Panama

Overview

Panama occupies a unique and enduring position among international financial centres. It combines one of the most straightforward territorial tax systems in the world with a mature legal infrastructure for privacy structures, a well-established banking sector that operates in US dollars, and two of the most accessible residency programmes globally. For individuals and businesses generating income from outside Panama, the tax position is clear and legally uncomplicated: that income is simply not subject to Panamanian tax.

The Panama Corporation (Sociedad Anónima, or SA) and the Panama Private Interest Foundation have been foundational instruments in international estate planning and cross-border structuring for decades. While Panama's profile in international financial media has been affected by the events of 2016, the underlying legal and commercial infrastructure remains well-developed and, for clients with clean, documentable structures, continues to function effectively.

Territorial Tax System

Panama operates a strict territorial tax system codified in the Fiscal Code. Only income arising from Panamanian sources — from activities conducted within the territory of Panama — is subject to Panamanian income tax. Income derived from foreign sources, including dividends, capital gains, interest, and trading profits from overseas operations, is entirely outside the scope of Panamanian taxation, regardless of where the company or individual holding that income is resident or incorporated.

This applies at both the corporate level (for Panama SAs and other vehicles) and at the individual level (for Panama residents and permanent residents). There is no requirement to remit foreign income to Panama for it to remain tax-exempt — it remains sheltered whether held offshore or brought onshore.

Tax	Rate
Personal Income Tax (Panama-source)	0–25% (progressive)
Personal Income Tax (foreign-source)	0%
Corporate Tax (Panama-source)	25%
Corporate Tax (foreign-source)	0%
Capital Gains Tax (foreign assets)	0%
Capital Gains Tax (Panama real estate)	10% (applicable rate)
Inheritance Tax	0%
Wealth Tax	0%
Currency	US Dollar (USD)

Panama Corporation (Sociedad Anónima)

The Panama SA, governed by the Corporations Law (Law 32 of 1927 as amended), is one of the most flexible and widely used offshore corporate vehicles in the world. Key structural features include:

• Minimum three directors required (may be corporate entities); nominee directors widely available
• Bearer shares abolished since 2015 in compliance with FATF requirements; all shares must be registered and held in custody with a regulated intermediary
• No requirement to file annual financial statements with the Public Registry
• No statutory audit requirement for non-regulated entities
• Registered agent required (must be a Panama-licensed resident agent)
• Formation in 3–5 business days; same-day formation available
• Annual government fee: approximately USD 300

Panama SAs are used for holding foreign investments and real estate, international trading, joint ventures, and as layers within multi-jurisdictional structures. For purely offshore income-generating activities, the SA provides a clean, legally robust vehicle with minimal ongoing compliance obligations.

Panama Private Interest Foundation

The Panama Private Interest Foundation (Fundación de Interés Privado, or FIP), established under Law 25 of 1995, is a civil law vehicle that combines features of a trust and a company. It occupies a distinct role in international estate planning and succession structures, particularly for clients from civil law jurisdictions where the common law trust concept may receive uncertain legal treatment.

Key features:

• Legal personality: the Foundation is a separate legal entity, unlike a trust, which does not have legal personhood in common law systems
• No beneficiaries in the traditional sense: the Foundation has objects (stated purposes) and designated beneficiaries who receive distributions according to the Foundation Charter and Private Regulations
• Founder retains control options: through the Foundation Charter and separate Private Regulations (which do not need to be registered publicly), the Founder can retain significant powers including power to amend the foundation, appoint/remove council members, and direct investments
• Asset protection: assets transferred to a properly structured FIP are generally protected from future creditor claims, subject to applicable limitation periods and fraudulent conveyance rules
• Succession planning: the FIP's legal personality and specific succession provisions allow it to hold assets across generations without probate proceedings
• Annual cost: government registration fee of USD 400, plus foundation council and administration fees

The Private Regulations (Reglamento Privado) of a Panama Foundation are not filed publicly, providing meaningful privacy regarding the identities of beneficiaries and the terms of distribution — a feature that distinguishes it from many comparable civil law structures.

Residency Programmes

Pensionado Visa

The Pensionado Programme is one of the world's most generous retirement residency programmes. It is available to individuals who receive a minimum lifetime pension of USD 1,000 per month from a government or private pension source. Qualifying pensioners receive permanent residency and a substantial package of lifestyle benefits including:

• 20% discount on professional and medical services
• 15% discount on hospital charges
• 25% discount on airlines and hotels
• 15% discount on fast food restaurants and similar establishments
• Tax exemption on importation of personal and household effects

The programme has no minimum age requirement, no requirement to invest in Panama, and no income tax on the qualifying pension income from foreign sources.

Friendly Nations Visa

The Friendly Nations Visa (FNV) is available to citizens of approximately 50 qualifying nations — including the US, UK, EU member states, Canada, Australia, Japan, South Korea, and others — who establish economic ties to Panama. Economic ties may be demonstrated through employment in Panama, incorporation of a Panamanian company, or purchase of real estate. The FNV provides the pathway to permanent residency and can be converted to naturalization after five years.

Processing timelines for the FNV vary from 3–9 months depending on documentation completeness and current government processing capacity.

Banking Sector

Panama's banking sector is well-established and operates with USD as the functional currency — a significant practical advantage. The Superintendency of Banks (Superintendencia de Bancos, SBP) regulates the sector under Banking Law 9 of 1998.

Major international institutions with significant Panama operations include:

• Banco General — Panama's largest privately-owned bank
• Banistmo (HSBC affiliate) — major retail and commercial bank
• Multibank
• BAC International Bank
• Balboa Bank & Trust
• CitiBank Panama — international operations

Banking for Panama SAs and Foundations has become more selective since 2016. Banks now require thorough source of funds documentation, clear beneficial ownership disclosure, and a credible business purpose. Well-structured, documented entities with identifiable, clean beneficial owners typically open accounts within 4–8 weeks. Accounts at US-correspondent-dependent banks may face greater scrutiny due to OFAC/BSA-driven correspondent bank risk aversion.

Key Compliance Considerations

FATF Status: Panama has been subject to enhanced scrutiny following its inclusion on the FATF grey list at various points. As of early 2026, Panama has implemented significant legislative reforms including enhanced beneficial ownership registers, improved anti-money laundering frameworks, and automatic exchange of information agreements. Clients should obtain current advice on Panama's FATF status and the implications for specific banking relationships.

Beneficial Ownership Register: Panama maintains a beneficial ownership register, accessible to competent authorities but not publicly available. The Panama Papers (2016) accelerated reforms that significantly increased transparency obligations for registered agents and formation professionals.

CRS Participation: Panama is a signatory to the Common Reporting Standard and participates in automatic exchange of financial account information with participating jurisdictions. Panamanian financial account holders resident in CRS-participating jurisdictions will have their account information reported to their home tax authority.

US Persons: A Panama–US Tax Information Exchange Agreement (TIEA) exists. US persons holding Panama SAs or Foundations with material assets are subject to standard US foreign asset reporting requirements (FBAR, Form 5471, Form 3520 as applicable). US-qualified tax advice is essential.

HPT's Assessment

Panama remains a viable and practical jurisdiction for the right client profile — specifically, individuals who can demonstrate a clear, legitimate source of offshore income and business activity, who are not from jurisdictions with aggressive anti-avoidance regimes targeting Panama structures, and who are prepared to maintain properly documented beneficial ownership and compliance records.

The territorial tax system is genuine and legally robust. The Private Interest Foundation remains one of the most flexible estate planning vehicles available to non-common-law clients. The Pensionado and Friendly Nations residency programmes offer practical pathways to permanent residency that few jurisdictions can match in accessibility.

Panama is not appropriate for clients seeking to obscure ownership or avoid legitimate tax obligations — the post-2016 regulatory environment has substantially narrowed the space for opaque structures. However, for transparent, well-documented operations, it retains considerable merit.