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Panama Banking And Taxes

Panamanian Banking and Taxation

Due to the fact that Panama has no central bank, this Latin American country faces a completely market-driven money supply. Panamanians must obtain their US dollars, the country’s de facto currency, by producing or exporting goods and/or services. This keeps inflation low. In fact, Panamaian inflation levels have consistently been 1 to 3% lower than their US counterparts. Because of its market-driven system, Panama has a stable macroeconomic environment. Unlike many other Latin American economies, Panama has not experienced a financial collapse or currency crisis since its independence from Colombia in 1903.

As a result Panamanian banks are amongst the most stable in the world. The country is home to the second largest banking center in the globe, behind Switzerland. There are more than 150 banks from 85 different nations in the country’s capital city alone. In 1998, Panama created the Superintendency of Banks. This regulatory agency grants banking licenses and authorizes banking activities according to the laws.

Panamanian banking laws make the country quite attractive especially for foreigners. For example, Panama maintains account security because it doesn’t offer numbered accounts. Rather, Panamanian banking is based on bearer share corporations with no listed owner. The person in possession of the shares owns the corporation and the account. Individuals may have the authority to sign on the account, but they are not account owners. On the account owner is allowed full disclosure on activities taking place within the account.

In addition, the Panama banking commission can not conduct investigations on individual banking clients. Information uncovered during regulatory operations can not be reported to any person, business or governmental agency unless subpoenaed by a Panamanian court order. Persons who come into contact with sensitive information and reveal it without the consent of the concerned party are subject to imprisonment for up to 2 years.

Panamanian officials take such offenses seriously and will prosecute individuals who go against these strict securities laws. The country has also remained firm in the face of pressure from large revenue agencies seeking to find information about tax evasion from Panamanian offshore bank account holders.

Panama also maintains its neutrality with respect to taxation. The country does not have any tax treaties with other countries. Personal income tax in Panam is based on a sliding scale fee, ranging from a minimum of 7% after the first $9,000 to a maximum of 27%. Of course, this only applies to Panamaian sourced income. Any income earned elsewhere, regardless of your residency status, is subject to ttaxation from the jurisdiction the revenue was generated in.

Of course, there are several profitable exemptions especially for corporations. These include:

  1. When the borrower is either a natural or legal person with residence or offices outside of Panama and the use of the borrowed funds is made outside of the country. Reimbursement of capital and interest occurs within Panama, however.
  1. Any interest on securities issued by the Panamanian government.
  1. Interest recognized or paid on savings or timed deposit accounts maintained on banking institutions established within Panama. (*Timed deposits can only be established over $10,000 USD without any restriction of interest rate paid to account holders. Savings deposits and checking accounts may also be offered without any interest rate limitations.)
  1. Interest paid to foreign investors for loans which the principal is directed, as determined by the Ministry of Housing, for housing projects geared towards low-income residents.
  1. Interest paid to official or semi-official entities of international organizations or foreign governments.
  1. Interest paid on hotels and approved tourist facilities and reforestry projects.
  1. Capital gains from transfer of shares, bonds, or other securities of the Panamanian Government and of foreign or local issuers approved by the Panama National Securities Commission.


For individuals, tax exemptions and reductions are also worthwhile. Retirees, who according to Panamanian Law can be as young as 18 years old, receive a one-time exemption of duties on the importation of household goods up to $10,000. They also get an exemption of duties EVERY TWO YEARS on the importation of a local purchase of an automobile. If you buy or build a new house, you won’t need to pay property taxes for up to 20 years.

Panama also offers incentives for residents and corporations with respect to real estate transfers, inheritance taxes, rental income and capital gains making it a fantastic location for residents, corporations (both offshore and in Panama) and retirees.

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