Regime Rate
0%
Under the Territorial Taxation
Standard Top Rate
25%
without this regime
Duration
Unlimited
No expiry — permanent regime
Target Profile
Territorial Taxation
Panama
Tax Savings Illustration
Example: €150,000 Annual Gross Income
Under Territorial Taxation
€0
Standard Rate
€26 250
Annual Saving
+€26 250
Eligibility Requirements
Who qualifies?
- All individuals and companies
How the Regime Works
Full details
Only Panama-source income taxed. Income from services delivered to foreign clients entirely exempt, even if funds deposited in Panamanian banks.
Regime vs Standard Rates in Panama
| Tax Type | Standard Rate | Under This Regime | Saving |
|---|---|---|---|
| Income Tax (top rate) | 25% | 0% | -25.0pp |
Frequently Asked Questions
What is the Territorial Taxation in Panama?
The Territorial Tax System — Foreign Income Exempt is a special tax regime in Panama that provides 0% flat rate to qualifying individuals or entities. Only Panama-source income taxed. Income from services delivered to foreign clients entirely exempt, even if funds deposited in Panamanian banks. Legal basis: Código Fiscal de Panamá, Art. 694.
Who is eligible for the Territorial Taxation?
Eligibility for the Territorial Taxation is limited to: All individuals and companies. Applicants typically must not have been Panama tax residents during a specified prior period. Always verify current conditions at the source: Código Fiscal de Panamá, Art. 694.
How much tax do you pay under the Territorial Taxation?
Under the Territorial Taxation, you pay 0% personal income tax — compared to the standard Panama top rate of 25%. This is a complete exemption for qualifying residents.
How long does the Territorial Taxation last?
The Territorial Taxation is a permanent regime with no set expiry — it applies for as long as you continue to meet the eligibility criteria.
How do I apply for the Territorial Taxation?
Application procedures for the Territorial Taxation are set out in Código Fiscal de Panamá, Art. 694. You typically need to file a formal application with Panama's tax authority after establishing residency. Consult a local tax advisor for guidance.
Other Special Regimes to Compare
Disclaimer: This information is for general guidance only and does not constitute tax advice. Tax laws change frequently. Always consult a qualified tax professional before making residency or tax planning decisions.