Tax residency in Panama
How to obtain tax residency in Panama
To obtain tax residency in Panama, you need to follow 5 simple steps:
- Cedula E, easy as it is automatically received by completing the legal residence procedure
- Apostilled copy of entire passport, done in a few hours
- Receipt of utility in your name or a notarized rental contract
- Having physically stayed in Panama for more than 183/184 days, even if not consecutively, according to universal law
- RUC, the personal tax code that streamlines the procedure.
The Republic of Panama and the Italian Republic have entered into a convention for the avoidance of double taxation with respect to taxes on income .
DGI, Convenio Para Avoidar Double Taxation Between Panama and Italy
| Category | Tax residency in Panama | Tax Residency in Italy |
|---|---|---|
Tax system |
Territorial taxation: only income generated in Panama is taxed. | Worldwide taxation: All global income is subject to tax |
Main taxes |
Corporate tax rate: 25% on local income, zero on foreign income | Progressive IRPEF rate up to 43% on global income |
Registered residence |
It is obtained through a residence permit or treaties (e.g. Panama–Italy) | AIRE registration is mandatory if you have been resident abroad for more than 12 months. |
Double taxation |
Panama does not withhold foreign income; no broad agreements | Italy has numerous double taxation treaties with other countries |
Practical advantages |
Zero taxes on foreign dividends, banking privacy, and easy company opening | Access to the national healthcare system, EU legal stability |
Frequently Asked Questions (FAQ) |
|
|
Conclusion |
Tax residency in Panama is a legal tax optimization strategy, highly sought after by entrepreneurs, investors, and individuals seeking to reduce their tax burden compared to the Italian regime. | |
Difference between tax residence and registered residence
There are two types of residences. Tax residence and registered residence. Both tax residence and registered residence play an essential and decisive role in the definition of a natural person subject or not to a certain type of tax treatment.
| Category | Tax residency in Panama | Registered Residence |
|---|---|---|
Definition |
Condition related to the obligation to pay income taxes under the Panamanian territorial system | Official registration of a person's domicile or habitual residence in a municipality or town hall |
Main criteria |
Stay of at least 183+ days per year in Panama or a center of economic interests | Habitual residence and documented family/emotional ties in a territory |
Tax effects |
Requirement to declare only income generated in Panama; foreign income is exempt | It does not directly imply tax obligations; it follows the rules of the country of citizenship. |
Requested documents |
Passport, residence permit, proof of residence and tax certificate | Identity card, proof of residence, municipal registry registration |
Advantages |
Drastic reduction of tax burden, asset protection, international flexibility | Access to local public services (healthcare, education, voting rights) |
Relevant FAQs |
|
|
Conclusion |
The distinction between tax residency in Panama and registered residency is fundamental: the former provides concrete tax advantages, while the latter concerns only civil and administrative aspects. | |
Definition of Registered Residence
Registered residence is the physical location where one is registered with the registry office to which they belong. Therefore, registered residence is located in a municipality, whether it is a province or not, where the citizen is registered with the Registry Office of that municipality.
Each municipality/municipality has a Population Registry office, and every citizen has the obligation and right to be registered in that registry, in order to receive the benefits to which they, as an Italian citizen, are entitled.
Registered residence is the municipality in which a person officially declares himself resident for administrative reasons, such as issuing identity documents, registering with the healthcare system, issuing a tax code and other similar matters.
- ▶︎ Tax implications of registered residence
Registered residence is important for identity and administrative issues , and has few direct tax implications but indirectly influences the validity of tax residence.
Definition of Tax Residence
Tax residence is the place where the private citizen is subject to tax treatment and is subject to tax monitoring according to the tax rules of that place.
Tax residency is where a person is considered fiscally relevant to pay or not pay taxes.
- ▶︎ Implications of tax residency
Tax residency determines whether a citizen must pay taxes in the country where they are fiscally active. The laws depend on the country where the citizen has chosen to be a fiscal resident. Typically, for an Italian, being a fiscal resident abroad also entails the loss of their registered residency.
In fact, to be eligible for preferential tax treatment in Panama, Italian citizens must register with the AIRE office of the Italian Embassy in Panama. This results in the loss of their registered residence in their municipality of origin. They therefore become registered and tax residents of Panama.
The law that regulates and governs the meaning of Panamense tax residence and requirements to obtain the status of tax resident in Panama is the Resolución 201-4984 of 12 July 2022.
Tax residency advantages in Panama
Tax residency in Panama is advantageous because it allows you to avoid paying taxes based on the country's territorial tax system. Every country has the right and duty to attract capital, and this is achieved through international tax cooperation mechanisms, amending its laws to make them attractive to foreigners.
Panama has the most advanced set of tax laws for expats in the world. This set of laws allows you to avoid paying taxes and live truly tax-free, legally in the eyes of the Italian tax authorities.
Furthermore, Panama complies with the latest OECD global tax transparency targets and, as a result, has been off the gray list since 2023 and is no longer considered a tax haven for Italy or Europe. This allows you to benefit from zero taxation, legal banking secrecy, unlimited permanent residence and tax-free tax, without having, once registered with AIRE, the burden of proof towards the Italian tax authorities.
Do your tax residency in Panama
Studio Panama Italia regularly provides tax residency certificates in Panama. All residents with a Cedula E can request a Tax Residency Certificate in Panama.
Note that this certificate can be obtained in any country in the world. The Panama tax residency certificate certifies that the individual or legal entity has a single tax residence in a single specific country and that, for tax purposes, it is treated according to the geographic location of that tax certificate.
Law 33 of July 2010, amended by Law 52 of August 28, 2012, Resolution No. 201-10860 of August 26, 2013, and Executive Decree No. 958 of August 7, 2013, regulate tax residency in Panama.
The certificate of tax residence in Panama is in principle only applicable to residents of countries with which Panama has signed double tax treaties. Currently these countries are:
- Mexico, Barbados, Qatar, Spain, Luxembourg, Netherlands, Singapore, France, Korea, Portugal, Ireland, Israel, Italy (latest arrival) Czech Republic, United Arab Emirates, United Kingdom, Vietnam
Pursuant to current legislation, natural and legal persons must demonstrate their tax residence exclusively on the basis of evidence regulated and duly recognized by the Authority.
The legal entity can prove its tax residency in Panama in two (2) ways by demonstrating the following:
- Which has means of management and administration in the Republic of Panama.
- Which has an Operations Notice in effect.
In the case of an individual, the certificate of tax residence in Panama can be obtained proving one of the following hypotheses:
- Who has economic interests in Panama, presenting an original letter of employment issued by a qualified person from the foreigner's employer company.
- For independent investors, a copy of the Panamanian tax return must be submitted, demonstrating that the applicant has stayed in Panamanian territory for more than 183 days, alternately or continuously, during a fiscal year or the immediately preceding year.
- That a center of vital interests of the person is maintained in the country, by demonstrating that he has established his principal home in Panamanian territory through a lease or title deed and by presenting a utility bill (water, electricity, telephone) in the name of the person requesting the certificate.
Once the natural person has demonstrated before the Competent Authority that he has his tax residence in Panamanian territory, the Directorate of General Taxation, DGI, issues a resolution together with the certificate, which confirms that he is subject to taxation in Panama and can mitigate double taxation in the other contracting country by presenting the certificate to the competent authorities.
You can contact us for more information, as well as details on the requirements established by our legislation for applying for a tax residency certificate. To obtain a tax residency certificate, Italians can apply for and obtain it through our firm. However, Italians must take up residency in Panama.
Pensioners are also required to request a Panamanian tax residency certificate in order to apply for tax exemption on their pension.
Tax residency in Panama
| Voice | Details |
|---|---|
Definition |
Tax residency in Panama means being taxed according to the territorial model: income from foreign sources is not subject to local taxes, although you are only taxed if the source of income is local. To avoid double taxation (for example, pensions), you need to obtain a tax residency certificate issued in your country of origin. |
Requirements |
• Actual presence of at least **183 days** per year or center of economic interests in Panama. • Issuance of the **Panamanian tax residency certificate (DGI)**. |
Requested documents |
Passport, immigration records, utility/rent receipts, contracts, bank statements, proof of economic ties and domicile. |
Tax benefits |
Panamanian territorial regime, no tax on foreign income, exemption from taxes on capital gains, royalties, and foreign dividends. |
Common mistakes |
Confusing registered residence with tax residence, lack of proof for 183 days, untraceable foreign accounts, lack of proof of domicile. |
Maintenance |
Maintain consistent documentation, complete all requirements in subsequent years, and maintain consistency with your bank and residency. |
When it is not convenient |
If you can't guarantee 183 days or strong evidence, or if the business generates significant Panamanian income: consider corporate or trust solutions. |
Tax residency in Panama for Forex Trader
It is possible to take up residency in Panama to avoid paying any tax on capital gains obtained through trading, forex trading, crypto trading, and any other speculative activity, sale of shares, government funds, etc. etc.
Many people move to Panama physically or legally, purchasing a Panamanian residence through our service for purely speculative/tax purposes. Trading in Panama is always tax-free and requires no accounting records.
You can trade either as an individual, receiving earnings in your personal Panamanian account, or as a corporation, receiving capital gains in your corporate account. It's up to you how. In both cases, zero taxes apply. It's important not to open accounts with Panamanian brokers due to Panama's territorial taxation.
So if you want to carry out an online trading activity, such as forex trading, or crypto trading, etc., you need to take up residency in Panama and use this residency to open a forex account outside Panama.
For example, opening a Degiro account in the Netherlands with your residence in Panama, or a forex account with a Swiss, Hong Kong, German, or American operator.
In any case, forex trading activity will not be subject to any capital gains tax in Panama and you will be able to operate your speculation in forex trading or crypto trading tax-free thanks to Panama's territorial taxation which also exempts you from the POEM if you use a Panamanian company.
Italian AIRE registration and loss of health insurance: what really happens?
By registering with AIRE you lose access to the SSN (National Health Service), except in the case of temporary return for urgent services.
Alternatives for Italians Abroad
You can maintain coverage through the S1 model, or take out a private policy in your country of residence. Some bilateral treaties guarantee mutual assistance.
Tax residency and inheritance: what's new for those living outside Italy?
If the deceased is a tax resident in Italy, all assets located worldwide are taxed. If the deceased is a tax , only those located in Italy are taxed.
How to Know If You're a Tax Resident in Italy or Abroad: The Ultimate Checklist
Determining whether you are a tax resident in Italy or abroad is not always easy. The 183-day rule is just one of the criteria: your AIRE registration and center of vital interests also count, as well as having tax or membership documents from your new host country (for example, Panama's RUC and Cedula E). Many Italians believe they have relocated for tax purposes, but continue to maintain financial and family ties in Italy. A clear checklist helps avoid errors and disputes with the Revenue Agency.
