People move to Panama for many reasons. One of which is the country’s favorable tax laws. Panama’s territorial taxation system allows foreign income to be completely exempt from Panamanian taxes. Declaring residency is the most effective way to take advantage of Panama’s tax benefits. However, tax residency in Panama has requirements you must consider.
Panamanian Tax Benefits
Revenue from the Panama Canal is a key driver of Panama’s economy. Therefore, Panama doesn’t need to place a huge tax burden on residents. Paying less in taxes means more money for residents to put back into the economy. It’s truly a win-win for everyone involved. Here are some key taxes that are low or non-existent in Panama:
- Capital gains tax – none
- Taxes on foreign income – none
- Estate or inheritance taxes – none
- Exit Tax – none
- Controlled Foreign Company rules – none
- Corporate income tax – 25% only on income made inside Panama
- Personal income tax – Progressive tax rate up to 25% on income earned inside Panama.
Another advantage is the ease of filing taxes in Panama. Residents and businesses outside Panama don’t need to report that income since it isn’t taxed. Another advantage for companies earning foreign income is that it isn’t audited, reducing bookkeeping and other administrative expenses.
Tax Residency in Panama Requirements
You must be considered a tax resident of Panama to get tax residency. The most significant rule for achieving tax residency in Panama is the time you must spend there. You must live in Panama for 183 days in one fiscal year. You also must demonstrate that you have a permanent residence in Panama.
Obtaining Residency in Panama
There are several ways to achieve residency in Panama, but two are particularly popular. The first is to incorporate a company in Panama, and the second is to invest. Both options work under the Panama Friendly Nations Visa. The Friendly Nations Visa is especially popular, as people from over 50 nations are eligible to apply. Additionally, this visa has advantages that make it easier to establish residency than going through other visa programs.
Company Incorporation
Incorporating or starting a business is among the best options for people from friendly nations. However, you will need a lot of guidance to complete the process correctly. That process includes getting a permit through a work contract. The work contract must be through the company’s activity in Panama. Hiring a local expert to guide you through this process will be critical.
Investment
The investment option for obtaining a Friendly Nations Visa is likely more expensive than incorporating but is more straightforward. You must choose between one of two requirements to gain tax residency using this option. You can deposit at least $200,000 in a Panamanian national bank. Or you can purchase $200,000 or more in Panamanian real estate. It requires a lot of cash on hand, but it gets the visa process moving faster.
Obtaining Residency from Outside Friendly Nations List
What if you want tax residency but don’t come from a country on the Friendly Nations list? There are options, but they require more financial resources. The most popular of these options is the Golden Ticket Visa. It provides a straightforward path to tax residency, but it is expensive. You can choose one of the following:
- Invest $500,000 in real estate
- Invest $500,000 in Panamanian stocks or bonds
- Deposit $750,000 in a Panamanian bank.
These options all cost money and take time. However, if you want to reduce your tax burden, consider tax residency in Panama.
Your Guide to Panama Real Estate
Are you interested in investing in real estate to gain Panama tax residency? The Agency Panama is your best resource. We have our finger on the pulse of the Panama real estate market. We can help you find the best deal for your needs and reduce your tax burden. Click here to see how our team of real estate professionals can make your search easier.