How is income tax calculated for a Panamanian company?

## The standard rate

Resident Panamanian companies, including the S. de R.L. and the S.A., pay Impuesto Sobre la Renta (ISR) at a flat 25% on net taxable Panama-source income. There are no graduated bands for companies. The tax year is the calendar year, 1 January to 31 December.

## Only Panama-source income counts

Panama has a territorial tax system. Income from activities, contracts or transactions completed or having effect outside Panama is exempt, even when it is invoiced through a Panamanian company. The first step in any calculation is to split income between Panama-source and foreign-source.

## The CAIR test for larger companies

Companies with gross taxable income over US$1,500,000 a year are also subject to CAIR, an alternative minimum tax. The company pays whichever is higher: 25% of net taxable income, or 4.67% of gross taxable income. If CAIR would give an unreasonable result, for example in a year with a real loss, the company can ask the DGI for authorisation to be excluded for that year.

## Filing

The Declaración Jurada de Renta for a legal entity with a calendar-year end is due on 31 March of the following year, through the DGI e-Tax 2.0 portal. A one-month extension can be requested, but the request must be made before the original deadline. A company with an active Aviso de Operación but no income still files a zero-income declaration.

## What Finn does

Finn keeps the books by income source, prepares the ISR figures and the CAIR comparison, and adds the deadlines to your calendar. You review the figures and file through e-Tax 2.0. Finn does not file with the DGI on your behalf.