Panama Corporate Income Tax Rate
Non-resident income is considered to be from Panamanian sources if it derives from services or actions that benefit persons or businesses benefiting Panamanian residents or businesses, including fees, interest and royalties. The calendar year is generally used as the taxation year, although in some cases the taxpayer may claim a special 12-month taxation year. Consolidated company reporting is not permitted. Each corporation must file a separate corporation tax return. Businesses must file a tax return within 90 days of the end of the fiscal year, and a one-month extension may be requested upon request. Gainful activities in each municipality pay a local tax on gross income, calculated according to the category and activity of the enterprises. The rate varies from municipality to municipality. Gainful activities are considered to be activities that generate private income (as opposed to not-for-profit organizations or charities). When selling securities, the buyer is subject to a withholding tax on the transaction amount of 5%, this tax can then be offset (or refunded) against income tax. Employers also pay occupational risk insurance premiums, premium rates vary by industry and range from 0.33% to 6.25%. Corporations with annual taxable income greater than $1.5 million can make two different calculations, and the tax payable is the net income payable, calculated on a normal basis at 25% or 4.67% above gross taxable income, whichever is greater. Professional services, interest and royalties paid to a non-resident company are subject to a withholding tax of 25% on 50% of the amount transferred abroad (i.e. an effective corporate tax rate of 12.5%).
The Kraemer and Kraemer team has the knowledge and experience to answer your tax questions. Contact us for more information on corporate tax. In addition, an education insurance contribution must be paid on the remuneration of 1.25% of employees and 1.5% of employers. Calculation: The traditional income tax calculation is simply to multiply the net taxable income by the tax rate. Panamanian companies with taxable income greater than $1.5 million use a different calculation. Their rate is higher between the traditional calculation and the multiplication of taxable income by 4.67%. Corporations are subject to a 25% income tax on net taxable income. Some companies are subject to a corporate tax of 30% on the net taxable income due to different activities and income.
All documented monetary transactions that are not subject to ITIMS are subject to stamp duty. Stamp duty of $0.10 is levied on each $100 transaction value. A maximum rate applies to any portion of the transaction value below $100. Income tax: Taxable income results from the subtraction of income from foreign sources and exempts income from gross income. All goods imported into Panamanian territory from another country are subject to import duties. The Panamanian Customs Office sets import duty rates, which range from 0% to 15% depending on the product. Panama`s income tax law affects the entire territory equally. Taxable income includes all income derived from carrying on business in Panama, less income-generating expenses incurred entirely and exclusively to obtain or maintain the source of taxable income.
Corporate income is taxed at a flat corporate tax rate of 25% above net income. The tax base for corporations with taxable income in excess of $1.5 million is the greater of (i) the net taxable income calculated on a normal basis, or (ii) 4.67% of the gross taxable income, known as an alternative income tax calculation (ACIR). The judiciary is vested in the Supreme Court, composed of nine judges, all appointed by the President (subject to approval by the National Assembly) for a 10-year term. The National Assembly (AsambleaNacional) is a unicameral body composed of 71 members elected by universal suffrage for a five-year term and eligible for re-election. The National Assembly initiates laws, regulates international treaties, approves the budget and establishes political divisions. If the annual flat-rate franchise fee (“tasa unica”) is not paid after two “deadlines”, the Company will be required to pay a second late payment penalty of $300 per year for each additional “deadline” missed thereafter. For certain categories of taxpayers (promoters, etc.), the tax rates are different. Panamanian source dividends are subject to withholding tax, usually at the rate of 10% (no corporate income tax is due upon receipt of dividends). There are several exceptions.
If a business has taxable and non-taxable income, it may be able to apply a 5% withholding tax rate on dividends. If the company has bearer shares, the tax rate increases to 20%. If a corporation distributes less than 40% of its after-tax profits, it must pay withholding tax on dividends in advance on the difference between 40% of its after-tax profit and the dividend paid. Deductions: Business expenses used to generate taxable income or to support the business are considered income tax deductible and must be documented and are only allowed in the year in which they occurred. Royalties, service charges and interest are taxed at a rate of 12.5%. With respect to royalties and service charges, this tax can be avoided if the paying corporation does not deduct it as an expense for corporate income tax purposes. The subscription of shares is not taxable by either the issuer or the subscriber. If the issuer offers the subscriber a financing option (e.g. payment by instalments), the corresponding interest is subject to the standard income tax rate of 25%.
17 DTA: Barbados, Czech Republic, France, Ireland, Israel, Italy, Korea, Luxembourg, Mexico, Netherlands, Portugal, Qatar, Singapore, Spain, United Arab Emirates, United Kingdom, Vietnam. Capital gains from the sale of stocks, securities and negotiable instruments are subject to a 10% capital gains tax. The buyer must withhold 5% of the sale price as a deposit of income tax and pay this amount to the tax authorities. The seller charges a 10% tax on the profit. If the 10% of the profit is greater than the 5% retained by the buyer, the seller may consider the 5% as a definitive tax. If the 10% of the profit is less than the 5% retained by the buyer, the seller can request a refund of the difference. Income from the sale of government securities and income from companies registered with the National Securities Commission is not taxable. When selling securities, the buyer is subject to a withholding tax on the transaction amount of 5%, this tax can then be offset (or refunded) with corporate income tax.