Quick answer
In Panama, tax fraud (defraudación fiscal) becomes a crime when the tax evaded reaches USD 300,000 or more in one fiscal year. It is punished with two to four years in prison plus a fine. Below that threshold, the DGI applies administrative fines, surcharges and interest. Paying in full can end criminal proceedings.
Last reviewed: November 2026 · Reviewed by Stéphane Gombauld, tax expert, technologist and digital nomad
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Check my tax setup →Panama's territorial system means many expats owe little or no local income tax. That makes it easy to assume nobody is watching. This guide explains, for 2026, what counts as tax fraud in Panama, where the criminal line sits, what the fines look like and how to fix a mistake before it becomes a problem.
Panama tax fraud regulations in 2026: the key figures
| Item | 2026 rule |
|---|---|
| Criminal tax fraud threshold | USD 300,000 or more of tax evaded in one fiscal year |
| Prison sentence | 2 to 4 years |
| Criminal fine | A multiple of the amount evaded |
| Way out of criminal proceedings | Full payment of tax, surcharges and interest before the case is decided |
| Below USD 300,000 | Administrative penalties under the Tax Procedure Code (Law 76 of 2019) |
| Tax crime as money-laundering predicate | Yes, since 2019 |
| Record-keeping for companies | Accounting records and supporting documents for at least 5 years |
| Automatic exchange of financial account data (CRS) | Active since 2018 |
Is this guide for you?
Read on if you…
- live in Panama and earn some Panamanian-source income;
- own or manage a Panamanian company, including one with only foreign income;
- found a mistake in a past return and want to correct it.
Probably not your case if you…
- earn only foreign income and have no Panamanian company, property or business;
- are already under criminal investigation, where you need a local criminal-tax lawyer now.
What counts as tax fraud in Panama?
Defraudación fiscal – in plain words, deliberately paying less tax than you owe, or claiming refunds you are not entitled to. The law looks at intent. Typical behaviours include:
- hiding Panamanian-source income or sales;
- using false or inflated invoices to claim deductions or VAT credits;
- keeping two sets of books;
- claiming that local work is foreign-source when it clearly is not;
- using a company or nominee to hide the real owner of taxable income.
An honest error is not fraud. A wrong classification made in good faith is a tax adjustment, not a crime. Here's the catch: the DGI decides first, and you then have to prove good faith with documents.
When does tax fraud become a crime?
Panama made serious tax fraud a criminal offence in 2019. Law 70 of 2019 added it to the Penal Code (article 288-G and following) and linked it to anti-money-laundering rules.
- The threshold. The tax evaded must reach USD 300,000 or more in a single fiscal year. It is counted per tax and per year.
- The sentence. Two to four years in prison, plus a fine based on the amount evaded.
- The exit. If you pay the tax, surcharges and interest in full, the criminal action can be extinguished. This option is not available to repeat offenders.
- Aggravating factors. Using front companies, false documents or public officials can increase the penalty.
Below USD 300,000, the matter stays administrative. That still means significant fines.
What administrative penalties can the DGI impose?
The Tax Procedure Code (Law 76 of 2019) sets the general penalty system. It distinguishes between fraud, contraventions and simple breaches of formal duties.
| Breach | Typical consequence |
|---|---|
| Fraud below the criminal threshold | Fine of a multiple of the tax evaded, plus the tax and interest |
| Late filing of a return | Fixed fine per return |
| Late payment | Surcharge plus monthly interest |
| Not issuing valid invoices | Fines and possible temporary closure of the business |
| Failure to keep or provide records | Fines; for companies, possible suspension of corporate rights |
The DGI can review past years within the statute of limitations. Keep your records at least that long.
What are the reporting duties that catch people out?
Accounting records for every company
Since 2021, every Panamanian company must keep accounting records and supporting documents, and provide its resident agent with a copy or the address where they are kept. This includes "offshore" companies with only foreign income. Missing it leads to fines and possible suspension of the company.
Beneficial ownership register
Resident agents must record the beneficial owners of Panamanian companies and foundations in a private, centralised register. The tax authority and supervisors can access it.
Automatic exchange of information
Panama exchanges financial account data under the OECD Common Reporting Standard (CRS) since 2018. If you hold a Panamanian bank account, your home country probably receives the balance and income each year. The reverse is also true.
EU and FATF lists
Panama left the FATF "grey list" in 2023. It has, however, remained on the EU list of non-cooperative jurisdictions for tax purposes. Being on it means extra scrutiny of Panamanian structures by EU tax authorities.
How do you fix a mistake before it becomes fraud?
Good news: Panama allows corrections. The sooner you act, the lower the cost.
- Gather the facts. List the income, expenses and years affected, with documents.
- File an amended return (declaración rectificativa) through the DGI's e-Tax system.
- Pay the difference, surcharges and interest at once, or ask for an instalment arrangement.
- Keep proof of good faith, such as advice letters or contracts that explain your original position.
- If the amounts are large, take advice before filing, since an amendment is an admission.
Honestly? For most location-independent professionals, the real risk is not Panama. It is the home country that still considers them resident and receives their Panamanian bank data through CRS. Our tax residency in Panama and ceasing your tax residency guides cover that side.
Example – Ana, Colombian event producer in Panama City
Ana billed Panamanian clients USD 90,000 in 2024 but declared it as foreign income. In 2026 she realises the work was done locally. The unpaid income tax is about USD 15,850, far below the USD 300,000 criminal threshold. She files an amended return, pays the tax plus surcharges and interest, and avoids the heavier fraud fine the DGI could impose after an audit.
Ana caught her mistake in time. Have you checked yours?
Get your Panama income classification reviewed before the DGI does it for you.
Check my tax setup →Common mistakes (and what they cost)
- Treating local freelance work as foreign-source → the DGI reassesses at 15% to 25%, plus fines and interest.
- Leaving an "offshore" company without accounting records → fines and suspension, which can freeze its bank account.
- Using a nominee to hide the real owner → beneficial ownership breaches and, above the threshold, criminal exposure.
- Assuming CRS doesn't reach you → your home country receives your Panamanian account data and can tax unreported income.
- Ignoring late-filing notices → fixed fines escalate, and the DGI can block your tax clearance (paz y salvo).
Frequently asked questions
Is tax evasion a crime in Panama
Yes, above a threshold. Since 2019, tax fraud is a criminal offence when the tax evaded reaches USD 300,000 or more in one fiscal year. The penalty is two to four years in prison plus a fine. Below that amount, the DGI imposes administrative fines, surcharges and interest. Paying the full amount owed can extinguish the criminal action for first-time offenders.
What happens if I file my Panama tax return late
You pay a fixed late-filing fine and, if tax is due, surcharges and interest on the unpaid amount. Repeated failures increase the penalties. The DGI can also refuse to issue your paz y salvo, the tax clearance certificate you need for many transactions, until you are up to date. Filing late is always cheaper than not filing.
Can I correct a past tax return in Panama
Yes. You can file an amended return through the DGI's e-Tax system and pay the difference, plus surcharges and interest. Acting before an audit usually keeps you away from the heavier fraud penalties. For large amounts, take advice first, because an amended return is an admission that the original was wrong.
Do Panama offshore companies have to keep accounts
Yes. Since 2021, every Panamanian company must keep accounting records and supporting documents, and give its resident agent a copy or the address where they are kept. This applies even when the company only earns foreign-source income and pays no Panamanian income tax. Breaches lead to fines and possible suspension.
Does Panama share bank information with other countries
Yes. Panama has exchanged financial account information under the OECD Common Reporting Standard since 2018. Banks report account balances, interest and dividends of foreign tax residents to the DGI, which sends them to partner countries. If your home country still considers you resident, it probably receives your Panamanian account data every year.
Is Panama still on a tax blacklist
Panama left the FATF grey list for money laundering in 2023. It has, however, remained on the EU list of non-cooperative jurisdictions for tax purposes, which leads to extra checks on Panamanian structures by EU tax authorities. Check the latest EU update before relying on a Panamanian company for EU business.
Related guides
- Panama tax landscape overview
- Tax residency in Panama
- Corporate income taxes in Panama
- Business expenses in Panama: what you can deduct
- Practical guide to ceasing your tax residency in Panama
- Tax fraud regulations of Paraguay
- Tax fraud regulations of Mexico
- All country tax guides
Sources
- Dirección General de Ingresos (DGI) – Panama tax authority
- Gaceta Oficial de Panamá – Law 70 of 2019 and Law 76 of 2019
- Ministerio Público de Panamá – public prosecutor
- Council of the EU – EU list of non-cooperative jurisdictions for tax purposes
- Financial Action Task Force (FATF)
- OECD – tax transparency and exchange of information
This guide is general information, not personalised tax advice. See how we research and review.
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