Is Panama a tax haven?

No, Panama has been off the OECD blacklist since 2019 and applies the CRS standard for automatic banking information exchange. It's a TERRITORIAL tax regime: only Panama-source income is taxed in Panama, but transparency to your home country (US, UK, etc.) is total.

If I live in Panama, do I still pay taxes back home?

It depends entirely on your TAX RESIDENCY status under your home country's rules. If you keep a primary home, spouse, kids, or 'center of economic interests' there, you remain a tax resident at home despite living in Panama. Simply having a Friendly Nations visa is NOT enough.

How do I properly switch from US tax residency to Panamanian?

Americans cannot fully escape US taxation (citizenship-based) but Panama residency offers FEIE ($120k+ exclusion in 2026), foreign tax credit, and possibly Foreign Housing Exclusion. Steps: 1. Establish bona fide residency (full year + cédula). 2. File Form 2555 with US 1040. 3. Optionally setup a Panamanian SA. 4. Get a tax attorney's blessing on the structure.

My Paris rental — taxed where?

In France. Rental income from real estate located in France is taxed in France, period — that's standard double-taxation treaty rule. Panama doesn't tax this (French source), but France taxes it normally with non-resident withholding.

And dividends from a Panamanian SA?

If the Panamanian SA generates revenue only from clients OUTSIDE Panama (US clients, EU clients), it pays 0% corporate tax in Panama (territorial regime). Dividends paid to you as a Panamanian tax resident are also taxed at 10% in Panama — vs 20-30% qualified dividends in the US. But this structure is USELESS if you remain a US/UK tax resident.

What are the pitfalls?

The 3 classic pitfalls: 1. Keeping an empty home in your origin country (presumption of fiscal home there). 2. Believing the Panamanian SA 'protects' you while you're still tax-resident at home — it's a presumption of sham (Subpart F US, art. 209 B France). 3. Not declaring your Panamanian bank accounts at home (FBAR US, formulaire 3916 FR — mandatory the first year post-departure too).

How much does a Panamanian accountant cost?

For a single individual with a simple SA: $80-150/month for bookkeeping, $300-500/year for the annual filing (Aviso de Operación + Renta + Tasa Única). For more complex business (multi-clients, employees, ITBMS): $250-500/month.

Panama territorial taxation 2026: how it really works

Panama's territorial tax regime is one of the most favorable in the world — provided you use it correctly. Here's what works, what doesn't, and what gets you a tax audit at home.

Disclaimer — This article is informative guidance based on the regime in force in May 2026. It does not replace tax or legal advice. Any decision regarding the taxation of a Panamanian SA or a tax residency change must be validated by a Panamanian licensed accountant AND a qualified tax advisor in your origin country. Tax laws change; check the update date above.

The core idea

Panama applies a principle rare worldwide: territorial taxation. This means a Panama resident pays Panamanian tax only on Panama-source income. Everything earned outside Panama (rentals abroad, US dividends, remote-work salaries from EU) is exempt in Panama.

Article 694 of the Panamanian Tax Code:

“Subject to income tax are revenues produced within the territory of the Republic of Panama.”

Sounds too good. It is, if you haven’t properly handled your tax exit from your home country. Here’s what you really need to know.

Territorial taxation in practice

What’s taxable in Panama (Panama-source income)

Income	Taxed in Panama?
Salary from a Panamanian employer	✅ Yes (progressive 0/15/25%)
Rental income from Panama real estate	✅ Yes (10% above $11,000/year)
Dividends from a Panamanian company operating in Panama	✅ Yes (10%)
Capital gains on Panama real estate sale	✅ Yes (10%)
Commercial activity in Panama	✅ Yes (ITBMS 7% + IR 25%)

What’s NOT taxable in Panama (foreign-source income)

Income	Taxed in Panama?
Remote-work salary from a foreign employer	❌ No
Dividends from a foreign company	❌ No
Rental income from real estate outside Panama	❌ No
Capital gains from foreign stocks	❌ No
Foreign retirement pension	❌ No
Interest on foreign bank accounts	❌ No
E-book / consulting sales to clients outside Panama	❌ No
Affiliate income (Wise, Skyscanner, Amazon — non-PA clients)	❌ No

This is the magic: you can earn a living from a blog or a SA serving European/US clients and pay 0% Panamanian corporate tax on this income, even as a Panamanian tax resident.

Hold your foreign income in multi-currency Many expats receive their foreign-source income into a multi-currency Wise account: a USD/EUR IBAN in your name, the real exchange rate with no hidden markup, fully online to open. Open a Wise account → Partner link — at no extra cost to you.

Minimum residual taxation

Even on 100% foreign-source income, your Panamanian SA must pay:

Tasa Única (annual SA fixed fee): $300/year
Aviso de Operación (activity declaration): ~$60/year
Renta (annual filing, 0% if territorial revenues): accountant fees
Mandatory bookkeeping: $80-150/month

So ~$1,500-$2,500/year of operating overhead for a simple SA, plus your accountant’s fees.

Pitfall #1: home country tax residency

Your Panamanian taxation depends entirely on your tax residency status at home. As long as you’re a US/UK/EU tax resident, your worldwide income is taxed at home, and the Panamanian SA risks being qualified as sham/Subpart F, triggering an audit.

The 4 criteria that make you a US tax resident

The US is citizenship-based: as long as you’re a US citizen or green card holder, you owe US taxes regardless of where you live. The relevant tools:

FEIE (Foreign Earned Income Exclusion): exclude up to ~$120,000/year of foreign-earned income (2026) if you pass the Bona Fide Residency Test OR the Physical Presence Test (330 days outside US in 12 consecutive months).
Foreign Tax Credit: credit Panamanian taxes against US tax liability.
Foreign Housing Exclusion: additional housing exclusion above FEIE.
Tax Treaty between US and Panama: doesn’t fully solve double taxation but prevents some.

For UK, FR, DE, BE, CH residents: residency is determined by domicile + 183-day rule + ties test. Each country has slightly different criteria — engage a local tax attorney.

The reverse-proof

You left home in September 2024 but you kept:

Your apartment empty “for when we visit”
Your home bank account with auto-withdrawals
Your spouse and kids back home until end of school year

You’re still tax-resident at home for 2024 (fiscal home there) and probably for 2025 (economic interests still there). Your Panamanian SA is at risk of being qualified as sham. The income it generates will be imputed to you at home at full marginal rate.

How to switch cleanly (transition checklist)

Year N-1 — Preparation (12 months before departure)

Decide on the actual departure date
Sell or definitively rent out the primary home in your origin country
Prepare the Friendly Nations or Pensionado file in Panama (see the visa guide)
Engage a Panamanian accountant AND an international tax attorney specialized in expat taxation
Gather all home income and capital attestations for proof of source of funds

Year N — Year of departure

Effective exit date = the flight date out (keep the boarding pass — it’s tax evidence)
File the home country exit form (US: Form 8854 if expatriating; FR: Cerfa 2042-NR)
Liquidate or dormant home accounts (Wise/Revolut OK)
Panamanian visa filed (provisional cédula expected within 12-18 months post-arrival)
Panamanian lease signed OR property purchase
Update new address with all home institutions (banks, insurers, etc.)
Keep all proof of life in Panama (electricity bills, internet, lease, doctor visits, etc.)

Year N+1 — Effective switch

Provisional Panamanian cédula obtained = definitive switch of fiscal home to Panama
Set up the Panamanian SA IF you need it (not mandatory, you can stay as an individual)
Open the Panamanian bank account (Tower Bank or Banco General — see the comparison)
Declare your Panamanian bank accounts to home (FBAR for Americans, formulaire 3916 for French — mandatory even after departure for the first year)

Year N+2 onwards — Cruise mode

You become a Panamanian tax resident under the relevant tax treaty
Your worldwide income is declared in Panama, taxed under territorial regime
Your home-source income (Paris rental, US dividends) remains taxed at the home source — that’s normal
Foreign-source income outside PA (US clients, EU clients) is 0% in Panama

Concrete cases — who pays what?

Case 1 — Sarah, freelance journalist

Sarah earns ~$4,500/month, 80% from US/EU clients and 20% from Panamanian clients (consulting Inside Panama).

US/EU revenue ($3,600): invoiced via Panamanian SA, 0% in Panama (territorial)
Panamanian revenue ($900): invoiced via SA, taxed 25% IR + 7% ITBMS in Panama
Total Panamanian tax: ~$250/month (on Panamanian portion only)
Total US tax: 0 if FEIE qualifies (under $120k limit in 2026)

Case 2 — Pierre, US salaried remote (Stripe)

Pierre is a Stripe (USA) employee remote, $110,000/year net.

US salary: deposited in Panama account, 0% in Panama (US-source income)
US Federal Tax: applies (citizenship-based) but FEIE excludes up to $120k → effective US tax ~0 if Bona Fide Residency
Total tax: ~0% net (vs ~30% if he stayed in the US as expat)

Case 3 — Marie, Pensionado retiree

Marie receives a $2,500/month US Social Security + $800/month employer pension.

US pensions: tax treaty US-Panama art. 19 → taxed in the US at source (public/private retirement regime). The US withholds.
In Panama: 0% tax on these pensions (US-source revenue)
Pensionado benefits: on the ground, 25% domestic flights, 15% hospitalization, 50% leisure

Case 4 — Paul, Panamanian real estate investor

Paul bought 3 apartments in Costa del Este (total $850,000) which he rents.

Panamanian rentals (~$5,800/month gross): taxed in Panama at 10% above $11,000/year of net rental
Deductible expenses: mortgage interest, IBI, condo fees, maintenance
Estimated Panamanian tax: ~$3,500-$5,000/year
In US/origin country if non-resident PA: also taxed in residence country with foreign tax credit

The 5 mistakes that trigger a tax audit

Keeping your home in the origin country (empty house + spouse/kids) — presumption of home country tax residency.
Setting up the Panamanian SA before the cédula — not illegal but flagged if your home country still considers you resident.
Not declaring Panamanian accounts to home the first year post-departure — FBAR / 3916 mandatory.
Underestimating “center of economic interests” — if 80% of your clients are from your home country and you bill in EUR/GBP via PayPal, the center is at home.
Confusing Friendly Nations Visa with tax residency — the migration visa is conditional but distinct from the tax status.

Costs (summary)

Minimum annual fees in Panama (individual + simple SA)

Item	Annual cost
Tasa Única (SA fixed fee)	$300
Aviso de Operación	~$60
Panamanian accountant (bookkeeping + filing)	$1,200-$2,500
Renta (income tax if territorial revenues)	variable
Minimum total	~$1,500-$2,800/year

That’s negligible compared to what you save on home country taxation if you switch cleanly.

Going further

Friendly Nations Visa: 2026 conditions — prerequisite to become a Panamanian tax resident
Pensionado Visa for retirees — the fast path for lifetime pensioners
Tower Bank vs Banco General — which bank to open first
How to open a bank account in Panama

— Inside Panama editorial team, from Bella Vista, Panama City