Panama: pure territoriality still attracts entrepreneurs

Panama taxes Panamanian-source income. Income whose source is abroad is not part of the tax base, even when received by a resident.

This rule is not a time-limited incentive regime: it has always structured the Panamanian tax system and explains the presence of the banking centre, the shipping registry and service companies.

Its solidity stems precisely from this structural character. Closing a special regime is an isolated political decision; abandoning territoriality would require a complete overhaul of the system, which is a different matter altogether.

But territoriality protects the source, not the person. Income from a service performed from Panama calls for its own analysis, and the line between foreign-source income and locally generated income is the real technical issue in Panamanian cases.

A consultant who settles in Panama and invoices European clients from Panama City sits exactly on this line. The client is foreign, but the service is performed on Panamanian territory.

We do not publish Panamanian doctrine on the territorial attribution of services performed from Panama for foreign clients: it does not appear in the official sources we have been able to verify. Yet this is the decisive point, and it must be secured with a Panamanian adviser before settling.

This gap must be taken seriously. Most of the project's value depends on the answer: if the service is of Panamanian source, the income is taxable and territoriality protects nothing.

Nor do we publish the Panamanian income tax scale or the rates applicable to companies, dividends and capital gains: they do not appear in our verified sources. This is a real gap for anyone who would receive Panamanian-source income.

An entrepreneur who structures their business so that the service is performed outside Panama is in a clearer position — but they must then live elsewhere, which defeats the purpose of the project.

The permanent resident permit as a retiree requires a monthly pension of at least from $1,000¹, one of the lowest thresholds in the world, together with statutory discounts on many services.

A real estate investment route is available from about $200,000².

A separate regime exists for nationals of countries that have privileged relations with Panama, with its own conditions involving, in particular, a deposit or investment of $200,000³.

Opening a local bank account, on the other hand, is slow and requires extensive documentation. Compliance obligations have been considerably strengthened following the international monitoring the country has been subject to, and its old reputation for ease no longer matches practice.

These three routes lead to a right of residence, not to citizenship, and none of them in itself confers Panamanian tax residency. That follows its own criteria, and obtaining it requires a separate application, on whose outcome any reliance on a tax treaty depends.

1. Have the source of your income classified with a Panamanian adviser before settling.
2. Plan ahead for opening a bank account, which is slow and document-heavy.
3. Prepare civil status documents and criminal record extracts in France, apostilled and translated.
4. For a purchase, check the nature of the right: registered title or untitled possessory rights.
5. Deal with the departure from France according to its own criteria: Panamanian territoriality settles nothing on that side.

Finally, the US dollar circulates as currency in Panama, which eliminates currency risk for a budget in dollars and makes prices immediately readable. This is a considerable practical advantage, and it sets the country apart from most of its Central American neighbours.