The territorial principle
Panama uses a territorial tax system: in general, only income earned inside Panama is taxed, while most foreign-source income is not. For many retirees and remote workers, this is a major draw — but it isn’t a licence to ignore your home country’s rules.
What this means in practice
- Foreign pensions and investment income are generally outside Panama’s tax net.
- Panama-source income (a local job or local business) is taxable here.
- Your home country may still tax you — US citizens, for example, file worldwide.
Other taxes to know
There’s a value-added tax (ITBMS) on many goods and services, plus property-related taxes with exemptions in some cases. Rates and rules change, so treat this as orientation, not advice.
Get professional help
Use a cross-border tax professional who understands both Panama and your home country. See our taxes in Panama guide for more detail.
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