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Withholding tax in Panama 2026
Panama's cross-border withholding is light: dividends carry the 10%/5% final rates, while interest and royalties remitted abroad are taxed at the ordinary progressive rates applied to only half the payment — an effective ceiling of 12.5%.
The royalty and interest withholding only bites when the Panamanian payer deducts the expense — payments unconnected to Panamanian taxable income flow out untouched.
At a glance
- top rate
- Effective 12.5% (25% on a 50% base)
- entry band
- 5% dividends from foreign-source profits
- tax year basis
- Withheld per payment
- filing deadline
- Final for withheld items; others file by 15 March
- residency basis
- Panamanian-source payments
- regime flag
- Treaty benefits need a request 30 days before the transaction
Rates
Withholding on cross-border payments (2026)
| Rate | Base | Applies to |
|---|---|---|
| 10% / 5% / 20% | Gross dividend | Dividends — local profits / foreign-source or free-zone profits / bearer shares (final) |
| Progressive (0-25%) | 50% of the payment | Interest paid or credited abroad, where deducted by the payer |
| Progressive (0-25%) | 50% of the payment | Royalties paid to foreign recipients, where deducted by the payer |
| 5% | Gross interest | Bonds and securities registered with the securities regulator (exempt if exchange-traded) |
| 10% / 15% | Amount paid | Entertainment-expense allowances — 10% up to PAB 25,000, 15% above |
Withholding residents meet (2026)
| Rate | Base | Applies to |
|---|---|---|
| Progressive (0-25%) | Monthly salary | Employer withholding, remitted with social security |
| 3% | Higher of price or cadastral value | Buyer's advance on property sales |
| 5% | Sale value | Buyer's advance on securities sales |
Thresholds & allowances
- Treaty windowApply 30 days before the transaction
Treaty relief is not automatic — the tax authority must pre-approve
Residency
Residency trigger
Withholding closes the file for dividends and most passive flows; non-residents with other Panamanian income file personally or through an agent by 15 March.
Non-resident treatment
If a non-resident files nothing, the authorities collect through withholding agents on later payments; tax-residence certificates for treaty use are issued on documented application.
Notes
- The 50%-base mechanism means the practical ceiling on outbound interest and royalties is 12.5% — and 0% where the payer cannot deduct the cost.
- Salaries paid by Panamanian companies for work done abroad carry no withholding at all — the income is foreign-source.
- Rulings from the tax authority are available but not binding.
- Late employer information filings carry fines of PAB 100 to 1,000 scaled to the employer's income.
FAQ
What withholding applies to payments abroad from Panama?
Dividends 10% or 5% final; interest and royalties at the progressive rates on half the payment — an effective maximum of 12.5%, and only when the payer deducts the expense.
Do foreign investors file Panamanian returns?
Not for fully withheld income like dividends; other Panamanian-source income means filing by 15 March personally or through an agent.
Figures: tax year 2026, compiled from public sources. Not tax advice.