Corporate taxes in Panama: what companies pay in 2026

Corporate taxes in Panama go well beyond income tax. A company with operations and employees in the country deals with at least eight separate obligations. Each one has its own base, its own rate and its own deadline.

This guide covers the main ones, with current rates and the source for each figure. Two agencies collect most of them: the DGI (Dirección General de Ingresos, Panama’s tax authority) and the CSS (Caja de Seguro Social, the Social Security Fund). At the end you will find what to review so you don’t overpay.

What taxes do companies pay in Panama? Summary table

Tax	Rate or base	Collected by
Corporate income tax (ISR)	25% of net taxable income	DGI
CAIR (alternative calculation)	Higher of net taxable income or 4.67% of gross taxable income, if taxable income exceeds US$1.5 million	DGI
Dividend tax	10% general; 5% on foreign-source, export or exempt income; 20% on bearer shares	DGI
Complementary tax	Advance on dividend tax when less than 40% of net profit is distributed	DGI
ITBMS (VAT)	7% general; 10% alcohol and lodging; 15% tobacco	DGI
Notice of operation tax	2% of equity (minimum US$100, maximum US$60,000)	DGI
Municipal tax	Depends on the activity and the municipality	Municipality
Real estate tax	0% to 1% depending on value and use	DGI
CSS contributions (employer)	13.25% social security, 1.50% education insurance, 0.33% to 6.25% occupational risk	CSS
Withholding on non-residents	12.5% effective on services, royalties and interest	DGI

Panama corporate income tax rate: 25% on a territorial basis

Companies pay a flat 25% on net taxable income. Panama applies a territorial system. Only income generated inside the country is taxed. Foreign-source income does not pay income tax, although it can still trigger dividend tax when profits are distributed.

If your company has clients or subsidiaries abroad, this distinction matters a lot. See how we work with foreign companies in Panama.

The CAIR: when taxable income exceeds US$1.5 million

Companies with taxable income above US$1.5 million must run the alternative income tax calculation, known by its Spanish acronym CAIR. They compare two bases and pay on the higher one:

• Net taxable income, calculated the normal way.
• 4.67% of total gross taxable income, excluding exempt, non-taxable and foreign-source income.

The CAIR hits companies with thin margins or losses hardest. If the CAIR produces a loss, or an effective rate above 25%, you can ask the DGI not to apply it. The DGI has six months to respond. If it doesn’t, the request is deemed approved.

Filing deadlines and estimated tax

The sworn income tax return is due three months after the fiscal year closes. For most companies the fiscal year runs from January to December, so the return is due at the end of March. You can request a one-month extension.

Companies also pay estimated tax in three installments. They fall due at the end of the sixth, ninth and twelfth month after the close.

Dividend tax and complementary tax

When the company distributes profits, it withholds dividend tax:

• 10% as the general rule.
• 5% on dividends paid out of foreign-source income, export income or exempt income.
• 20% if the shares are bearer shares.

Loans to shareholders are treated as dividends and carry a 10% withholding.

If in a given year the company distributes less than 40% of its after-tax net profit, it pays complementary tax. Think of it as an advance on dividend tax. When the company later declares the dividend, it can credit what it already paid.

ITBMS: Panama’s VAT

ITBMS (Impuesto de Transferencia de Bienes Muebles y Servicios) is Panama’s value-added tax. It applies to the sale of goods and the provision of services. The general rate is 7%. Alcoholic beverages and lodging pay 10%. Tobacco products pay 15%.

According to the DGI, registration is required when annual revenue exceeds B/.36,000 (the balboa is at par with the US dollar), or depending on the activity. The company offsets the ITBMS it paid on purchases against the ITBMS it charged on sales. Exports are not subject to ITBMS.

Notice of operation tax, municipal tax and real estate tax

Notice of operation tax. The notice of operation (aviso de operación) is the license every business needs to operate in Panama. It carries an annual tax on equity. The rate is 2%, with a minimum of US$100 and a maximum of US$60,000. In free zones and special economic areas it is 1%, with a maximum of US$50,000. The base is total assets minus liabilities. Liabilities owed to related parties abroad are not deducted.

Municipal tax. Law 106 of 1973 governs the municipal tax regime. Municipalities tax commercial, industrial or for-profit activities that have effects within their territory. When a company obtains its notice of operation through Panamá Emprende (the government’s online business registration platform), the municipality identifies it and starts assessing its taxes.

Real estate tax. Property owners pay between 0% and 1% each year, depending on the value and use of the property.

Employer contributions to the CSS

Every employee on payroll generates contributions paid by the company. They are added on top of salary, not deducted from it:

• Social security: 13.25% since April 2025, under Law 462 of 2025. It rises to 14.25% on March 1, 2027 and to 15.25% on March 1, 2029.
• Education insurance: 1.50%.
• Occupational risk: between 0.33% and 6.25%, depending on the company’s activity.

The employee contributes 9.75% to social security and 1.25% to education insurance. The company withholds these amounts and pays them together with its own share. If you need help running this process, see our payroll administration service.

Withholding on payments abroad

When your company pays a non-resident for services, royalties or interest, it must withhold tax. The 25% rate applies to 50% of the payment. The result is an effective withholding of 12.5%.

On services and royalties, the company can choose not to withhold. If it does, it cannot deduct the expense. On interest, withholding applies even if the expense is not deducted. There is no withholding if the recipient is registered as a taxpayer in Panama. Double tax treaties can reduce these rates.

For a foreign parent company that bills management fees or licenses to its Panama subsidiary, this rule shapes the cost of every intercompany invoice.

How to avoid overpaying

Most overpayments don’t come from a misapplied rate. They come from decisions nobody reviewed in time. These are the questions worth asking every year:

1. Does your company clearly separate Panama-source income from foreign-source income? Foreign-source income pays no income tax, and dividends from it pay 5%, not 10%.
2. Does the CAIR apply to you, and should you request an exemption? If your margin is thin, the request can change the year’s result.
3. Do you withhold on every payment abroad? One payment without withholding can turn a deductible expense into a non-deductible one.
4. Is your notice of operation tax calculated on the right base? Check how related-party liabilities are classified.
5. Does your estimated tax reflect the actual year? An inflated estimate ties up cash for months.
6. Do you distribute at least 40% of profits? If not, calculate the complementary tax before year end.

Tax advisory reviews these decisions before you file, not after.

How ARVA can help

ARVA Contadores Públicos Autorizados has served mid-sized companies, multinational subsidiaries and foreign companies operating in Panama since 2005. We review which taxes apply to your company, how much you pay today and where there is legal room to organize your tax burden. Learn more about our corporate tax services in Panama, or contact us to schedule a review.