Panama: corporate tax guide

What the tax system covers

The ordinary corporate system is source-based. A 2026 law introduces a qualifying foreign passive-income framework from the 2027 tax year. Its multinational-group, income-category and substance conditions must be tracked separately from the current-year baseline.

When a company becomes tax resident

Under Article 762-N, as explained in Panama’s jurisdiction submission to the OECD, an entity must be incorporated under Panamanian law or registered there as a foreign branch and maintain material means of direction and administration in Panama. Board meetings alone are insufficient. The guidance looks for commercial or support activity, physical premises and personnel actually performing the functions. A Panamanian registered legal vehicle without the operational connection may therefore be refused resident status. A private-interest foundation still needs material administration and direction even though it need not carry on commercial activity.

Rates and the tax base

25% ordinary corporate income tax. Applied to taxable net income under the domestic calculation. Sectoral regimes, alternative computations, foreign-source exclusions and special regimes require separate analysis.

Outbound dividends, interest and royalties

Dividends: 10% domestic profits; 5% covered foreign/exempt profits. The dividend rules distinguish the origin of distributed profits and the distributing entity’s position. The 5% category includes specified exempt and foreign-source profits; complementary tax and bearer-share rules need separate assessment.

Interest: 12.5% ordinary corporate-recipient calculation. DGI applies the ordinary 25% company rate to 50% of covered gross remittances. The source, deductibility, registration and statutory-exception tests matter; this is not a tax on every transfer of money abroad.

Royalties: 12.5% ordinary corporate-recipient calculation. DGI applies the ordinary 25% company rate to 50% of covered gross remittances. The source, deductibility, registration and statutory-exception tests matter; this is not a tax on every transfer of money abroad.

Foreign passive income: enacted in 2026, effective from 2027

Law 526 and Decree 32 create a specific economic-substance framework for relevant Panama entities in multinational groups earning foreign passive income. Decree 32 applies to fiscal periods beginning on or after 1 January 2027. The rule must therefore be distinguished from both ordinary Panama-source taxation and the personal tax treatment of a resident individual.

Entities, income categories, exclusions and the holding-company provisions require classification before a conclusion is reached. The new regime is not a conventional shareholder-level CFC rule and should not be collapsed into a yes/no CFC comparison.

Companies need more than an address

For corporate tax-residence certificates, DGI asks for evidence including premises, personnel and decisions taken in Panama. Separately, another country may claim residence or a taxable presence because the founder or operating team remains there.

A sound implementation records authority, actual management, contracts, personnel and annual obligations. We can help assess the entire arrangement and coordinate the agreed work, including introducing an external management provider where appropriate.

Substance must be evidenced, not described in a brochure

For the full 2027 test, Decree 32 requires proportionate qualified, remunerated human resources and physical facilities in Panama. The relevant governing body must take strategic decisions and oversee risks, with at least two physically attended Panama meetings during the fiscal period; complexity can require more. Records must reflect the decisions actually taken.

Operating expenditure must relate to the relevant activities. Outsourced support is permitted under conditions, including work in Panama, supervision and no double-counting of staff time across entities. The board’s own strategic direction and control cannot simply be outsourced. Pure qualifying holding entities have relief from parts of the full test, rather than a blanket exemption from all substance and reporting.

Reporting and intellectual property need their own workstream

The decree calls for the substance information within the income-tax return and annexes and for supporting records retained in Panama for five years from the period end. Preferential-regime entities are not automatically outside the reporting analysis. A nonqualifying entity’s foreign-tax credit has limits and evidence requirements.

For qualifying intellectual-property income, the decree uses an asset-specific expenditure nexus and excludes marketing intangibles such as trademarks from the identified qualifying-asset definition. A generic royalty invoice from an offshore company is therefore insufficient. Assess the legal ownership, development work, costs, records and actual rights involved.

The recurring obligations belong in the original budget

A residence investment may require holding-period evidence and immigration maintenance. A company needs its registered-agent relationship, records, accounting and applicable returns. Banking brings its own periodic updates and source-of-funds requests. These obligations should be assigned to named providers before the initial project ends.

DGI describes calendar-year income-tax return deadlines of 15 March for individuals and 31 March for companies, subject to the relevant filing rules and exceptions. The team should decide which person or entity must file, rather than assume territorial treatment means no paperwork.

What the tax-residence application asks the company to prove

The DGI sworn application asks for the entity’s tax registration, physical address, activity in Panama, directors and their addresses, and employee numbers. Build the application from the business that actually exists. The governing guidance distinguishes actual direction and administration from the location of a board meeting.

Resident status and territorial source taxation then remain separate analyses. A local certificate does not establish that all receipts are foreign-source or remove a taxable presence elsewhere. Before applying, reconcile the registered entity, decision-makers, staff, premises and contracts with the claimed business functions. A private-interest foundation needs an administration analysis suited to its purpose rather than invented trading activity.

Foreign companies and income attribution

A general CFC conclusion remains under review. Separately, Decree 32 implements scoped foreign-passive-income and substance rules for Panama entities in multinational groups from fiscal years beginning in 2027; this is not blanket personal worldwide taxation.

Departure, migration and continuing obligations

A current comprehensive personal and corporate departure analysis is required; this draft does not certify an absence of exit charges.