Tax analysis
Panama
0% on foreign income (territorial). Friendly Nations Visa: residency with $5K deposit.
Last updated:
- VAT
- 7%
- Corporate
- 25%
- Dividends
- 10%
- Capital gains
- 10%
- Wealth
- —
- Days/year required
- 0
- Visa types
- Friendly Nations Visa, Pensionado, Forestry / Reforestation Investor
- Difficulty
- Easy
- Paperwork
- ~16 wk
- Double-taxation treaty
- Yes (2010)
- Modelo 720
- Yes
- Exit tax
- >€4.0M
- Risk level
- High
Why Panama?
Panama offers 0% on foreign-source income (pure territorial system), one of the fastest residencies for citizens of "friendly nations" (Spain included), use of USD as local currency (no FX risk), and a developed international banking sector. The cost: heavy fiscal scrutiny from Europe due to its history as an offshore jurisdiction.
Territorial tax system
- ISR (Income Tax) personal: 0% on foreign-source income.
- ISR on local income (services performed in Panama / Panamanian clients): brackets 15-25% on excess over $11,000/year.
- ITBMS (VAT): 7% on local sales.
- Corporate: 25% on Panamanian income. 0% on foreign income of classic SA company.
- Dividends: 5/10/20% depending on source and regime.
If you work remotely billing European/American clients without Panamanian client and without physical activity in Panama, your effective ISR is 0%.
Friendly Nations Visa (FNV)
Program for nationals of ~50 "friendly" countries (Spain included):
- Requirements (post-2021 reform): employment contract in Panama OR real estate property $200K+ OR $5,000+ bank deposit with 3-year fixed term.
- Processing:
16 weeks with Panamanian attorney ($3,000-5,000 fees + government). - Result: permanent residency + ID card. Renewal every 10 years.
- No minimum presence requirement (technically 1 day every 2 years to avoid loss).
Pensionado (alternative)
If you have a lifetime pension >$1,000/month:
- Permanent residency via Pensionado visa.
- Extra benefits: discounts on many services, household imports tax exemption.
Spain-Panama treaty (2010)
Bilateral treaty exists, in force since 2011. Covers:
- Employment income (where performed).
- Dividends, interest, royalties with reduced withholding.
- Tie-breaker rules for residency.
But: the treaty doesn't automatically protect if Hacienda proves lack of economic substance.
Implications from Spain (HIGH risk)
- Panama has been on EU non-cooperative jurisdictions list at various times (periodic review, exit and re-entry). Implies automatic fiscal scrutiny.
- Modelo 720 required if you keep Spanish assets.
- Main risk: using Panama as paper change without real physical presence or cutting economic ties in Spain. Hacienda watches Panamanian cases very closely.
For it to actually work:
- Effectively live in Panama most of the year (not a legal Panamanian requirement, but it is a Hacienda defense requirement).
- Move company, accounts and economic ties.
- Keep exhaustive documentation (flight tickets, real rental contracts, daily expenses).