# What are the tax benefits of Panama tax residency?

Most of Panama’s tax advantages do not depend on residence. It taxes only income produced inside its territory. Individuals pay nothing on the first B/. 11,000 of taxable income, and interest on deposits in Panamanian banks is exempt under the Code text we read. Tax residence adds a DGI certificate and treaty access. Your home country may still tax you.

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## Your benefits at a glance

| Benefit | What you get | Needs tax residency? | Rule | Read more |
| --- | --- | --- | --- | --- |
| Territorial tax | Income produced abroad is not taxed in Panama | No. It applies to anyone | Fiscal Code, article 694 | [Territorial tax](/territorial-tax/) |
| Exempt band | For individuals, the first B/. 11,000 of taxable income pays nothing, up to B/. 50,000 pays 15% and above pays 25% | The articles speak of individuals. We have not read whether a non-resident with Panamanian income gets the same band | Fiscal Code, articles 700 and 708 | [The rates](/territorial-tax/) |
| Bank interest | Interest on deposits in banks established in Panama is exempt, on the Code text as we read it. The current version is not confirmed | No. The text looks at the bank, not at the depositor | Fiscal Code, article 708, letter l | [Bank interest](/territorial-tax/) |
| Foreign pensions | On our reading, a pension paid from abroad is not income produced in Panama | No | Fiscal Code, article 694 | [Foreign pensions](/territorial-tax/) |
| Residence certificate | DGI proof of tax residence, for a treaty, a bank or your home country | Yes | DGI Resolution 201-0354 of 2016 | [The certificate](/certificate/) |
| Double tax treaties | 17 treaties in force, none with the United States or Canada | Depends on the treaty | DGI, treaties in force | [The treaty list](/tax-treaties/) |

Source: Fiscal Code, articles 694, 700 and 708; DGI Resolution 201-0354 of January 13, 2016, Official Gazette 27951-A; DGI, double taxation treaties in force

## The territorial rule is not a residency perk

Article 694 taxes income produced in Panama whatever the place where it is received, and the taxpayer is the person, Panamanian or foreign, who receives it. Nationality plays no part. The other side holds too: income produced abroad is outside the tax whether or not you hold a residency card.

What tax residence adds is proof and a duty. You become a tax resident by staying more than 183 days, continuous or not, in a fiscal year or the year before, or by making Panama your permanent home, and then you can ask the DGI for a certificate. Staying more than 183 days also brings article 701, letter k: a foreigner who earns income subject to the tax must determine it and pay it at the individual rates.

Source: Fiscal Code, articles 694, 701 letter k and 762-N; Executive Decree 958 of August 7, 2013, Official Gazette 27347-A

## What the certificate lets you do

The DGI issues the certificate for the year you ask for. You can use it as proof that you are resident in Panama, for example for a treaty, a bank or your home country. It does not by itself free you from tax in your home country.

Source: DGI Resolution 201-0354 of 2016; DGI, questions on the tax residence certificate

## Where the benefits stop

- A U.S. citizen files a U.S. return on worldwide income wherever he or she lives, and there is no treaty between Panama and the United States.
- A Canadian who leaves Canada can face an exit tax on property, and there is no treaty with Canada either.
- A foreigner who stays more than 183 days and earns income subject to the tax must determine it and pay it at the individual rates in article 700.
- Treaty benefits apply only to the 17 countries on the DGI list.

- [Taxes for US citizens](/us-citizens/)
- [Taxes for Canadians](/canadians/)
- [Retiree benefits of the Pensionado visa](https://panamapensionado.com/benefits/)

Source: IRS, U.S. citizens and resident aliens abroad; Canada Revenue Agency, leaving Canada as an emigrant; Fiscal Code, article 701, letter k, added by Law 8 of 2010, article 14, Official Gazette 26489-A

## Questions people ask

### Does Panama tax my foreign pension?

Article 694 taxes income produced in Panama. A pension paid from abroad is not income produced there, so on our reading the rule leaves it out. No rule names foreign pensions. The Pensionado law adds import and immigration benefits but no income tax exemption of its own.

### Do I pay less tax just for holding a residency card?

No. The territorial rule applies whatever your immigration status. What your days in Panama or your permanent home change is your tax residence, which brings the DGI certificate and the duty in article 701, letter k.

### Is the interest on my Panamanian bank account taxed?

Letter l of article 708 exempts interest on deposits in banks established in Panama. That is the text of the Code as we read it, copied from a third-party site. Check the current version before relying on it.

### Does a tax residence certificate end my tax in my home country?

No. It proves where you are resident. What your home country does with it depends on its own law and on any treaty.

### Is the work I do in Panama for a foreign client tax free?

We do not publish it as tax free. Article 694 treats as produced in Panama the pay for personal work of people hired for their profession or trade, and article 701, letter k, makes a foreigner who stays more than 183 days pay on income subject to the tax. The literal text leans toward Panamanian income. Directing from a Panamanian office transactions that take effect abroad is not Panamanian income. We found no DGI ruling on remote work.

## What the law does not say

- Whether work you do physically in Panama for a foreign client or employer is Panamanian income.
- Whether the B/. 11,000 exempt band applies in the same way to a non-resident with Panamanian income.
- Whether letter l of article 708 has been amended since the text we read.
- Whether article 701, letter k, still reads as the 2010 law wrote it.
- The fee for the certificate. Neither the resolution nor the DGI’s page mentions one.

## Keep reading

- [Does Panama tax foreign income?](/territorial-tax/)
- [The tax residence certificate](/certificate/)
- [Double tax treaties](/tax-treaties/)

## Planning your move to Panama?

Book a free 15-minute call with a Panamanian lawyer. We will tell you what applies to your case and what to prepare.

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