Let’s start with the good news: in October 2023, Panama was finally excluded from the gray list of jurisdictions! And it means that you can safely set up your business in the country without fear of any restrictions looming on the horizon. The Central American tax haven is one of the best-organized destinations for work and life that we strongly recommend. You will not have to jump through too many administrative hoops to obtain a residence permit, and you will be able to take advantage of a low cost of living (as compared to Europe and North America) and security (the crime rate is negligible). What is more, you can start your company here to benefit from the local territorial taxation.
If you need more information on Panama (and maybe other tax havens as well), welcome to our portal called International Wealth. We write about international business and banking services, citizenship- and residence-by-investment programs, tax optimization, asset protection, and other things related to wealth management. You can book a free initial session with our expert to discuss your needs and choose the best possible option – and we will help you analyze your situation and shortlist the best destinations at no charge! If you need any support with company opening, bank account setup, or any interaction with local authorities that you would like to delegate, we can do it for you – in most cases, we will manage remotely. All you need is contact us!
Meanwhile, let’s concentrate on Panama.
Taxation in Panama
The country has a territorial taxation system applicable to individuals and legal entities alike. The taxes in Panama are only paid by the companies that operate locally or by the hired employees.
This is advantageous for your business as you will not pay any taxes in Panama if you derive 100% of your income from activities carried out abroad. The country is also good for freelancers and digital nomads as they are not liable for any taxes on the same principles.
Let’s look at the tax rates applicable in 2023:
If you derive your income from local sources, you will have to pay a personal income tax regardless of whether you are a resident or a non-resident. It equals 0% for income up to 11,000 dollars a year, 15% for income ranging between 11,001 and 50,000 dollars a year, and 25% for any amount above that.
The corporate tax amounts to 25% – but only if you get profits locally. Otherwise, you will be exempt.
The VAT is 7%.
The country does not impose a wealth tax or an inheritance tax.
As for the property tax, you will only have to pay it if the cost of the property you own exceeds 120,000 US dollars. In this case, the rate ranges between 0.5% and 0.7%.
The capital gains tax equals 5% for Panamanian tax residents and 10% for non-residents. Royalties and interest paid to non-residents are subject to 12.5%.
The social security tax equals 9.75% of the salary amount for the employee and 12,25% for the employer.
As you see, the rates are not high at all, which is the reason why we highly recommend Panama as a place where you can start your business.
Reasons to Form a Company in Panama
Low taxes are not the only reason to set up your business in Panama. Let’s take a look at other aspects that attract large corporations to the country:
There are a lot of free economic zones in Panama which make it possible to engage in duty-free trade and production.
The company incorporation process is not very long: you will need an experienced lawyer and a registered agent to do it in no time.
Companies can be fully owned by foreigners.
Panama is a politically stable country, and the economy is prospering.
If you establish a company, you can obtain a residence permit in Panama.
The Panama Canal is a very convenient transportation hub.
The jurisdiction officially allows the use of the nominee services, which adds to the confidentiality of the beneficial owners and shareholders.
Panama has an advantageous geographical location between the North and South Americas.
As you see, the benefits are numerous! We can provide a reliable lawyer and a registered agent for your convenience. This is a mandatory procedure: you cannot set up a company in Panama on your own.
Panamanian Residence Permit
Panama offers several immigration programs to take advantage of:
Residence permit for wealthy foreigners can be provided to you if your passive income exceeds USD 850 a month.
Friendly Nations visa program is available to the nationals of some foreign countries, and the respective visa is granted for 2 years with a possibility of extension.
The Panamanian golden visa is provided to individuals who want to stay in the country for a long time. Eligible applicants are required to invest USD 300,000 in local real estate, bonds, or other assets. If you are interested, you’d better hurry as the amount to be invested is going to reach USD 500,000 in 2024.
The Pensionado program is available to foreigners who receive a pension of at least USD 1,000 a month. If a pensioner applies with dependents, USD 250 will be required per each of them.
Choose the program to your liking and welcome to Panama! If you need a specialist’s assistance, we are just a click away.
Real Estate in Panama
If you want to acquire a residence permit in Panama, you can do so by investing USD 300,000 in local real estate. However, this path is not very popular as the prices have grown significantly over the past ten years. This is easy to explain as the country is thriving, there are a lot of immigrants, and the people’s wealth is growing, so apartments cost more: an average apartment in Panama City costs USD 170,000.
However, the tendency for price growth is expected to continue, which means that you can buy a property and later sell it at a profit if you want to. Try this path if you want to, and we can help you choose a suitable facility, open an account, and successfully complete the transaction.
Interested in living or starting a business in Panama? Please explore our portal for more information or get in touch with our experts using the above link.
