Panama (PA)
Panama is one of the most popular expat countries in the Americas in 2026, especially for retirees, remote-income households, investors, entrepreneurs and families who want US-dollar living, strong air connectivity, private healthcare and established expat communities.
Tax & Payslip Guide
Understanding your taxes in Panama — tax year Calendar year: 1 January – 31 December.
📊 Income Tax Brackets
| Income from | Income to | Rate | Notes |
|---|---|---|---|
| 0 | 11,000 | 0% | No tax on the first USD 11,000 of net taxable income per year. Taxable income = gross income minus allowable deductions. |
| 11,001 | 50,000 | 15% | Net taxable income between USD 11,001 and USD 50,000 taxed at 15%. Progressive — only the income in this band is taxed at this rate. |
| 50,001 | ∞ | 25% | Net taxable income above USD 50,000 taxed at 25%. Panama's territorial system means only Panamanian-source income is included for most residents; foreign-source income is generally excluded. |
🏛️ Social Contributions
Mandatory for all formally employed workers. Covers: pension (jubilacion), sickness/maternity (enfermedad y maternidad), occupational risk (riesgos profesionales), disability and life insurance. CSS contribution is calculated on gross covered salary with no upper cap for most employees.
Separate levy from CSS proper. Mandatory for all formally employed workers. Funds Panama's educational system. Appears on the payslip as a separate deduction from CSS.
Individual retirement savings account within the CSS/SIACAP framework, introduced to complement the defined-benefit pension under the Law 462 social-security reform. Amounts vary by subsystem and year of first contribution.
🛒 VAT Rates
Panama's consumption tax is called ITBMS, not IVA/VAT. The standard rate is 7%. Registration is mandatory when annual taxable revenue exceeds USD 36,000; voluntary below the threshold. Monthly ITBMS declarations are due by the 15th of the following month. Canal Zone and special economic zone transactions may have different treatment.
🧾 Sample Payslip Decoder
🌍 Special Expat Tax Rules
Panama uses a strict territorial tax system: only Panamanian-source income is subject to ISR for individuals. Foreign-source income (salary from a foreign employer, dividends from foreign companies, rental income from properties abroad, interest on foreign accounts) is generally excluded. This makes Panama attractive for remote workers and internationally mobile professionals — but the source analysis is fact-specific and must be reviewed by a Panamanian contador. US citizens remain subject to IRS filing regardless of where they live or where income is sourced.
📋 Double Tax Treaties
Panama has tax treaties (convenios de doble tributacion) with approximately 40 countries including: Spain, Mexico, France, Italy, Ireland, Netherlands, Luxembourg, Portugal, Czech Republic, Barbados, Singapore, South Korea, UAE, Qatar, Israel and others. Panama signed the OECD BEPS Multilateral Instrument. No treaty with the US, UK or Germany as of 2026 — check DGI for current treaty list before assuming treaty relief is available. Treaty relief is not automatic; tax-residence certificates and source documentation are required.
Tax & Payslip
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