Panama is located in Central America, bordering both the Caribbean Sea and the North Atlantic Ocean, between Colombia and Costa Rica. Panama has a long history in the financial area, which is supported by a well-developed infrastructure.
Panama’s economy is service based, heavily weighed towards banking, commerce, tourism, trading, and private industry.
Corporations, partnerships, branches of foreign corporations, limited liability companies and any other entity considered a legal entity by law are subject to income tax at a flat rate of 25% on any profits or income generated in or derived from Panama.
Income that does not arise in Panama or is not derived from Panama is not subject to tax in Panama. However, dividends arising from foreign income that are distributed by Panamanian companies holding a Notice of Operation (formerly Commercial License) are subject to tax.
The withholding tax rate is 12.5% for interest and royalties paid to nonresident companies. Payments to nonresidents for professional services rendered in Panama or from abroad are subject to a 12.5% withholding tax.
All companies that have a Notice of Operations or Commercial License (the prior name of the Notice of Operations) or that generate taxable income in Panama must pay dividend tax at a fixed rate of 10% for nominative shares and 20% for bearer shares. Dividends distributed from foreign-source income, export operations, and certain types of exempt income are subject to a final 5% withholding tax. Subsequent distributions of these dividends are not taxed if they arise from dividends that already have been subject to the above-mentioned withholding. Dividends distributed by entities in free-trade zones from local source income, foreign-source income, export activities and certain types of exempt income are subject to a final 5% withholding tax.
Panama currently has tax treaties with: Barbados, Czech Republic, France, Ireland, Israel, Korea (South), Luxembourg, Mexico, Netherlands, Portugal, Qatar, Singapore, Spain, United Arab Emirates and United Kingdom.
HBM Panama S.A.
Via España, Bank of Boston Building, 8th Floor
Panama City, Panama