Panama corporate tax in 2026: 25% on local profit, 0% on foreign profit

Last reviewed: November 2026 · Reviewed by Stéphane Gombauld, tax expert, technologist and digital nomad

You're thinking of running your business through a Panamanian company, or you already do. The question is simple: what does it actually pay? This guide covers the 2026 corporate rate, the minimum tax for larger companies, dividend tax, filing dates and the structure choices that matter for location-independent founders.

Panama corporate income tax in 2026: the key figures

Is this guide for you?

Read on if you…

• plan to set up a Panamanian company for local or international clients;
• already own a Panama S.A. and want to check what it should pay;
• are comparing Panama with other Latin American company locations.

Probably not your case if you…

• work alone for Panamanian clients and don't need a company, where business expenses in Panama is more useful;
• run a regulated bank, insurer or utility, which follow special rules.

How is a Panamanian company taxed?

Only local profit is taxed

Panama applies the territorial principle to companies too. A company pays 25% on profit from activities carried out in Panama. Profit from sales, services or investments abroad is outside the tax net.

The Fiscal Code (article 694) also lists activities that are not Panamanian-source even when run from a Panama office. Examples include invoicing from Panama for goods sold abroad, and directing from Panama transactions that are completed and take effect abroad.

Here's the catch. Services physically performed in Panama for foreign clients are a grey zone. Their treatment depends on where the service takes effect.

The alternative minimum tax (CAIR)

Companies with taxable revenue above USD 1.5 million must compare two figures and pay the higher one:

1. 25% of net taxable income; or
2. 25% of 4.67% of gross taxable income – roughly 1.17% of revenue.

If CAIR would push your effective rate above 25%, or you made a loss, you can ask the DGI not to apply it. Ask in time, with your financial statements.

Rate exceptions

Some companies pay different rates:

• Companies in which the State holds more than 40% pay 30%.
• SEM (multinational headquarters) and EMMA (manufacturing-related services) companies pay reduced rates on qualifying services.
• Companies in special zones, such as the Colón Free Zone, Panamá Pacífico and the City of Knowledge, follow their own regimes.
• Micro-enterprises registered with AMPYME can get a temporary income tax exemption.

What happens when profits are paid out?

Dividend tax

When a company distributes profits, it withholds dividend tax:

• 10% on profits from Panamanian-source income;
• 5% on foreign-source profits or export profits of companies holding a business licence (aviso de operación);
• 20% on bearer shares, now heavily restricted.

A company with only foreign-source income that doesn't need a business licence generally pays no dividend tax.

The complementary tax

If a company distributes less than 40% of its after-tax profit in a year, it pays an advance on dividend tax on the shortfall. This advance is credited when dividends are later paid.

When do you file and pay?

1. Year-end. Most companies use the calendar year.
2. Annual return. Due within three months of year-end, so by 31 March. An extension can be requested.
3. Estimated tax. Companies pay estimated tax in three instalments during the year, based on the previous year's tax: 30 June, 30 September and 31 December.
4. Transfer pricing report. Companies with related-party transactions abroad file it within six months of year-end.
5. Annual fee. The USD 300 tasa única is due every year, with or without profit.

All filings go through the DGI's e-Tax system.

Which structure fits your business?

Two warnings for remote founders:

• Management and control. If you make the company's key decisions from Germany, Spain or France, that country can treat the company as resident there and tax all its profit. Panama's 0% on foreign income then means little.
• Permanent establishment (PE) – in plain words, a fixed place of business or a person signing deals for the company in another country. A PE creates tax in that country on the profit it generates.

Compare structures in legal forms of business in Panama, or get help through our business setup service. For the wider picture, see the Panama tax landscape overview.

Common mistakes (and what they cost)

• Treating work done in Panama as foreign-source → the DGI reassesses at 25%, plus surcharges and interest.
• Forgetting the CAIR comparison above USD 1.5 million → you underpay and face penalties on the difference.
• Managing the company from your home country → that country taxes the company's worldwide profit, often at 25% to 30%.
• Not keeping accounting records for an "offshore" S.A. → fines and suspension, which can freeze the company's bank account.
• Skipping estimated tax instalments → interest and surcharges on each missed instalment.

Frequently asked questions

What is the corporate tax rate in Panama in 2026

Panama's corporate income tax rate is 25% of net taxable income in 2026. It applies only to Panamanian-source profit, because Panama uses a territorial system. Companies with taxable revenue above USD 1.5 million must also compare it with the alternative minimum tax of about 1.17% of gross revenue and pay the higher amount.

Do Panama offshore companies pay corporate tax

No, not on foreign-source income. A Panamanian company that earns all its profit from activities outside Panama pays no Panamanian income tax. It still pays the USD 300 annual fee, must keep accounting records with its resident agent and must report its beneficial owners. Your home country may tax it if you manage it from there.

What is CAIR in Panama

CAIR is Panama's alternative minimum income tax. It applies to companies with taxable revenue above USD 1.5 million. They pay the higher of 25% of net taxable income or 25% of 4.67% of gross taxable income, about 1.17% of revenue. Companies with losses, or whose effective rate would exceed 25%, can ask the DGI not to apply it.

How are dividends taxed in Panama

Panamanian companies withhold 10% on dividends paid from Panamanian-source profits. The rate is 5% on foreign-source or export profits of companies holding a business licence, and 20% on bearer shares. A company with only foreign-source income that needs no business licence generally pays no dividend tax. Treaties may lower rates for some foreign shareholders.

When is the corporate tax return due in Panama

A Panamanian company files its annual income tax return within three months of its year-end, so by 31 March for calendar-year companies. It also pays estimated tax in three instalments on 30 June, 30 September and 31 December, based on the previous year's tax. Everything is filed online through the DGI's e-Tax system.

Can a non-resident own and run a Panama company

Yes. Foreigners can own 100% of a Panamanian S.A. and act as directors from abroad, with a local resident agent handling registration and records. The tax risk sits elsewhere: if you manage the company from your home country, that country may treat it as tax resident there and tax its worldwide profit.

Related guides

• Legal forms of business in Panama
• Business expenses in Panama
• Specific taxes in Panama: VAT, property and company fees
• Panama tax landscape overview
• Tax fraud regulations of Panama
• Corporate income taxes in Paraguay, compared
• All country tax guides

Sources

• Dirección General de Ingresos (DGI) – Panama tax authority
• Gaceta Oficial de Panamá – Fiscal Code and corporate tax laws
• Ministerio de Economía y Finanzas de Panamá
• Panamá Emprende – business licence portal
• PwC Worldwide Tax Summaries – Panama, corporate taxes on income (secondary cross-check)

This guide is general information, not personalised tax advice. See how we research and review.