Life and Business in Panama: All You Need to Know

Why opt for Panama? First of all, this is a perfect country if you want to reduce the tax burden: Panama is an offshore jurisdiction that offers generous tax incentives. Second, this is a safe country to live in (which is confirmed by the low crime rate), while living expenses are much lower compared to North America or Europe. Third, obtaining a residence permit is not difficult at all: you can become an investor or use one of the immigration programs that the country offers. If these criteria are not enough for you, you can get additional information from International Wealth experts and make a final decision. Panama is a great country, but not for everyone!

Meanwhile, let’s look at the details.

Panamanian Taxation System

Panama has a territorial taxation system, and it applies to individual and corporate taxes. Companies that operate locally and salaried employees are liable for taxes. However, if your company generated 100% of its profits abroad (or you are a freelancer working for foreigners), you will not pay anything to Panama.

Here are the main taxes payable in Panama:

• Social security tax. The employer pays 12.25%, while the employee is liable for 9.75%.
• Capital gains tax. If you are a tax resident of Panama, you have to pay 5%. Non-residents are liable for 10%. If you sell real estate or non-issued shares, you will also have to pay 10%. Non-residents who receive interest or royalties are liable for 12.5%.
• Property tax. The Panamanian property that costs less than USD 120,000 is tax-exempt. However, if the price exceeds that figure, the tax will range between 0.5% and 0.7%.
• Inheritance tax and wealth tax in Panama are nonexistent.
• VAT is payable at quite a low rate of 7%.
• As for the corporate tax in Panama, there is one rate applicable to all: 25%. Those who manufacture certain types of products can get a reduction, though. Once again, if your company derives income abroad, the corporate tax payable in Panama will equal zero.
• Personal income tax. The tax base here is the income derived locally, and the rates depend on its amount:
  • You will not pay anything if your income does not exceed USD 11,000 a year.
  • USD 11,001 to 50,000 makes you liable for 15% a year.
  • If you get more than that, you will have to pay 25%.

Panama for Business

Panama is home to numerous funds and international corporations as they find the country’s taxation system really beneficial. However, this is not the only reason (although it may be essential for some entrepreneurs). Let’s look at some other factors that make Panama appealing for businesses:

• The company can be fully owned by a foreigner.
• If you need to transport goods, the Panama Canal is a unique artery that will certainly be of use.
• The country’s strategic location between South and North America makes it a great place for company location.
• You will be able to benefit from Panama’s booming economy and political stability.
• If the level of confidentiality is your primary concern, Panama is exactly what you need. Privacy is hard to find in the present-day world, and absolute anonymity is simply nonexistent. However, you can officially use a nominee service in the country and appoint nominee directors and shareholders to remain in the shadow.
• If you are a company founder, you will have the right to a residence permit in Panama.
• The country has created numerous free economic zones you can take advantage of. Benefit from duty-free trade and production activities, and pay zero taxes on the condition your activities are conducted outside the country.
• A company can be registered quite quickly. Keep in mind, though, that you will need a registered agent and a local lawyer who will do the job for you. You cannot apply on an individual basis. If you want recommendations (of course, we are not talking about hiring just any lawyer or agent you can find as there are plenty of fraudsters), please follow the above link to talk to an expert and get in touch with a reliable specialist.

Living in Panama

Immigrants who choose Panama are fascinated by its warm climate and enjoy affordable prices. American retirees simply love Panama as a haven to spend their golden years in peace! 

Let’s look at the main costs per month (the first figure refers to the income per 1 adult, while the one in brackets indicates the expenses for a four-member family):

• Rent and utilities will cost USD 588 (944).
• You will need to spend USD 65.8 (179) on transport.
• Food costs USD 365 (968).
• You will need USD 1,112 (2,587) with rent on a monthly basis to live comfortably in Panama.

Here are some other reasons why foreigners decide to relocate:

• The healthcare services are provided in Panama on a very high level.
• Freelancers and digital nomads will surely appreciate high-speed Internet connection and well-developed infrastructure.
• You can easily get a residence permit in Panama by buying real estate or using any other legal grounds.
• The crime rate is low.

You should be aware of some downsides existing in the country, though:

• English is not widely spoken, so you need to know Spanish to feel comfortable in the country.
• There are some locations in Panama where sidewalks are unavailable.
• Hurricanes are quite frequent in the country.

Becoming a Panamanian Resident

Let’s look at the immigration programs that exist in Panama:

• A Golden Visa is a program for investors: you put a certain amount into the local economy in return for a residence permit.
• Residence permit for wealthy foreigners. You may be eligible if your passive income exceeds USD 850 a month.
• Friendly Nations visa program. Nationals of some foreign countries are allowed to get this kind of visa for 2 years and then extend it. Investments are required in this case, too: you need to buy a property with at least USD 200,000 and have a bank deposit with the same amount.
• Pensionado program is available to those who get a pension of at least USD 1,000 a month (plus USD 250 per dependent if any).

Does Panama seem to be an attractive country? You can follow the above link to explore the portal and see other good countries for relocation or talk to our expert (use the live chat during business hours) to ask your questions.