What is Income Tax (ISR, Panama)?
Impuesto Sobre la Renta (ISR) is Panama's corporate income tax. It is a flat 25% on net taxable Panama-source income for resident companies such as the S. de R.L. and the S.A.
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Current Rate (Calendar year, 1 January to 31 December)
25% flat on net taxable Panama-source income
Example
A Panamanian S. de R.L. with US$80,000 of net taxable Panama-source income owes US$20,000 of ISR at 25%. Income earned entirely outside Panama is not part of that figure.
How Income Tax (ISR, Panama) works in Panama
ISR is administered by the Dirección General de Ingresos (DGI), part of the Ministry of Economy and Finance. The rate is the same for every resident company, so the real work is deciding which income counts as Panama-source.
Legal entities with a calendar-year end file the Declaración Jurada de Renta by 31 March of the following year through the e-Tax 2.0 portal. A one-month extension can be requested, but the request has to reach the DGI before the original deadline. Companies with an active Aviso de Operación and no income in the year still file a zero-income declaration.
Larger companies can owe more than 25% of net profit because of the CAIR alternative minimum tax. Finn prepares the figures and the filing pack. You review and file through the DGI portal.
Related terms
Panama taxes only Panama-source income. Foreign-source income, meaning activities, contracts or transactions completed or having effect outside Panama, is exempt from Panamanian tax even when it passes through a Panamanian company.
CAIR (Cálculo Alterno del Impuesto sobre la Renta) is an alternative minimum tax for companies with gross taxable income above US$1,500,000 a year. The company pays the higher of the standard 25% calculation or 4.67% of gross taxable income.
Dividends paid out of Panama-source income are subject to a 10% withholding tax. Dividends paid out of foreign-source income or export income are taxed at a reduced 5%.
Formulario 430 is the monthly ITBMS return filed through the DGI's e-Tax 2.0 portal. It is due on the 15th of the month following the reporting period.
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