Panama taxes for companies: territorial system, RUC and annual obligations

How do Panama taxes work? The territorial tax system

Article 694 of the Fiscal Code provides that income tax applies to income produced within the territory of the Republic of Panama, wherever it is received. Foreign-source income, meaning income from operations carried out outside the country, is generally not subject to income tax in Panama.

Being a Panama company does not mean paying tax on everything it earns: what matters is where the income is produced. This principle is why many people from other countries use Panama companies and foundations for international investments and business.

What changed in 2026: economic substance (Law 526)

Law 526 of May 28, 2026 added economic substance rules to the Fiscal Code for Panamanian entities that are part of a multinational group and receive foreign-source passive income, such as dividends, interest, royalties, capital gains and rent.

For that income to remain untaxed in Panama, the entity must report it in its income tax return and show substance in the country: qualified staff, premises, strategic decisions made in Panama and adequate operating expenses. Holding companies and entities that only hold real estate on a non-habitual basis have reduced requirements. If it does not comply, the entity is treated as non-qualified and that income becomes taxable. Companies that are not part of a multinational group fall outside these rules.

Obligations of every company with the DGI

• Register with the Taxpayer Registry (RUC). According to the DGI, every company registered at the Public Registry must register, even if it has no income or expenses in Panama, because it must pay the annual government fee (tasa única).
• Pay the annual fee set by Article 318-A of the Fiscal Code. Late payment generates surcharges and the company can be suspended.
• Keep accounting records and supporting documents, as required by Law 52 of 2016, even if all its activity is abroad.
• File the sworn income tax return when applicable, within the deadlines set by the Fiscal Code. A company with foreign-source income reports it in its return and records.

If the company sells or provides services in Panama

When the business has activity inside the country, other obligations apply: the business license (aviso de operación) with the Ministry of Commerce and Industries, electronic invoicing, income tax on that activity, the transfer tax on goods and services (ITBMS) where it applies, dividend tax when profits are distributed, and Social Security obligations if it has employees. These depend on the activity, so it is worth reviewing them with an accountant before starting operations.

How a company registers for the RUC

1. The application is made online only, on the DGI's e-Tax 2.0 platform (Registration, legal entity registration request).
2. You attach the legal representative's valid ID or passport and the company's Public Registry registration record or certificate.
3. Any document from abroad must be apostilled and in Spanish, or translated by an authorized public translator.
4. The DGI emails you when it receives the application and again when it is approved. According to the DGI, approval usually takes 2 to 6 business days.

Panama tax residency certificate

The tax residency certificate is issued by the DGI and proves to another country that a person or company is tax resident in Panama, for example to apply one of Panama's 17 double taxation treaties. It is requested through e-Tax 2.0 and, according to the DGI, takes about three months and is handled in order of arrival, so it should be planned ahead.

For a company, the DGI asks for a filing with a power of attorney to a lawyer explaining its activity, the treaty or general use and the year requested; the company's Public Registry certificate; the certificate of its property or its lease; and evidence that it has staff in Panama and that its decisions are made from the country. A company with no office or staff in Panama is unlikely to obtain it.

If the company stops operating

If you want to keep the company in good standing but without activity, the DGI says you must file a final return with cessation of operations, cancel the business license at the Ministry of Commerce and Industries, request the cancellation or suspension of its obligations and obtain the cessation certificate from the Social Security Fund. The annual fee is still due while the company exists.

How Panainfo helps

We register your company for the RUC, remind you of and handle the annual fee payment, obtain the Public Registry certificates that the DGI and banks ask for, and prepare the documents for the tax residency certificate, with apostille and translation when needed. Income tax returns and bookkeeping are coordinated with an authorized public accountant.

Legal basis

• Fiscal Code of Panama, Article 694, on the territorial principle of income tax.
• Law 526 of May 28, 2026 (Official Gazette 30534-B), which adds Articles 707-A to 707-F to the Fiscal Code on economic substance for foreign-source passive income.
• Article 318-A of the Fiscal Code, on the annual fee for companies and foundations.
• Law 52 of 2016, on accounting records of legal entities.
• Rules and procedures of the Directorate General of Revenue (DGI) of the Ministry of Economy and Finance on the RUC, the tax residency certificate and double taxation treaties.