DOING BUSINESS IN PANAMA

Posted By Romain Ponsot on Oct 6, 1907 in Doing Business


Date de publication : 06-10-1907

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The following information are for the sole purpose  of providing a general overview of  the local taxation of the Corporate tax aspects of the country. In any case, it can not replace a tax advice, or be considered as an official information.

 

Yes we tax in Panama

 

Flash News

New tax reform: No specific information

New tax treaties:

  • Tax treaty between Panama and Vietnam enters into force.

Local tax advisors

No specific information on the local tax advisors.

Local tax administration

Website Ministry of Finance: Click here

Permanent Establishment

The definition of Permanent Establishment follows the wording of article 5 of the OECD Model:

  • Dependent agent who habitually concludes contracts in the name of a non-resident company (except is the activity is limited to purchase of goods);
  • Fixed place of business, building site, construction, assembly or installation and any related supervisory activity, for a period of 12 months.

Resident companies are taxed on their panama income only.

Entities are considered to be resident for tax purposes in Panama if generates income from sources in Panama.

Note: the definitions of permanent establishment and place of residence are subject to the relevant provisions of any applicable double tax treaty, if any.

Corporate Income Tax

The general CIT tax rate is 25%.

Non-taxable income includes the following:

  • Certain dividends received from qualifying participations

Non-deductible expenses includes the following:

  • Dividends benefiting from the participation exemption
  • Interest in excess of the arm’s lengths principle.

Carry forward: Yes 5 years, but some restrictions may apply.

Carry back: No

Companies should submit the tax return annually within 3 months after the fiscal year.

Annual tax returns are established by the company on a self-assessment system.

Companies shall pay monthly advance payments representing 1% if the taxable income; and the balance must be paid before the 31 March of the following year.

Whithholding Taxes (payment to foreign companies)

The local tax rates in Panama are the following, subject to the provisions of an applicable double tax treaty, if any.

There is 10% WHT on the profits paid from a branch to its foreign head office.

There is a WHT on dividends between 5% and 20% depending of the nature of the shares.

The general rate of WHT on interest is 12.5%.

The general rate of WHT on Royalties is 12.5%.

The general rate of WHT on management fees is 12.5%.

The general rate of WHT on technical services is 12.5%.

Capital gains

Capital gains generally taxed under the regular CIT. However capital gains derived from new immovable property are taxed under different tax rates.

Note: there is a 10% separate tax rate for assets not used in the course of the business of the company.

VAT

Standard VAT tax rate is 7%

There is no zero-rated transactions.

Exempt supplies include, subject to certain conditions:

  • Export of goods ;
  • Port operations;
  • Medical services;
  • Transfer of shares and foreign currency;

There is no VAT refunds for non-residents.

No other specific information of VAT in Panama.

Miscellaneous

The general statute of limitation is 3 years starting at the end of the year in which the tax return had to be filed, and 15 years for the taxes withholding taxes.

There are foreign exchange prohibitions in Panama on dividends, interests and other profits of any kind distributed abroad.

There are no thin capitalization rules in Panama, however the prices should be determined on an arm’s length basis.

 

 

 

Do not hesitate to share your experience in Panama with us in the comments below. Any comments are welcome !

 

Romain Ponsot

Romain est conseiller en fiscalité au sein d’un leader mondial du shipping. Grâce à son expertise tant en matière de TVA, fiscalité internationale, problématiques intragroupe qu’en matière de fiscalité des particuliers, Romain vous guidera au travers d’articles professionnels et humoristiques. 

Romain, poète dans l’âme, aime particulièrement le couscous et passe beaucoup de temps à glacer ses souliers. Profil LinkedIn
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