Panama offers a low corporate income tax rate of 25%, with tax payments due within three months after the end of the accounting period. The tax return must be filed within three months after the end of the fiscal year. There is also a general value-added tax rate of 7%. Non-residents are subject to a withholding tax of 5% on dividends and 10-20% on interest and royalties, while residents are subject to a withholding tax of 5% on dividends and no tax on interest and royalties. The country does not have a capital gains tax, making it an attractive jurisdiction for investment. However, estimated tax payments are due 6, 9, and 12 months after the end of the tax year, which may be a disadvantage for some businesses.
Panama Tax Brief
Time of Update 4/04/2026
Panama Corporate Income Tax (CIT)
Panama Withholding Tax (WHT)
Panama Value-Added Tax (VAT)
Panama Capital Gain Tax (CGT)
Panama Effective Tax Rate (ETR)
Composite Effective Marginal Tax Rate:
18.47%
Additional info
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TKEG Expat™ (Test) Panama Corporate Tax Guide
1.
Panama Value-added Tax (VAT)
The movable goods and services transfer tax (ITBMS) in Panama is essentially a value-added tax (VAT). The general tax rate is 7%, but certain items have higher rates, such as alcoholic beverages and hotel accommodations, which are taxed at 10%, and tobacco products, which are taxed at 15%. ITBMS is applied based on value-added through a system of tax credits and tax debits, which are calculated on taxable transactions. Exported goods are not taxed, and businesses may recover ITBMS on export-related costs. Non-taxed items include medical services and transportation, although these do not produce ITBMS credits.
2.
Panama Corporate Income Tax (CIT)
In Panama, the corporate income tax (CIT) rate is 25%, and companies within the financial sector may face higher rates. The CIT return must be filed within three months after the fiscal year ends, with the final tax payment also due within the same three-month period. Panama requires estimated tax payments to be made six, nine, and twelve months after the end of the taxable year to ensure that taxes are paid in advance throughout the year.
3.
Panama Personal Income Tax (PIT)
Panama's personal income tax (PIT) has a headline rate of 25%. Individuals are required to file PIT returns by March 15, with the final payment due by March 31. Panama mandates that estimated payments are made in three equal installments on June 30, September 30, and December 31, allowing taxpayers to spread their payments across the year.
4.
Panama Withholding Tax (WHT)
In Panama, withholding tax (WHT) rates vary depending on the type of income and whether the taxpayer is a resident or non-resident. For residents, the WHT on dividends, interest, and royalties can range between 5%, 10%, and 20%. For non-residents, the applicable WHT rates are 5%, 10%, and 20%, with certain types of income facing a rate of 12.5%. These rates apply to ensure that the government collects taxes from foreign income sources as well as local ones.
5.
Panama Immovable Property Tax
Panama imposes an immovable property tax on real estate at rates between 0% and 1%, depending on the value and usage of the property. This tax is levied annually on property owners, and the rate depends on the market value and how the property is being used, whether for personal, commercial, or other purposes.
