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Tax Law

Panama's Territorial Principle of Taxation: An Overview


The Republic of Panama operates under a distinctive tax system governed by the Territorial Principle of Taxation. Under this unique framework, only income sourced within Panama's borders is subject to taxation. This approach offers significant advantages, especially for entities and individuals with business operations outside of Panama.


Key Implications:

Foreign-Sourced Income: If an entity or individual conducts its primary activities outside of Panama, they can benefit from a tax exemption on that income. In essence, income not originating from Panamanian sources remains untouched by local taxation.


Panamanian-Sourced Income: Conversely, any entity or individual engaging in business within Panama and consequently earning income from Panamanian sources is obligated to declare and pay annual income taxes.


Expert Tax Services by CLD Legal:

Navigating through Panama's tax landscape can be intricate. Whether it's strategic tax planning, resolving disputes with the Tax Authorities, or seeking clarity on the interpretation or application of Double Tax Treaties, CLD Legal possesses the expertise and experience to address and manage any tax-related situation arising in the Republic of Panama with efficiency and precision.

Ready to take the next step?   Schedule an appointment with us today!


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