Does Panama tax foreign income?
Panama taxes income produced within its territory, wherever it is received, and it does not tax income produced abroad. That is article 694 of the Fiscal Code.
For individuals, the first B/. 11,000 of taxable income is exempt, the next band pays 15% and income above B/. 50,000 pays 25% on the excess.
What the law taxes
Article 694 of the Fiscal Code taxes the taxable income produced, from any source, within the territory of the Republic of Panama, whatever the place where it is received. The taxpayer is the person, Panamanian or foreign, who receives that taxable income. Nationality plays no part.
The same article treats as produced in Panama the pay for personal work, such as salaries, fees and other remuneration, paid to workers or to people hired for their profession or trade. It also says that directing, from an office established in Panama, transactions that are completed or take effect abroad does not produce Panamanian income.
Source: Fiscal Code, article 694, as restored by Law 1 of January 8, 2014, Official Gazette 27450-A
Foreign pensions
A pension paid from abroad is not income produced in Panama, so the territorial rule leaves it out. The Pensionado law gives import and immigration benefits, but no income tax exemption of its own, because none is needed.
Source: Fiscal Code, article 694; Law 9 of 1987, article 2
The rates for individuals
The balboa is at par with the US dollar. The law also exempts the taxable net income of an individual that does not exceed B/. 11,000.
| Taxable net income | Tax |
|---|---|
| Up to B/. 11,000 | 0% |
| Over B/. 11,000 up to B/. 50,000 | 15% on the amount over B/. 11,000 |
| Over B/. 50,000 | B/. 5,850 on the first B/. 50,000, plus 25% on the excess |
Source: Fiscal Code, articles 700 and 708, as amended by Law 8 of March 15, 2010, Official Gazette 26489-A
When to file
The law excuses some people from filing, such as an employee with a single employer whose tax is withheld at source.
- Individuals file their return by March 15. Companies file by March 31.
- Any balance owed is paid no later than March 31.
- An extension of up to one month can be requested before the deadline, after paying the tax you estimate you owe.
Source: Fiscal Code, article 710, as amended by Law 52 of 2012, article 5, Official Gazette 27108
Questions people ask
Is Panama tax free?
No. Panama taxes income produced in Panama. It does not tax income produced abroad.
Does it matter where the money is paid?
No. The law looks at where the income is produced, wherever it is received.
Does becoming Panamanian change my income tax?
No. The law does not distinguish by nationality. It looks at where the income is produced.
Does the new law on foreign passive income affect me as a person?
No. Law 526 of 2026 applies to entities that belong to a multinational group, not to individuals.
What the law does not say
- Whether work you do physically in Panama for a foreign client or employer is Panamanian income. The text of article 694 looks at where income is produced, and we have found no DGI ruling or court decision on remote work. We do not publish that it is untaxed.
- Whether a resident whose only income is foreign must still file a return. The law obliges every taxpayer to report the income received, and no rule we have read says so expressly for this case.
- The exact article and paragraph that exempt interest on deposits in Panamanian banks for individuals.
Planning your move to Panama?
Book a free 15-minute call with a Panamanian lawyer. We will tell you what applies to your case and what to prepare.