The tax system in Panama is the core element of what makes it a great place for investors, perpetual travelers and geographically independent entrepreneurs in getting a permanent residency here. With its great landscape and stable economy, getting a Panama Friendly Nations Visa is the popular and the easiest residency program that the country offers.
However, there are a lot of choices that you can get too such as the pensionado Visa which takes a minimum of $1, 000 monthly pension, the Panama Agricultural Investor Program which takes a minimum of $60,000 for investment in agricultural business, the Reforestation Investor Visa which values a minimum of $80,000 investment of a certified five hectares reforestation project, the Business Investor Visa which has a minimum of $160,000 investment for a business in Panama, the Economic Self Solvency Visa with a minimum of $300,000 investment in real estate and/or a fixed deposit account in a Panamanian bank.
Also, the Republic of Panama is offering the most common way in getting residency that is available in most of the countries such as residence through marriage to a Panamanian or by being a parent to a child that is born in Panama.
Personal Income Tax in Panama
Panama is using a territorial-based taxation system. Both the residents and the non-residents are only based on the income that they get within Panama. This means that any income generated outside of Panama is zero tax. Otherwise, it is subject to a tax.
Tax exemption is for the first $11,000 taxable Panama-source generating income. A huge percentage of the Panamanian population is paying no direct taxes despite the increase of the average wages. An income from $11,000 to $50,000 is subject to tax at 15% while 25% will be subject to income that exceeds $50,000. Furthermore, a 0% to 0.7% is for the property tax.
7% is the standard VAT (Value-added tax). A special rate of 10% for the accommodations and 15% for alcohol.
Resident companies should withhold 10% on their dividends that are distributed from domestic profits and 5% on dividends distributed from their export profits or foreign-source profits. Payment of interests and royalties to a non-resident are subject to a 12.5% withholding tax.
How to Get the Panamanian Citizenship & Passport
The Panamanian passport has the 39th ranking out of the Henley Passport Index last year 2019. What it does is it gives a visa-free access to 142 countries. The said countries are all the Latin and South America, Russia and the Schengen area. Panamanians are required to have a visa to enter the US territory but wont get any issues in getting one. Also, they have access to the Global Entry program.
Panama is officially not recognizing dual citizenship. This means that you are required to renounce your former citizenship when you get your nationality there. The law in the Panamanian nationality requires you to have an oath of renunciation as a means of naturalization. The oath might not be effective when it’s not done by the relevant authorities of your current country of nationality. This would that you don’t have to give up your original nationality when you become a national in Panama.