How is income tax calculated in Panama?
Panama taxes Panamanian-source income. Taxable income up to 11,000 (balboa, at par with the US dollar) is tax-free; 15% applies from 11,000 to 50,000 and 25% above 50,000.
Employees pay 9.75% social security and 1.25% educational insurance tax on salaries, with no maximum limit on the amount charged.
What is the income tax rate in Panama?
| Taxable income | Rate |
|---|---|
| PAB 0 – PAB 11,000 | 0% |
| PAB 11,000 – PAB 50,000 | 15% |
| Over PAB 50,000 | 25% |
What mandatory salary deductions apply?
- Social security (employee): 9.75% of pay.
- Educational insurance (employee): 1.25% of pay.
Gross salary and take-home salary
Gross salary is what your contract says before anything is taken off. Take-home salary is what reaches your bank account after income tax and the compulsory employee contributions. Employer contributions are paid on top of your salary and are not taken from it.
Example: PAB 3,000.00 a month
An employee earning 3,000 a month, about US$3,000.
| Item | Monthly | Annual |
|---|---|---|
| Gross salary | PAB 3,000.00 | PAB 36,000.00 |
| Income tax | PAB 312.50 | PAB 3,750.00 |
| Compulsory contributions | PAB 330.00 | PAB 3,960.00 |
| Take-home pay | PAB 2,357.50 | PAB 28,290.00 |
Effective income tax rate 10.4%; all deductions 21.4%.
Frequently asked questions
Is there a ceiling on social security?
No. There is no maximum limit on the taxable amount for social security or educational insurance.
Is there a personal exemption?
Only for married individuals, who are entitled to a personal exemption of USD 800.
Are there local income taxes?
No. There are no local taxes on income.
Official sources
- PwC Worldwide Tax Summaries (reviewed 04 August 2026): Panama: Individual - Taxes on personal income. Read 5 November 2026.
- PwC Worldwide Tax Summaries (reviewed 04 August 2026): Panama: Individual - Other taxes. Read 5 November 2026.
- PwC Worldwide Tax Summaries (reviewed 04 August 2026): Panama: Individual - Deductions. Read 5 November 2026.
Last reviewed 5 November 2026. An estimate for planning, not tax advice; your employer’s payroll and the tax authority decide what is actually withheld.
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