Panama Dividends Tax
There is a 10% Panama dividends tax imposed upon entities that have a commercial operations permit and have Panama source income. The Panama dividends tax is only 5% if the earnings come from foreign sources, is export related, or other specific laws exempting the income. Companies located in the free trade zones pay a 5% dividend tax for all income. The entity providing the dividend withholds the tax and pays the tax authorities. There is no income tax on those receiving dividends. Panama dividends paid to holders of bearer shares must pay a 20% Panama dividends tax.
Panama Retained Earnings Tax
If no Panama dividends are paid or paid Panama dividends are less than 40% of the current Panama sources after tax earnings; there is a 10% tax on the difference between the 40% and what was paid. If no Panama dividends are paid or paid dividends are less than 20% of foreign source income or specific exempt income, there is a 10% tax on the difference between the 20% and what was actually paid.
This tax is known as the “complimentary tax” (impuesto complementario”) is credited towards future Panama dividends and can be seen as an advance of the Panama dividends tax in relation to the 40% or 20% of the current earnings. Registered subsidiaries of foreign corporations pay this tax on their total current earnings without regard if anym distribution was made.