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Panama is a country that encourages foreign investment and has long been known for being a reliable tax haven and for its safe Panama banking. In 1998 they passed the Investment Stability Law, which protects foreign investors from changes in tax, customs, municipal and labor rules for 10 years from the date an investment is registered. Other advantages include no taxes for foreign-earned income, a 15 year exemption on Panama property taxes for newcomers who buy or build a new house and retirees get a one time exemption of duties for importing up to 10,000 worth of household goods.

Summaries of the Main Types of Taxes in Panama:

• Income tax: Income taxes in Panama are applied to Panamanian-sourced income only. It is based on a sliding scale system, ranging from 7% to 27% after the first $9,000 earned. This taxable income also includes salaries and wages, business profits, income from copyrights, bonuses, royalties, trademarks, stock sales, bonds, and securities. Interest income from Panama banking is also taxable.
• Capital gains tax: Capital gains are taxed at the level the person is being assessed for income tax and should be included in the annual tax return. There is also a possible option to pay a flat rate of 10%.
• Panama Property tax: There is no property tax required for properties with a value of $30,000 or less. Properties with a higher value pay a percentage of the value, 1.75% for $30,000 to $50,000; 1.95% for $50,000 to $75,000; and 2.1% for any property valued above $75,000.
• Rental income tax: Those who receive rental return on their property will be liable for income tax up to 27% max. You may be exempt for 15 years if you invest in one of the special tourism zones.
• Transfer tax: Real estate transfer taxes in Panama are paid by the seller and are 2% of either the updated registered value of the property or the sale price, whichever is higher. The updated value is the registered value, plus 5% per annum of ownership.
• Inheritance tax: There is no longer an inheritance tax in Panama. However there is a tax on property given as a gift, the amount of the tax depends on the relationship between the two people.

Panama taxes are historically low. Many people living in Panama pay no property taxes or even income taxes on things such as interest derived from Panama banking. The tax structure here is just one more advantage to living in Panama.

This concludes our series of articles about Banking and Financing. Panama is becoming a world leader for retirement and rightly so, with all the things Panama has to offer the retiree.

For more information go to the Retiring in Panama section of our Web Site to know more about this useful to know topic.