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Panama: how residence and citizenship work

Residence tests, reporting duties, social security, living base and citizenship for Panama, with the official source for each.

Short answer

Panama's income tax is built on a territoriality principle: it taxes income produced within Panama, and its legislation refers to this as the principle of territoriality in the Panamanian legal framework. From the 2027 fiscal period, Law 526 of 2026 makes an exception for entities in multinational groups, which must show economic substance in Panama or pay a 15% rate on certain foreign-source passive income.

Key facts

Tax basisMainly territorial
Tax yearCheck current DGI guidance
Taxes citizens abroadNot as a general rule
Residence tests recorded2
RegionCentral America

How Panama decides tax residence

Each test is recorded separately with its own ID. Meeting or missing one test does not settle residence on its own.

PA-RES-01Ties testNot professionally reviewed

Treaty residence and tie-breaker

In Panama's treaty with Mexico, a resident is a person liable to tax in a state because of domicile, residence, place of management or similar criteria; the term excludes persons taxed there only on income from sources in that state. A person resident in both states is resident where they have a permanent home available, and if that does not decide, where their personal and economic relations are closer (centre of vital interests), followed by further tests. Other treaties must be read on their own terms.

Source: Convenio Panamá–México para evitar la doble imposición, artículo 4 (Ley 24 de 31 de marzo de 2010)Checked: November 8, 2026
PA-RES-02Day count183 days · Any 12 monthsNot professionally reviewed

Permanent establishment of foreign-domiciled persons: 183-day thresholds

Article 762-M of the Fiscal Code, as rewritten by Law 526 of 2026, treats foreign-domiciled persons as operating through a permanent establishment when they have a fixed place of business in Panama, and also when construction or installation work, or services by staff present in Panama, last more than 183 days within any twelve-month period. A permanent establishment is taxed on the Panamanian-source income attributable to it. This is a business-presence rule, not a test of individual tax residence.

Source: Ley 526 de 28 de mayo de 2026, artículo 3 (Gaceta Oficial 30534-B)Effective: From the 2027 fiscal periodDay method: not recordedChecked: November 8, 2026

Reporting duties to check

  • Foreign-source passive income and substance information (multinational group entities). From the 2027 fiscal period, entities that belong to a multinational group and earn foreign-source dividends, interest, royalties, capital gains or real estate and other capital income must report that income and the information showing economic substance in Panama in their annual income tax return. Entities that do not show substance are taxed at a single 15% rate on the net foreign passive income. Source

Living base

Foreign nationals need a migration permit or residence from the Servicio Nacional de Migración to live in Panama. The specific residence categories were not verified from an official page for this record. A residence permit does not by itself decide tax residence or how foreign income is treated.

How visas, permits and tax residence differ

Citizenship

Routes to Panamanian nationality, including naturalization residence periods and any rules on keeping another nationality, were not verified from an official page for this record; check the Constitution and the current requirements of the competent authorities.

Read the citizenship guide

Questions to take to a professional

  1. Which of my income items would count as produced within Panama, and which as foreign-source?
  2. Do I need a Panamanian tax residence certificate for treaty purposes, and on what criteria would it be issued?
  3. How would a treaty tie-breaker apply if another country also treats me as resident?
  4. If I own or manage a company in a multinational group, how would Law 526 of 2026 affect its foreign passive income from 2027?
  5. What economic substance would a Panamanian entity need to show, and what records must it keep?
  6. Could my activity in Panama, or my employer's, create a permanent establishment under the 183-day thresholds?
  7. Does my migration category carry any tax filing or reporting duty?

Official authorities

Sources

Other countries in Central America

🇨🇷 Costa Rica
Countries covered
Panama
Sources
4 sources listed above
Tax year
Current rules as checked
Review
Not professionally reviewed
Sources checked November 8, 2026