Panama · Taxes
Panama taxes for US citizens
Source-checked28 sources, 28 officialHow we checkIn brief
Panama taxes only income from Panamanian sources. A retiree living on US pensions and interest owes no Panamanian income tax, however long they stay.
In short: what you'd pay in Panama
Retiree on US income
Pensions granted abroad and interest from US payers count as foreign income, so Panama doesn't tax them. No social security is due either.
Ballpark: $0 a year at 90, 182 or 365 days
Remote worker paid from the US
Not settled yet: the remote-worker visa gives no tax exemption, and work done in Panama can be taxed. Still being checked
Working for a local employer
Pay for work in Panama is taxed through payroll, with social security and education contributions on top.
Ballpark: On $60,000 a year: about $8,350 income tax plus $6,600 contributions
Not yet verifiedThe retiree and full-year payroll results, worked out from the official tax rules.
Still being checkedHow short stays and remote work for a US employer are taxed.
How Panamanian tax works
- Tax residence: more than 183 days in Panama in the current or previous tax year.
- What's taxed: only income from Panamanian sources, for residents and visitors alike.
- Payroll contributions: local employees pay social security of 9.75% and education tax of 1.25%.
- Your US return: you still file every year. Panamanian tax may be credited against US tax; see a tax adviser.
- No Social Security agreement: the US and Panama have none, so US payroll tax continues.
Checked against the lawThe 183-day residence test.
Not yet verifiedThe payroll contribution rates.
Sources (7)
Links
- DGI: tax number and residence test
- Ley 8 de 2010: source and tax calculation amendments
- Law 51 of 2005 (CSS), consolidated text
- Law 13 of 1987: educational insurance on basic wages
- SSA: international Social Security agreements
- IRS: US citizens and resident aliens abroad
- IRS: foreign tax credit, how to figure the credit
Nine worked examples, 2026
The retiree has $30,000 of Social Security, a $40,000 private pension and $20,000 of interest. The employee works for a US company with a registered Panama branch paying local payroll.
| Who | Days in Panama | Panama income tax | US income tax, before credits |
|---|---|---|---|
| Local payroll employee, $60,000 | 90 | Not settled | $5,020 |
| Local payroll employee, $60,000 | 182 | Not settled | $5,020 |
| Local payroll employee, $60,000 | 365 | $8,350 | $5,020 |
| Local payroll employee, $150,000 | 90 | Not settled | $24,734 |
| Local payroll employee, $150,000 | 182 | Not settled | $24,734 |
| Local payroll employee, $150,000 | 365 | $30,850 | $24,734 |
| Retiree, $90,000 | 90 | $0 | $8,348 |
| Retiree, $90,000 | 182 | $0 | $8,348 |
| Retiree, $90,000 | 365 | $0 | $8,348 |
Don't add the two columns: credits and the foreign earned income exclusion can cut the US part.
Needs reviewThe 90- and 182-day employee cases.
Sources (17)
Legal basis and exact figures
- Retiree: territorial source rules. Executive Decree 170 art 10, as replaced by Executive Decree 98 of 2010 art 6, treats pensions granted abroad and interest from foreign debtors as foreign-source under its conditions. With no work, assets or business in Panama: $0 income tax and no compulsory social security or education contributions (Law 51 arts 71–73; DGI return instructions). Law 526 of 2026's new regime concerns entities in multinational groups, not personally held interest. Passive amounts are annual, not prorated by days.
- Employee, 365 days: ordinary resident local payroll, registered employer branch, correct withholding and compulsory coverage, appropriate work permission; official DGI tariff, no personal deductions: $8,350 on $60,000 and $30,850 on $150,000. Employee CSS (9.75%) plus education (1.25%) on the basic ordinary wage: $5,850 + $750 and $14,625 + $1,875. Excludes the thirteenth-month pay (DTM, different rates) and other arrangements. Not for the remote nonresident visa or tourist work.
- Employee, 90 and 182 days: not final. DGI Form 05 describes remittance taxation on 50% of cumulative gross and a registered-taxpayer exception; how remittance, source and payroll interact is open, so the ordinary-tariff illustrations aren't liabilities. An unregistered US-only employer is a separate unresolved case.
- US side: US figures are federal income tax before the exclusion and credits; employee FICA is extra ($4,590 on $60,000; $11,475 on $150,000). In the 365-day employee cases, Panama's income tax exceeds the US credit limit, so current-year US income tax is $0 after credit. No in-force US totalization agreement with Panama. No totals.
Links
- Executive Decree 98 of 2010: foreign-source transactions, pensions and interest
- DGI: income-tax FAQ
- DGI: personal and corporate income tax tariffs
- DGI: tax number and residence test
- Ley 8 de 2010: source and tax calculation amendments
- DGI: payroll report instructions (Informe 03)
- DGI: Form 05, nonresident remittances
- DGI: individual return, educational insurance base
- Law 51 of 2005 (CSS), consolidated text
- Law 13 of 1987: educational insurance on basic wages
- Law 526 of 2026: scope of the foreign passive-income regime
- SSA: international Social Security agreements
- IRS: 2026 inflation adjustments
- IRS: US citizens and resident aliens abroad
- IRS: foreign earned income exclusion
- IRS: foreign tax credit, how to figure the credit
- IRS: FICA tax rates (Topic 751)
Other Panama guides
Every rule with its legal source.
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