Panama Corporate Income Tax
The only income which is taxed is derived from within Panama. 聽The sale of products or services to people, entities, or companies in Panama are considered as 鈥淧anama source income鈥 and taxed. 聽The sales of products or services to persons, entities, or companies located outside of Panama are not taxed. 聽Income derived from the leasing or sale of Panama real estate is taxed. 聽Commissions and interest earned from loans financing business in Panama is taxed.聽 Call centers a special law聽exempting their earnings from income tax. 聽Trading companies which invoice products which never enter Panama are not taxed. 聽Companies in Panama who facilitate business activities conducted outside of Panama are not taxed.
Interest Income Exempt: Interest from savings and CD bank accounts from licensed Panama banks and Panama Credit Unions are exempt. 聽Interest from debt securities registered with the Panama National Securities Commission and listed on the stock exchange are exempt.聽 Non-resident financial institutions and lenders who receive interest and commissions paid by Panama banks or for the construction of public housing are also exempt from聽taxes聽in Panama.
Income Tax: Taxable income is derived from subtracting foreign source income and exempt income from the gross income.
Deductions: Business expenses used to generate taxable income or to preserve the business are considered as deductible from income taxes and must be documented and are only allowed in the same year they occurred.
Income Tax Rates: Starting in 2010, corporate tax rates were lowered from 30% to 27.5% and further reduced in 2011 to 25%. 聽Companies involved in telecommunications, banking, power generation, manufacturing cement, casino and gambling activities, and insurance or reinsurance will continue to pay the 30% rate until 2012 when the rate was lowered to 27.5% and in 2014 will be lowered to 25%. If the government owns 40% or more of a company鈥檚 capital that company will continue to pay the 30% rate. 聽Companies involved in agriculture and small聽businesses have a special lower income tax rates.
Calculation: The traditional calculation of income taxes is to simply multiply the net taxable income by the tax rate. 聽Panama corporations with taxable income exceeding $1.5 Million use a different calculation. 聽Their rate is the higher between the traditional calculation and multiplying the taxable income by 4.67%.
Monthly Payments: Since 2011, all companies and entities pay their estimated income tax by the 15th of every month equal to 1% of the total taxable income accumulated the prior month. 聽This is called 鈥淢onthly Income Tax Advance鈥 or “MITA”. Companies engaged in gasoline, oil products, pharmaceuticals, food, and medical products pay a different MITA.聽 At the end of the tax year, the company determines the total income tax and deducts the total MITA paid. 聽If the total MITA paid is larger than the actual tax owed, the company can obtain a tax credit to be used towards future MITA鈥檚.
Losses: Losses can be carried forward 5 years as long as the loss doesn鈥檛 exceed 20% of the total loss in any year. 聽 Certain regulated industries such as mining have special loss schedules.
Annual Returns: Income tax returns must be filed by companies within 3 months after the fiscal year ends. 聽While most company tax year is the calendar year, companies can petition for approval of a different fiscal year.
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