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Panama: Domestic Corporate Taxation

Income Tax Rates

The rate of income tax in Panama was reduced to 27.5% from 30% as a result of a fiscal bill passed in the first months of 2010. The lower rate applies from January 1, 2010. From 2011, the corporate tax rate fell to 25%. However, companies in the energy, telecoms, financial, insurance, banking and mining industries continued to paid corporate tax at 30% until 2012, then 27.5% until 2014, whereupon the rate for these companies will fall to 25%. Companies with turnover of less than PAB200,000 per year pay income tax at individual rates.

There is a withholding tax of 10% on dividends paid out of taxed income. If less than 40% of taxed income is distributed, then Undistributed Profits Tax of 10% becomes payable on the undistributed balance; this therefore amounts to a maximum of 4% tax. In effect this is an advance withholding tax, and it is creditable against the 10% tax on later distributions of the taxed profit.

A new alternative minimum tax was introduced in 2010 for companies with revenues exceeding US$1.5 million. Tax liability is assessed on the greater of 25% of net income or 1.168% of gross taxable income. Whenever the effective income tax rate exceeds 25% of the net taxable income earned by a taxpayer, a waiver may be obtained from the Tax Administration and no presumptive taxation will apply. The same will apply in the event of losses for taxable purposes. The waiver may be granted for a maximum period of four fiscal years (the year for which the waiver is granted and the three subsequent fiscal years).

 

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