How can you acquire tax residency quickly and efficiently in the Panama tax haven? Indeed, the country of Panama offers many tax benefits for both companies and individuals. Panama is especially attractive for “pensionados” from the US looking to gain an offshore foothold, but the tax benefits are for all financial brackets to consider.
You will indeed have the potential to legally reduce your income tax in this beautiful offshore location. Plus, find long term financial security in an increasingly uncertain world.
Panama has become the best offshore tax solution on many different levels. For those seeking a retirement home offshore, Panama is the #1 ranked retirement destination.
Panama offers a full suite of affordable health care, second home options, secure banking and global access for those over 18 years of age with a clean background and financial means. So how can you relocate to Panama?
Relocate to Panama
You can immediately relocate to Panama if necessary or make a gradual transition if you wish to do so. Panama makes it easy with their residency by investment options.
Visit Panama at least one time per year to obtain the Panama Permanent Resident ID (learn more below). After which the path to Panama citizenship is attainable within 5 years.
In addition to tax benefits, Panama offers essential political neutrality. Indeed, Panama is a country that has friends instead of enemies.
Get acclimated at your own pace, when you are ready to become a permanent expatriate in a beautiful country, Panama is waiting for you!
Continue reading to learn why Panama may be the best option to protect your family, your assets and your freedom.
Post Contents
- Introduction to Panama
- Historical Timeline
- US Influence in Panama
- US Dollars and English
- Offshore Financial Center
- How to get Panama Residency
- How to get Panama Citizenship
- Tax Laws for Individuals
- Tax Laws for Companies
- Panama “Tax Haven” Scandal
Introduction to Panama Tax Haven
Officially known as the Republic of Panama (Panama), the country has immense geopolitical significance due to its strategic location. Panama is located at the southern end of the land bridge (isthmus) spanning the distance between the continents of North and South America.
Since the construction of the Panama Canal was completed in 1914, Panama has facilitated an essential transit link between the Western and Eastern Hemispheres by eliminating the need to travel all the way around the southern tip of South America.
The canal has indeed created immense economic benefits for Panama. Toll revenues and related economic activity in the Colon Free Zone are directly sourced from the Panama Canal. As a result, they have have become cornerstones of Panama’s economy.
The Panama Canal has brought global and regional significance to Panama on many different levels. Since 2016, capacity of the canal has doubled thanks to the completion of an expansion project. The additional revenues will help to strengthen Panama’s financial system for many years to come.
Historical Timeline
| 1501 | Isthmus of Panama discovered by first European explorer. |
| 1513 | A cross country trek proves that Panama is an ideal link between the Atlantic and Pacific Oceans. |
| 1519 | Camino Real (Royal Road) becomes land predecessor of the Panama Canal. |
| 1538-1821 | Panama falls under Spanish Rule. |
| 1821 | Panama declares de facto independence from Spain. |
| 1821-1899 | Panama becomes a subdivision of Columbia known as “Gran Columbia”. |
| 1899-1902 | “Thousand Days War” between Panama and Columbia. |
| 1903 | Panama becomes “independent” from Columbia (with US assistance). |
| 1914 | Panama Canal completed by US; |
| 1989 | US invasion of Panama; |
| 1999 | Panama Canal zone is returned to Panama by US Government. |
| 2016 | Expansion project doubles capacity of the Panama Canal. |
US Influence in the Panama Tax Haven
Besides economic benefits, the geographical significance of Panama has also brought some less desirable attention. The Spanish colonists were the first to arrive in 1501 when they seized control for 300 years.
The United States government then took active interest in Panama to help them achieve “independence” from Columbia in 1903. The explicit US invasion of Panama then followed in 1989 after their more passive efforts to control the country began to falter e.g. CIA Ops, bribes.
Despite the US invasion in 1989, Panama is still considered an independent country. However, the de facto US control of Panama is significant in many ways and will remain so for the foreseeable future. This may be a benefit but also a drawback, depending on your perspective.
US Dollars and English
In Panama, you are never too far away from the US government. Although there is always the possibility of another US military invasion or worse, it is unlikely since Panama does appear to accept US mentorship in some rather conspicuous ways.
One example of de facto US control is the prominent use of US dollars. Throughout Panama, USD is used as legal tender alongside Panama’s local currency. Known as the Balboa, the local currency is only issued in coins, in contrast with printed US dollars. The local currency is pegged to the USD at One Balboa = One US dollar.
Furthermore, Spanish is the national language of Panama but the use of English is gaining popularity. The majority, 93% of Panamanians are fluent in Spanish, while 14% speak English. However, English is gaining traction, which is expected to increase in the future. This is because English has become part of the general curriculum in Panama schools.
It is not only in Panama, the use of English language in Central America is pretty common, especially in more developed metropolitan areas but less so in rural areas.
Offshore Financial Center
Toll revenues from the Panama Canal are a significant contributor to the local economy. In addition, the canal is the primary source of economic activity in the Colon Free Zone. However, Panama’s well developed financial services sector is also an essential contributor.
Financial service revenues are sourced from Latin America, but since 2012, Panama has also received significant benefits from a bilateral US free trade agreement. As a result, Panama serves as a regional financial center to the US and also countries throughout the Americas.
The financial sector is indeed a significant contributor to Panama’s economy with nearly 10% of GDP attributed to financial services. Furthermore, financial services directly employs over 24,000 people in Panama’s banks.
The Panama tax haven is an attractive option for investors who wish to take advantage of tax free interest on savings accounts, term deposits and tax free interest earned from Panama government securities.
These type of bank customers are usually not fleet of foot, so to speak. Therefore, deposits in the Panama’s banks are “sticky”. Offshore investors open bank accounts with a long term perspective in mind and that boosts the capital buffers. Panama is indeed a safe banking destination (US influence notwithstanding).
How to get Panama Residency
In addition to the above mentioned economic sectors, tourism is an important component of the Panama economy. As a result, the Panama tax haven has become a win~win solution for long term tourists and the government has nurtured Panama’s residency by investment options.
For those seeking a path to Panama citizenship, two of Panama’s residency programs make Panama citizenship attainable within 5 years. See the table below.
| Program | Financial Requirements | Duration | Path to Citizenship |
| Tourista Pensionado | Minimum $500 per month government or private pension. | Permanent Residency | None |
| Reforestation Visa Program (40k) | $40,000 investment in rain forest reforestation program. | 1 year renewable residency visa, convertible to PR after 5 years. | Eligibility after 5 years with Panama Permanent Resident ID. |
| Reforestation Visa Program (80k) | $80,000 investment in rain forest reforestation program. | Permanent Residency | Panama citizenship eligibility after 5 years. |
| Private Income Retiree Visa | 5 year certificate of deposit to yield $750 per month (est. $170,000) | Renewable every 5 years | None |
| Person of Means Visa | $200,000 deposit for 2 year term, $80,000 can be used for home purchase. | Permanent Residency | Panama citizenship eligibility after 5 years. |
Although it is not required to reside in Panama year round, you must visit the country at least once per year in order to maintain your residency visa.
Additional perks include a plethora of discounts on Panama services under the Tourista Pensionado program. US pensioners also might qualify for tax benefits in the US on offshore income less than $100,000 USD.
How to get Panama Citizenship
Traditional paths notwithstanding such as through marriage, or by birth, Panama provides alternate paths to citizenship for those who have held a Panama Permanent Resident ID for a minimum of five years.
How do you acquire the Panama Permanent Resident ID? If you intend to use it to qualify for Panama citizenship, acquire the permanent resident ID using either the “Rain Forest Reforestation Visa Program” or the “Person of Means Visa” outlined above.
In further benefit, you can recoup your reforestation investment funds after the requisite holding period. Or if you were holding a bank deposit, 100% of tax free interest income is retained by the applicant.
After becoming a citizen of Panama, the Panama passport will offer many benefits including visa free entry to countries throughout Central America, South America and Western Europe e.g. UK, Schengen Area. Also Russia, South Africa and Asian countries such as South Korea, Malaysia, Singapore and Indonesia.
Panama Tax Laws for Individuals
It is not possible to become a tax resident of Panama automatically or by default. To become a bona fide tax resident of Panama a “Tax Residency Certificate” may be issued by the “General Revenue Directorate” if:
“the person has been physically present in Panama for over 183 days, consecutive or alternate, in the fiscal year for which a certificate is requested; Or he or she has established their permanent home within the national territory and has a link to it.”
Since Panama has a territorial taxation system, holding a bona fide tax residence certificate will not necessarily mean you have tax liabilities in Panama. An individual whose source of income is entirely from outside the territory of Panama, will not be subject to Panama income tax.
Exempt income sources include no wealth tax, inheritance tax or gift taxes. Furthermore, Panama has no tax on interest earned from savings or term deposits received from Panama banks or interest paid from Panama government securities.
Employment Income
Certain exemptions apply to chargeable income sources. Directing company operations from within Panama, if revenues are sourced wholly from outside Panama, should offer a tax exemption to the company director.
Panama’s tiered tax rates on chargeable employment income are as follows:
| Taxable Income (USD) | Rate |
| Income below $11,000 | 0% |
| Income Between $11,000 and $50,000 | 15% |
| Income above $50,000 | 25% |
Capital Gains Tax
Capital gains* on the sale of real estate or securities is generally taxed at 10% and is subject to withholding tax on the gross transaction value although the difference may be recoverable.
*Panama has certain contingencies that may or may not apply. In addition, transfer taxes and advanced income tax collection may be applicable. Therefore, it is best to assess your capital gains tax liability in Panama, at the time of the transaction, with a qualified local tax advisor.
Panama Tax Laws for Companies
At the discretion of the General Revenue Directorate (DGI), a Tax Residence Certificate may be issued to a company that demonstrates material means of management and administration from within the territory of Panama.
- All tax resident companies must be duly registered in the Panama Public Registry.
- Commercial activity is carried out from within Panama, local offices exist for this purpose.
- The company conducts administrative meetings that determine its direction and business strategy from the registered office in Panama.
- Dedicated personnel exist at the company’s registered Panama office for carrying out commercial activity or support.
Since Panama has a territorial taxation system, holding a bona fide Tax Residence Certificate will not necessarily mean your company has income tax liabilities in Panama. Therefore, a company whose source of income is entirely outside the territory of Panama, will not be subject to Panama income tax.
Panama “Tax Haven” Scandal
Perhaps the most notorious private data leak of all time, the “Panama Papers”, occurred when the database of Mossack Fonseca, a Panama law firm and corporate tax advisor, was hacked and the stolen information was published worldwide by organized “whistle blowers”.
The data leak exposed the detailed financial and attorney-client information of over 214,000 offshore entities. As a result, the international press summarily concluded that all offshore companies and their beneficial owners are guilty of tax evasion.
Although everyone was found guilty by the court of public opinion, a scant few of the beneficial owners were actually found guilty of any crimes by a legitimate court of law.
In addition, what material connection actually exists between Panama the country and the “Panama Papers” besides the location of Mossack Fonseca? Follow the money.
So how much of these many billions of offshore funds found their way into Panama banks? This remains unclear. However, the money trail leads elsewhere e.g. Spain, United Kingdom, Australia.
What has become increasingly clear, especially for those who question the wisdom of the masses, is that the gratuitous exposure of confidential information used as cheap entertainment, serves no legitimate public interest.
Indeed, the European Court of Justice has since ruled that despite the importance of preventing money laundering and terrorist financing, the legal requirement to publicly disclose the identities of beneficial owners is no longer valid.