Tax-Free Activities in Panama

The Tax law of Panama is based upon the principle of territoriality, which has remained unaltered from the foundation of the Republic. Therefore, taxes are only burdened the net income arising from transactions carried out within the territory of the Republic of Panama. This basic principle has remained virtually unchanged since the founding of the Republic.

The Panama Law defines the activities that are not subject to the payment of income tax in Panama:
- Bill, from an office in Panama, the sale of goods or products that are really handled abroad.
- Directing, from a office established in Panama, transactions that are consummated and complete to have effects abroad.
- The distribution of dividends or shares of legal persons, when such dividends are derived from revenues generated outside the territory of the Republic of Panama.
- Boarding and / or landing in Panamanian ports of passengers on ships in transit through international waters or the Panama Canal. Moreover, air transport to and from Panama to those passengers.

Royalties, interest, dividends, commissions, securities gains and other income received from foreign sources not subject to income tax in Panama. Panamanian corporations could distribute those earnings as dividends (or otherwise) to its shareholders free of income tax or dividends. Interest earned from fixed deposits or savings accounts in banks operating in Panama are not taxable, regardless that the funds are generated in Panama or abroad.