Income tax in Panama 2026

The scale could not be simpler: 0% on the first PAB 11,000, 15% up to 50,000, and 25% beyond — applied only to income earned in Panama.

Salary earners whose only income averages PAB 800 a month or less (PAB 10,400 a year) are exempt outright, and services performed abroad are never Panamanian-source, even when a Panamanian company pays.

At a glance

top rate: 25% above PAB 50,000
entry band: 0% up to PAB 11,000
tax year basis: Calendar year
filing deadline: 15 March; salary-only employees settled by withholding
residency basis: Territorial; resident at 183 days in the year or the previous year, or a permanent home
regime flag: Registered small enterprises: 7.5-22.5% reduced scale

Rates

Income tax scale (2026)

Taxable net income (PAB)	Rate
0 – 11,000	0%
11,001 – 50,000	15%
Over 50,000	25%

Marginal rates apply within each band.

Reduced scale for registered small enterprises (by gross income)

Gross income (PAB)	Rate on taxable net income
Up to 11,000	0%
11,000 – 36,000	7.5%
36,000 – 90,000	10%
90,000 – 150,000	12.5%
150,000 – 350,000	17.5%
350,000 – 500,000	22.5%

Thresholds & allowances

Low-income exemptionPAB 10,400 a year
Employment as the only income source, averaging PAB 800 a month excluding the 13th-month salary
Mortgage interestUp to PAB 15,000 a year
For buying, building or improving your own Panamanian home
School expensesUp to PAB 3,600 (higher education)
School and first/second-level education costs for dependent children also deductible; fully deductible for disabled dependants
Medical expensesDeductible
Incurred in Panama and documented, including health-policy premiums
Joint-filing allowancePAB 800
For married couples electing a joint return
DonationsUp to PAB 50,000 a year
To approved public and non-profit institutions
Severance reliefPAB 5,000 + 1% per service year
Termination payments are taxed separately with these deductions; up to PAB 5,000 is exempt

Residency

Residency trigger

Residence follows 183 days in the tax year or the previous one, or a permanent home in Panama — but because the tax is territorial, residence mostly matters for treaty certificates, not for what you owe.

Non-resident treatment

Non-residents pay the same 0-25% scale on Panamanian-source income; interest and royalties paid abroad are withheld at the progressive rates applied to 50% of the payment.

Notes

Everyone files an estimate of the coming year's income with the annual return and pays it in instalments on 30 June, 30 September and 31 December.
Business losses carry forward 5 years, deductible at 20% of the loss a year and never beyond half of that year's taxable income.
Foreign individuals staying 183+ days with taxable local income are taxed like nationals.
Returns above PAB 11,000 of gross income need a certified public accountant's sign-off through the online portal.
Farming income under PAB 350,000 of gross receipts and the first 2 years of registered micro-enterprises (billing under PAB 150,000) are exempt.

FAQ

What is the top income tax rate in Panama?

25%, on Panamanian-source taxable income above PAB 50,000 — with the first PAB 11,000 free and 15% in between.

Does Panama tax foreign income?

No — 0%. The system is territorial: foreign salaries, dividends, gains and pensions are outside Panamanian tax entirely, for residents and non-residents alike.

When is the Panamanian tax return due?

15 March of the following year, extendable by 1 month on request; employees with only salary income are settled through withholding.

Figures: tax year 2026, compiled from public sources. Not tax advice.

See income tax in other countries

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