Panama has a territorial tax system. Hence, all foreign income is tax-free. Once you’ve become a permanent resident, you may obtain a tax number and declare your income from abroad, still maintaining the tax-free condition.
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How is my foreign income taxed in Panama if I get permanent residency through its RBI programs?
I am very interested in applying for a private retiree visa and getting Panamanian permanent residency. My income will come from outside Panama. Will this foreign income be taxed? What is the tax rate?
Answers
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Please note that if you applied for a private retiree visa and get Panamanian permanent residency, your income that comes from outside Panama will not be taxed. In Panama, the principle of territoriality governs. Therefore, taxes are paid just for activities carried inside Panamanian territory.
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Panama´s well-known territorial tax system will only tax your income sourced in Panama, regardless of your residency status in the country. The most important thing is to determine what is considered "sourced income," as it can vary from country to country. Your current existing income will not be taxed in Panama, as long as the current conditions of producing it are maintained, considering too that in its current sourced country, it should comply with the local income tax rules. Please keep in mind, though that if you receive income abroad produced from services rendered in Panama, it would then be taxed here, as it would be one of the cases considered locally sourced. Panama´s personal income tax rate is 0 percent for the first $11,000 net income; 15 percent from $11,000 to $50,000; and 25 percent above $50,000.
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