Can I Claim Dividends and Owner Drawings as a Business Expense in Panama?
No. Dividends are a distribution of profit to shareholders and not a business expense. Withholding of 10% or 5% applies depending on the source of the profit.
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What Dirección General de Ingresos (DGI), Ministry of Economy and Finance (MEF) says
Dividends from Panama-source income are subject to 10% withholding, and dividends from foreign-source or export income to 5%. A dividend is a distribution of profit, so it does not reduce taxable income.
When you can claim
- Salary paid through payroll to an owner who works in the business
- Adviser fees for planning a distribution
- Dividend withholding remitted correctly, recorded as a liability and not a cost
- Repayment of a documented loan from a shareholder, which is not a dividend
When you cannot claim
- Dividends paid to shareholders
- Personal drawings taken as cash
- The withholding tax on the dividend
- Personal spending paid from the company account
Good to know
Pro tip: Decide what share of profit is foreign-source before declaring. It sets the dividend rate.
Related expenses
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