Special Tax Regimes in Panama: Opportunities for Your Business in 2025
Panama is a magnet for businesses and investors thanks to its special tax regimes. These incentives cut costs and drive growth in sectors like logistics, technology, and manufacturing. Here’s a breakdown of the main ones, their benefits, and how to take advantage of them. Each case needs legal review, but this guide is a great starting point.
1. Panama-Pacific Special Economic Area
Created by Law 41 of 2004, this zone near the Panama Canal is ideal for tech, logistics, or service companies.
Benefits:
- Zero import taxes or duties on goods and equipment.
- Exempt from ITBMS (Panama’s VAT).
- No taxes on commercial real estate or property transfers.
- Full exemption on exports and re-exports.
Requirements: Register with the Panama-Pacific Agency and meet economic substance rules, like hiring local employees.
2. Multinational Company Headquarters (SEM)
Under Law 41 of 2007, this regime is for multinationals using Panama as a base for corporate services.
Benefits:
- 5% ISR (Income Tax) on net service income.
- Exempt from ITBMS if services are for foreign clients.
- No dividend tax, regardless of the source.
- Only 2% on capital gains from SEM share sales.
Requirements: Register with the Ministry of Commerce and Industries and show substance with an office, employees, and expenses in Panama.
3. Free Zones
Regulated by Law 32 of 2011, these zones support trade, storage, and light manufacturing.
Benefits:
- ISR exemption for 10 years (extendable by 5 with investment or job creation).
- No import taxes, duties, or VAT on imported/exported goods.
- Exempt from ITBMS for internal transactions.
- No real estate tax for business properties, dividends, or royalties.
Requirements: Obtain a license from the National Free Zones Authority and operate within a designated zone.
4. Special Regime for Manufacturing Companies (EMMA)
Similar to SEM but focused on manufacturing-related services for multinational groups.
Benefits: Includes exemptions like SEM, such as reduced ISR rates and no import duties on equipment.
Requirements: Specific registration and compliance with economic substance rules.
5. Special Regime for Micro, Small, and Medium Enterprises (MIPYMEs)
Created by Law 189 of 2020, this applies to businesses with annual gross income up to B/. 2.5 million.
Benefits: Lower progressive ISR rates:
- Up to B/. 11,000: 0%.
- B/. 11,001 to 36,000: 7.5%.
- B/. 36,001 to 100,000: 10%.
- Up to 25% for higher incomes within the limit.
Requirements: Register with the DGI (General Revenue Directorate) and keep income below the threshold.
Changes and Obligations for 2025
In 2025, no major reforms affect these regimes, but the focus is on optimizing tax collection and meeting international standards to exit gray lists. Companies in special regimes must file economic substance reports six months after the fiscal year closes. The calendar includes ISR payments in March (for calendar-year businesses) and transfer pricing reports.
These regimes boost growth but require planning. At EDTIJ, we help you assess if your business qualifies and manage the process. Contact us for more details.
What to Do After Acquiring Property in Panama
Introduction
Purchasing property in Panama is a significant investment that offers multiple benefits, including asset security, tax advantages, and the possibility of establishing tax residency in Panama. However, to maximize these benefits and avoid future complications, it is essential to comply with certain administrative and tax procedures after the purchase. One of the most important steps is to update the property with the National Land Administration Authority (ANATI) and request an exemption from tax on the value of improvements made to the property.
The exemption for improvements is a right that allows reducing the taxable base of the property tax, thus optimizing your tax burden and preventing the accumulation of taxes, surcharges, and interest that can lead to a substantial debt with the General Directorate of Revenue (DGI). This article explains in detail what to do after acquiring property in Panama, with practical examples and clear steps to help you protect your investment and comply with tax obligations.
Importance of Updating the Property with ANATI and Requesting the Exemption for Improvements
Cadastral updating with ANATI is the process through which changes or improvements made to a property-such as expansions, renovations, or new constructions-are registered. This registration is crucial because the DGI uses this information to calculate the property tax, which taxes the total value of the asset, including both the land and the improvements.
However, Panamanian law provides specific exemptions for the value of improvements, provided they are requested timely and meet certain requirements. Failing to request this exemption can result in the tax being calculated on a higher value, generating a tax debt that includes surcharges and accumulated interest over the years.
Updating the property and requesting the exemption is not only an administrative procedure but also a tax optimization strategy that can make a significant difference in asset management and tax planning, especially for those seeking tax residency in Panama or wishing to take advantage of Panama’s tax exemptions.
Hypothetical Examples of Negative Consequences
Example 1: Large Debt Due to Failure to Request Exemption
Imagine John, who bought a house in 2010 but never updated the property with ANATI nor requested exemption for the improvements. In 2025, when trying to sell the property, he updates the information with ANATI and discovers he owes more than USD 45,000 in back taxes, surcharges, and interest. This debt arose because the value of the improvements was not exempted on time, increasing the taxable base of the property tax and generating a considerable fiscal liability that affects the sale and financial planning.
Example 2: Legal and Tax Problems in Selling a Commercial Property
Mary purchased a commercial property from a developer in 2018 but did not verify if the property was updated nor requested the corresponding exemption. When attempting to sell the property in 2024, she faces legal and tax difficulties due to accumulated debt from non-exempted taxes. This causes delays in the transaction, additional expenses in legal and tax advice, and loss of buyer confidence, affecting the profitability of her investment.
These examples illustrate the importance of complying with the updating and exemption procedures to avoid complications that can harm tax optimization and property management in Panama.
Detailed Steps to Follow After Purchasing Property
To avoid the problems mentioned, it is essential to follow a series of clear and specific steps, which may vary slightly depending on the purchase scenario.
Scenario A: Purchase Directly from the Developer
- Verify Correct Registration with the Public Registry and ANATI
Before finalizing the purchase, ensure that the developer has correctly registered the property and improvements with the Public Registry and ANATI. This guarantees that the information is up to date and prevents surprises later. - Request Exemption from Tax on Improvements
Once the property is acquired, request exemption from tax on the value of improvements with the DGI. This procedure can be done online and requires submitting documents such as the ANATI registration certificate, approved plans, and construction permits. - Confirm Updating with ANATI
It is important that the property is updated with ANATI including the date of construction permits and declared improvements. This update forms the basis for the DGI to correctly process the exemption and calculate the adjusted property tax. - Review the Account Status with the DGI
Regularly check the property tax account status to verify that the exemption has been applied and that there are no outstanding debts.
Scenario B: Purchase from an Owner
- Update the Property with ANATI
If you purchase from an owner, the property may not be updated with the improvements made. You must update the information with ANATI, including all permits and improvements carried out. - Request Exemption from Tax on Improvements
If the previous owner did not request the exemption, you as the new owner have the right to do so. Submit the necessary documentation to the DGI so that the account is reprocessed and the corresponding exemption is applied. - Review the Account Status with the DGI and Request Adjustments
It is essential to review the account status to detect possible debts and request adjustments or corrections if the exemption was not previously applied. - Maintain Constant Follow-Up
Managing property taxes in Panama requires ongoing follow-up to avoid accumulating debts and to take advantage of all available tax exemptions.
Tax Optimization and Benefits of Complying with These Steps
Requesting exemption for improvements and keeping the property updated allows you to optimize your tax burden by reducing property tax and avoiding surcharges and interest. It also facilitates financial and asset planning, especially for those seeking tax residency in Panama or wishing to benefit from Panama’s tax exemptions.
Complying with these procedures also avoids legal issues, facilitates the sale or transfer of the property, and improves buyer and investor confidence.
Conclusion
After acquiring property in Panama, updating the information with ANATI and requesting exemption from tax on improvements is essential to protect your investment and optimize your tax burden. These steps prevent cumbersome procedures, fines, and unnecessary delays, ensuring that you can manage your assets efficiently and in accordance with current regulations.
If you seek tax optimization, tax residency in Panama, or want to take advantage of Panama’s tax exemptions, do not overlook these essential procedures. Proper management of your property is key to avoiding fiscal surprises and maximizing the benefits of investing in properties in Panama
