Income tax calculator

In short: personal income tax in Panama has three brackets: 0% up to 11,000 USD of net taxable income a year, 15% between 11,000 and 50,000 USD, and 25% above 50,000 USD. Only Panamanian-source income is taxed. The calculator applies the rate schedule of article 700 of the Tax Code.

Net taxable income = Panamanian-source income minus allowed deductions (for example, the 800 USD basic deduction, mortgage interest on a primary residence up to 15,000 USD, social security contributions). Indicative calculation.

Who pays income tax in Panama

Panama applies a territorial system: only income generated inside the country is taxed. A resident who receives income from abroad pays no Panamanian income tax on it. Employees are taxed through monthly withholding by the employer; independent professionals and merchants file an annual return before 15 March.

Current rate schedule for individuals

Annual net taxable incomeTax
Up to 11,000 USD0%
11,000.01 to 50,000 USD15% on the amount above 11,000 USD
Above 50,000 USD5,850 USD + 25% on the amount above 50,000 USD
Key fact: the 15% bracket tops out at 5,850 USD. From there every additional dollar pays 25%. An income of 80,000 USD pays 13,350 USD, an effective rate of 16.7%.

How it is calculated

  • Add up the year’s Panamanian-source income (salary, fees, rent, business activity).
  • Subtract the deductions allowed by the Tax Code.
  • Apply the bracket schedule to the result. Amounts already withheld by the employer are credited against the final tax.
Frequently asked questions

Does a foreign resident pay tax on income from abroad?

No. Panama taxes only Panamanian-source income. Dividends, pensions or salaries generated outside the country are not taxed in Panama, although they may be taxed in the country of origin.

Do employees have to file a return?

Someone with a single employer and no other taxable income is not required to file; monthly withholding covers the tax. With several employers or additional income, a return must be filed.

What is the rate for companies?

Legal entities pay a flat 25% on net taxable income, under rules that differ from those for individuals.

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