INDIVIDUAL TAXES
SIGNIFICANT DEVELOPMENTS
There have been no significant tax or regulatory developments in the past year.
TERRITORIALITY AND RESIDENCE
Panama's tax system is based on a territorial concept of income. Citizens and residents are taxed on income earned from Panama sources. Nonresidents are taxed only on income from Panama sources, and the tax on any type of income paid to a nonresident must be withheld by the payer. Citizens, residents and nonresidents are not taxed on exempt income (i.e., interest
on Panamanian government securities and interest on savings accounts and time deposits with banks established in Panama).
GROSS INCOME
Employee gross income/An employee is taxed on compensation earned for work done in Panama regardless of where payment is made or received.
Compensation includes salary, premiums, profit distributions, living allowances, housing allowances, tax reimbursements, benefits-in-kind, house, car, retirement benefits, and any other compensation-in-kind. There is no concession to a foreign employee.
Capital gains and investment income/Capital gains on the sale of real estate located in Panama and on securities not registered with the National Securities Commission are taxable.
Capital gains arising from the sale of real estate are subject to a specific tax rule. Capital gains from the sale of shares, bonds and other securities represent an integral part of the taxpayer's gross income, unless these securities are exempt.
Investment income from a Panama source, such as dividends, is subject to a 10% withholding tax. However, dividends on bearer shares are subject to 20% withholding tax.
DEDUCTIONS
Business deductions/Unreimbursed items such as moving expenses,
business-connected travel expenses and business entertainment expenses are not deductible against the employee's compensation income.
A fixed allowance (representation expenses) can be given to employees as a part of salary. This allowance is considered to be gross taxable income, and the taxpayer may deduct 25% of this allowance as expenses up to a maximum of B/,6,000 per year.
Representation expenses are not subject to social security and educational insurance taxes for either the employee or the employer.
Nonbusiness expenses/Interest paid on mortgage loans for homes or for home improvements on residences located in Panama is deductible; the maximum deduction allowed is B/.15,000 annually, provided the interest payment does not classify as preferential interest for new homes. Interest paid on
loans for financing education is deductible if duly documented. The educational insurance tax (see below) is deductible. Medical expenses are deductible, provided they were incurred in Panama and are duly documented. Donations to local educational and charitable institutions are deductible, provided the deductions are authorized by the law establishing or
organizations in Panama are also deductible expenses.
Personal allowances/An individual who is not married is entitled to a personal exemption of B/.800; married couples filing a joint return are entitled to an exemption of B/.1,600. An additional exemption of B/.250 is granted for each dependent. These exemptions are applicable in determining
taxable income.
TAX CREDITS
No tax credits are allowed income taxes paid to foreign countries.
OTHER TAXES
Social security taxes/Social security tax is assessed at a rate of 7.25% on wages and other compensation paid, including compensation-in-kind. However, compensation-in-kind from the employer is subject to social security tax to the extent of 20% of the employee's salary. There is no maximum limit on the taxable amount.
Local taxes on income/There are no local taxes on income.
TAX ADMINISTRATION
Returns/Husbands and wives can file joint returns. Joint filing is not advantageous if both spouses earn separate income, because the tax rates are graduated. The only advantage of filing a joint return for a couple with a single source of taxable income is that in a joint return there is an exemption of B/.1,600, while in a single return the exemption is
B/.800.
All taxpayers, except employees having only one source of income from wages, salary or other remuneration for personal services and whose monthly income tax is deducted by the employer, must file a tax return on a calendar-year basis.
Employees having only one source of income from personal services who want to take advantage of nonbusiness expenses must file a tax return. Employees who receive representation expenses are also required to file a tax return.
Tax returns and estimated income for the current year must be filed o forms prescribed and supplied by the Income Tax Department.
Payment of tax/There is income tax withholding from wages, salaries and other remuneration for personal personal services.
[1] [2] [3] 下一页
