Taxes in Panama

In Germany, you sometimes get the impression through the media that you don’t have to pay taxes in Panama…this is wrong. Panama has a progressive tax system in which tax rates and rules are clearly defined. Generally you can say that the taxes in Panama are lower and easier to understand for investors, entrepreneurs and citizens compared to Germany. And the tax system in Panama has a positive feature.

Panama has a territorial tax system, which basically means that Panama only taxes the income that is earned within Panama’s borders. For companies and investors resident in Panama, this means that foreign income is taxable in the other country, but not in Panama. This is a significant difference to the German tax system, where you also have to pay tax on foreign income.

Here is a brief overview of the tax rates in Panama (as of 10.2022):

  • Corporate tax 25% (small and medium-sized companies have lower tax rates / multinationals negotiate their own tax rates)
  • Income tax ( salary, rent, etc.), progressive
    • 0 – 11 TUSD annual income: 0%
    • 11- 50 TUSD annual income: 15%.
    • > 50 TUSD annual income: 25%.
  • Capital Gain tax 10%
  • Interest income is tax-free
  • Inheritance tax does not exist in Panama
  • Real estate sales tax: 2% on the sales value
  • Property tax (valid from 2019, based on real estate value, valid for investors):
    • up to 30.000 USD / exempt
    • 30,000 – 250,000 USD / 0.6% p.a.
    • 250,000 – 500,000 USD / 0.8% p.a.
    • over 500,000 USD / 1.0% p.a.
  • Value added tax 7%

Especially in the field of property tax in Panama there are many (mostly very positive) exemptions to the above mentioned rules. For example, real estate completed before 31.12.2011 is usually exempt from property tax in Panama for 20 years. Furthermore, the “first real estate” that you occupy is tax-exempt up to 120,000 USD real estate value. And there are very special tax benefits for investments in the UNESCO old town “Casco Viejo in Panama, such as a 10-year exemption from taxation of rental income.

The beautiful Panama doesn’t make everything perfect, but it tries with its own resources to attract investors and people to the country.

As we are no tax advisors, we are not responsible for the accuracy of the information and you should consult a tax advisor. We would like to give you a good overview and are available to answer your questions with our team of specialists.


Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. He offers advice on all aspects of living in Panama.

The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.

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Investments in Panama

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