Panama Home Latin America Panama Living There Taxes on Residents' Income from Property in Panama More PA × Panama Financial Overview Overview Market in Depth Rental Yields Income Tax et al Tax Example Taxes if Resident Buying Guide Landlord and Tenant Property Inheritance Country Statistics Property Investments Where to Buy Survey of Panama Bocas del Toro La Cresta Marbella San Francisco Santa Ana Key Contacts Accountants Lawyers Real Estate Agents Mortgages Income tax in Panama November 09, 2017 INDIVIDUL TAXATION Panamá has a territorial taxation system and residents are taxed only on their Panamian-sourced income. Married couples are generally taxed separately but they may opt for joint taxation. INCOME TAX Resident individuals are taxed on their total income received from Panamá sources, including (1) income from employment and from rendering personal services, (2) income from business activities, (3) income from agricultural activities, and (4) investment income. All individuals, with the exception of employees earning a single salary, are required to file an income tax return. Income tax is levied at progressive rates, depending on the taxable income. INCOME TAX TAXABLE INCOME, (US$) TAX RATE Up to US$11,000 0% US$11,000 – US$50,000 15% on band over US$11,000 Over US$50,000 25% on all income over US$50,000 Source: Global Property Guide Resident individuals are allowed to deduct the following personal allowances and deductions from their taxable income: Annual deduction of US$800 for married couples filing a joint tax return Interest paid on mortgage loans for home improvements on residences located in Panama, up to US$15,000 annually Interest paid on loans for education Medical expenses of the taxpayer and his dependents, subject to certain conditions Donations to local educational and charitable institutions, up to US$50,000 annually RENTAL INCOME Rental income is taxed at progressive rates. Income-generating expenses are deductible from the gross rent: municipal and national taxes, maintenance and repairs, administrative expenses, and depreciation of the property. CAPITAL GAINS Taxable capital gains are calculated by deducting the following from the property value at the time of disposal (selling price or market value): acquisition costs, improvement costs, and transaction costs. Capital gains realized from transactions that are part of ordinary business activities are taxed at the standard progressive income tax rates. VALUE ADDED TAX (Impuesto a la transferencia de bienes corporales muebles con crédito fiscal) Leasing immovable property in Panamá is subject to VAT, levied at a flat rate of 7% on the gross rent. Entities with an average monthly turnover less than US$3,000 (during the previous tax year) and an average yearly turnover of US$36,000 are exempted from VAT. PROPERTY TAX Property Tax (Impuesto de Inmuebles) Real estate located in Panamá, whether urban or rural, is subject to property taxes. The tax base depends on the total value of the land, plus all improvements, as appraised by Land Commission (Oficina de Catastro). Real estate transactions at prices above the appraisal value automatically increase their value for tax purposes. The property tax is imposed at progressive rates. PROPERTY TAX TAX BASE, US$ TAX RATE Up to US$30,000 nil US$30,000 – US$50,000 1.75% on band over US$30,000 US$50,000 – US$75,000 1.95% on band over US$50,000 Over US$75,000 2.10% on all value over US$75,000 CORPORATE TAXATION INCOME TAX Income earned by companies is taxed at a flat corporate tax rate of 25%. Income-generating expenses are deductible when calculating taxable income. CAPITAL GAINS TAX Capital gains realized by companies from transactions that are part of ordinary business activities are taxed at the standard progressive income tax rates. Capital gains realized by companies from transactions not part of ordinary business activities are taxed at a special flat rate of 10%. A 3% withholding tax is levied on the transaction, which will then be credited against the taxpayer’s capital gains tax liability. Panama - More data and information Lawyers (attorneys) with property law practices in Panama Where to by property in Panama Comments Be the first to comment on this article! Login or Register to submit a comment! In order to promote open and spam-free conversations, Global Property Guide moderates commetns on all articles. You can expect that your comment will be published within 24 hours.