How a Panamanian company is taxed

The Tax Code taxes income produced, from any source, within the territory of Panama, wherever it is received. The law also lists what is not Panamanian income even when it is handled from an office in Panama: invoicing from Panama the sale of goods that move only abroad, directing from Panama deals that are concluded or take effect abroad, and paying dividends out of income not produced in Panama by a company that needs no business license.

It works the other way too. A foreign provider paid for services that benefit someone in Panama and affect their Panamanian income has Panamanian income, and the payer withholds tax on half of what it remits.

Source: Tax Code, article 694, as restored by Law 1 of 2014

Every taxpayer files a return for the previous year’s income and also reports the dividends it distributed. The exceptions in the law cover salaried workers, small self-employed earners and small farmers, not corporations. A company files by March 31, and can ask for one extra month before the deadline if it pays the estimated tax first.

Some sites say companies with only foreign income file nothing, or file by May 31. The law says otherwise.

Source: Tax Code, article 710, as amended by Law 52 of 2012

There is no general zero rate for foreign shareholders: a tax treaty prevails where one applies, and otherwise the company withholds. What the law does say is that a company with no business license and no taxable income in Panama pays dividends out of foreign income that are not Panamanian income at all. Withheld tax is remitted within ten days.

Source: Tax Code, articles 694 and 733, as amended by Law 8 of 2010

A company that withholds on dividends and distributes nothing, or less than 40 percent of its net earnings for the year after taxes, pays 10 percent of the difference. For companies taxed at the 5 percent rate, the threshold is 20 percent.

Source: Tax Code, article 733, literals g and i, as amended by Law 8 of 2010

Law 526 of 2026 applies to entities in Panama that belong to a multinational group and earn foreign passive income: dividends, interest, royalties, capital gains and income from real estate or other capital. They must report that income in their return and show adequate paid staff and premises in Panama, take their strategic decisions and bear their risks in Panama, and incur adequate operating expenses there. If they do not, that income pays a flat and final 15 percent. It applies from the 2027 tax year.

A multinational group means two or more entities linked by ownership or control and tax resident in different countries. A corporation owned by one individual with no other foreign entity does not form a group on its own.

Source: Law 526 of 2026, Official Gazette 30534-B, adding articles 707-A to 707-Ñ to the Tax Code; Executive Decree 32 of 2026

On October 9, 2026 the Council of the European Union moved Panama from Annex I, the list of non-cooperative jurisdictions, to Annex II, where it stays until the Global Forum confirms its rating on exchange of information. That review is planned for the first quarter of 2027. Which national measures each EU country lifts is a matter of that country’s law.

Source: Delegation of the European Union to Panama, October 9, 2026; Code of Conduct Group report ST 13306/26

The IRS treats a Panamanian sociedad anónima as a corporation in every case: it is on the list of per se corporations and cannot elect another classification. A foreign corporation in which U.S. shareholders hold more than 50 percent of the vote or value is a controlled foreign corporation, and certain U.S. persons file Form 5471, with a penalty of US$10,000 per year for each company if it is late. Accounts of your company in a Panamanian bank count for the FBAR if you have a financial interest or signature authority and the total exceeds US$10,000.

This is U.S. law, explained from the official sources. Talk to a U.S. tax adviser about your own filings.

Source: 26 CFR 301.7701-2; IRS Instructions for Form 5471; 31 CFR 1010.350

Under FATCA and the OECD Common Reporting Standard, the reporting is done by the bank or other financial institution that holds the account, not by the company. If the company is a passive entity, such as an investment holding company, the bank reports the people who control it to their country of tax residence, if that country participates. The United States receives this through FATCA.

Source: Law 51 of 2016, articles 11 and 12, Official Gazette 28149-B; DGI Resolution 201-3931 of 2017

• Whether a company with no activity at all in the year must file a zero return. The duty follows from the general rule, but no specific DGI rule says so.
• Whether a local bank account alone makes income Panamanian. The law does not mention it.
• Whether two sister companies owned by one person form a multinational group for Law 526.
• When the complementary tax is paid, and how the dividend return form and its surcharge are set.
• Whether the Tax Procedure Code, with its different fines for not filing, is in force today.
• What counts as capital for the business license tax.

• The annual franchise tax
• Offshore companies
• Opening a bank account