Residence permission and tax residence are different
DGI describes a physical-presence criterion exceeding 183 days for individual tax residence, while the full statutory and treaty analysis may involve other facts. A permanent-residence card is immigration evidence; it is not automatically a tax-residence certificate.
DGI’s certificate process asks for entry and exit records, a home or lease, utility evidence and the applicant’s local activity. Plan to substantiate the reality of the connection rather than buying a document and hoping it settles the issue.
Classify each income stream
Panama’s tax framework is principally territorial. The practical question is whether income is Panama-source under the relevant rule. Foreign customers, foreign invoices or an overseas payment processor do not automatically answer that question.
Separate services performed in Panama, business activity abroad, dividends, interest, property and disposals. Ask who earns the income and where the functions producing it occur. Treat an active online business differently from a portfolio that requires no local work.
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.
The ordinary rate calculation
The published individual schedule is zero through B/.11,000, 15% on taxable income between B/.11,000 and B/.50,000, then B/.5,850 plus 25% above B/.50,000. The general company rate is 25%. A calculation still needs the correct source, taxpayer, deductions and any specific regime before those percentages can be applied.
DGI’s filing guidance distinguishes individual and corporate returns and calendar-year deadlines. Certain taxpayers and income patterns have specific exceptions, so registration and annual-return duties should be checked rather than inferred from an account balance or a residence card.
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.
Sources & research notes7 references
Sources supporting this guide. Research draft awaiting editorial review.
- Panama DGI — Individual tax registration and residence
- Panama DGI — Tax residence certificates
- Official Gazette — Decree 32 of 2026 on foreign passive income substance
- DGI — Income-tax brackets and corporate rate
- DGI — Income-tax filing
- Official Gazette — Decree 32, effective from tax years beginning in 2027
- MICI — September 2026 property and public-bank thresholds