Working in Panama?

Connect with fellow expats in Panama
Join exciting events and groups
Get information in our Panama guides
Exchange tips about expat life in Panama

Panama: Taxation and Working Conditions

Panama’s economy has one major asset: The Panama Canal. The 77-km long canal connecting the Pacific and the Atlantic Ocean provides numerous employment opportunities for people in Panama. InterNations has compiled some useful information for expats interested in working in Panama.
Long lunches are an integral part of business life in Panama.

Now let’s look at some of the practical issues involved when it comes to working in Panama: tax rates and working conditions, and a few useful tips on business etiquette in Panama.

Corporate Income Tax in Panama

All Panamanian source income is subject to income tax, whether you are an individual or a corporation. This applies to branches of foreign companies as well as to Panamanian companies. The fixed tax rate for companies is 25% of net taxable income.

An alternative minimum income tax calculation can be used, by which the 25% rate is applied to the net taxable income that arises after deducting 95.33% from the gross taxable income. Small businesses benefit from a calculation over a combination of the personal and the corporate tax rate, although they cannot apply for the alternative calculation if their gross taxable income is less than 1,500,000 USD.

A franchise tax is payable by all foreign and domestic companies registered in the Public Registry, even if they are not doing business in Panama. All industrial or commercial businesses that must have a license to operate are also subject to an annual license tax of 2% of the company’s net worth. In the Colón Free Zone, the rate is reduced to 1%.

The fiscal year in Panama normally corresponds to the calendar year. Tax returns and payments are due by the end of the third month after the end of the fiscal year.

Individual Taxation in Panama

At the time of writing, tax rates for individuals were as follows:

  • An annual net income of up to 11,000 USD is tax free.
  • A 15% income tax rate applies to all income exceeding 11,000 USD, up to 50,000 USD.
  • On all income exceeding 50,000 USD, a 25% rate applies; the first 50,000 USD are taxed with 5,850 USD.

Panama has recently concluded double taxation treaties with some countries in order to fight its reputation as a tax haven.

Working Conditions in Panama

As mentioned above, salaries and wages in Panama are not particularly high. Even if you are in a management position in a big corporation, you are unlikely to get rich. However, you are also unlikely to be over-worked any time soon.

Standard business hours in Panama are from 8am to 5 or 6pm, which normally includes a rather long lunch break between 12 and 2pm. You are entitled to 30 days of paid vacation pro rata in addition to 13 public holidays. Your employer can request you to work on a public holiday, but it means you are entitled to double pay for that day.

It is quite normal for people working in Panama to mix their personal and their professional life, so don’t expect to be able to draw a strict line between them. You may be asked out by your colleagues, you may meet their families. This should not make you feel awkward. As a woman working in Panama, you should take special care to include your colleague’s partners in dinner invitations or other business socializing events.

Women who come from Western and Northern European or North American countries may have some difficulties adapting to Panamanian gender conventions. Gender equality is not writ large in Panamanian business life, and while the number of women working in Panama is on the increase, you are unlikely to find many women in leading positions.

Business Etiquette in Panama

Doing business in Panama is unlikely to make you feel out of your depth. Just to be on the safe side, however, here are some business etiquette guidelines:

  • Punctuality: It is not the end of the world to be late. However, while your Panamanian business partners may turn up late to a dinner or delay a scheduled meeting, you shouldn’t – at least not at your first meeting. Panamanians know that other nationalities may be less flexible with regard to time and will therefore expect you to be on time. However, always reconfirm the time and place of a meeting, especially if it has been arranged a long time ago.
  • Hierarchies: These are very important in Panama and are often based on education and title of the person you are dealing with. If you have an MBA or PhD, do not hide it, for neither will your Panamanian contacts. Instead, they will expect you to address them with their correct title.
  • Dress code: You should always dress conservatively and take care of your appearance. The heat is no excuse for slovenly dress, short sleeves or – heaven forbid – short trousers.
  • Gifts: Business gifts are not expected and are not the norm in Panama. It’s best not to give any. 

We do our best to keep this article up to date. However, we cannot guarantee that the information provided is always current or complete. 

William Shirming

"Thanks to the City Guide, I found the right place to go for a business lunch in Panama City. "

Carla Echevarria

"As a Spanish expat in Latin America, moving to Panama was probably easier for me than for others. But I am still glad that I found this site! "

Global Expat Guide

Top Articles Expat Guide