Taxes & Law
Territorial tax system, income tax brackets, ITBMS and notes for newcomers — with official sources.
Updated: Research as of: November 2026
Tax system – overview
- Territorial principle: Panama generally taxes Panama-source income; foreign-source income is typically outside the local income-tax base (DGI / fiscal code practice).
- Income tax (ISR) for individuals: progressive brackets 0% / 15% / 25% on net taxable Panama-source income (DGI tariff page).
- ITBMS (VAT-like): general rate 7%; higher rates for some items (e.g. lodging/alcohol often 10%, tobacco 15% — confirm current DGI lists).
- Double-tax treaties: depend on your home country — check the applicable treaty.
Individual income tax (DGI)
Per DGI “Tarifa – Personas Naturales” (fetched Nov 2026): rates on net taxable income:
ISR brackets (natural persons)
| Net taxable income | Tax |
|---|---|
| Up to B/.11,000 | 0% |
| Over B/.11,000 up to B/.50,000 | 15% on the excess over B/.11,000 |
| Over B/.50,000 | B/.5,850 on the first B/.50,000 + 25% on the excess |
ITBMS
Impuesto de Transferencia de Bienes Muebles y Prestación de Servicios: general rate 7% on taxable transfers of movable goods and services in Panama. Reduced/zero and higher special rates exist for listed goods/services — see DGI.
Source vs residence
Under the territorial system, liability focuses on Panama-source income rather than worldwide income. Physical presence and immigration status still matter for other obligations (e.g. filing, social security). Treat “tax residence” wording carefully — Panama’s framework is source-based.
Disclaimer
Sources
Disclaimer: This page is for general guidance only and is not legal, tax or immigration advice. Rules and prices change — verify with official sources.