I wish to buy a home in Panama and retire there. I meet the minimum income requirements. However, what taxes do I face as a retiree living there with a resident permit? Will I pay any local income taxes if I’m not working? What other things should I consider?
Answers
Panama has a territorial tax system, which means that local income is taxed, but foreign income isn’t. If you live in Panama under a pensionado visa your retirement won’t be taxed in Panama. Neither would be banking interests.
Please note that the Panamanian tax regime is based in the territoriality principle. Therefore, residents are only taxed on their income earned within the country's borders. You can buy a home in Panama and retired here. If you aren't working or have any income for activities in Panama, you don't have to pay taxes.
Once in Panama, all of your foreign-sourced income (including retirement income) are tax-free, including interests from savings at local banks. In fact, you will not be obliged to report income taxes in Panama at all. Your real estate might be subject to property taxes, although there are tax exemptions, which will vary according to the property. You will only pay the regular 7% VAT taxes on your purchases subject to it.