territorial taxation
Only income earned in Panama is taxed; foreign-source income is generally exempt, subject to tightening foreign-source income (FSIE) substance rules for multinational group entities.
Friendly Nations Visa
Fast permanent residency for citizens of eligible countries who set up a Panama business or deposit funds and show economic ties; processing typically takes months.
SEM (Multinational Headquarters) regime
Regional HQ companies serving group entities abroad get a 5% reduced rate and exemptions on foreign-source income, with employment and substance conditions.
Short Stay Remote Worker Visa
Nine-month visa for remote workers (renewable once) with at least US$3,000 monthly income from foreign sources; income is not taxed in Panama.
Pros and cons
Why founders pick Panama
- No tax on foreign-source income for companies and individuals
- Uses the US dollar; no currency risk
- Remote incorporation via registered agent; private shareholder register
- Friendly Nations Visa leads to permanent residency
Watch out for
- Reputation is mixed: past tax-haven listings and the Panama Papers, EU grey-list status as of October 2026
- Corporate bank accounts take weeks and need strong documentation
- Foreign-source passive income substance rules are tightening
- Panama-source income, including locally serviced clients, is fully taxed
Best for: Freelancers and online businesses earning only foreign-source income · Founders seeking a territorial base and USD-denominated economy · Holding and trading companies needing a flexible, private structure
Panama: common questions
Does Panama tax foreign income?
No. Panama taxes only income generated in Panama, so income from clients and activities abroad is generally outside the tax net for both companies and individuals. Since 2019, group entities earning foreign passive income need economic substance to keep the 0% rate, otherwise 15% applies.
Is Panama on the EU tax blacklist in 2026?
Panama was on the EU list of non-cooperative jurisdictions (Annex I) until 9 October 2026, when EU finance ministers moved it to the grey list (Annex II) after it reformed its foreign-source income exemption regime. The change takes effect when the revised annexes are published in the Official Journal, so verify the current status before relying on it. Banks and EU counterparties may still apply enhanced due diligence.
How much does it cost to open a company in Panama?
A Panama S.A. typically costs about $1,200–$3,000 in the first year, including legal fees, registration and a registered agent, then roughly $800–$2,500 per year including the USD 300 annual Tasa Única. Nominee directors and a resident agent are usual, and remote setup is possible with a Panamanian lawyer.
Can I get residency by starting a company in Panama?
Yes, if you are a citizen of a Friendly Nations country. Under the Friendly Nations Visa you can obtain permanent residency by showing economic ties, such as a US$200,000 real estate purchase or bank deposit, or by forming a company with employees. Other nationals can use the Qualified Investor visa from US$300,000 in real estate.
Is Panama good for a digital nomad?
The Short Stay Remote Worker visa lets you live in Panama for nine months, renewable, with at least US$3,000 monthly foreign income. Foreign income is not taxed locally, but staying 183+ days can create home-country tax residency obligations, so check your home rules.
Sources
- DGI Panama (Dirección General de Ingresos)
- Servicio Nacional de Migración de Panamá
- Council of the EU: list of non-cooperative jurisdictions
- PwC Worldwide Tax Summaries: Panama
Compare Panama
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Not tax or legal advice. Rates and rules change; we check official sources and update every page, but verify with a licensed adviser in the country before acting. Spotted something out of date? Use the correction form below.