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What works differently in Panama

Argentina. For full detail on Argentina, go to The Argentine Thread.

Last verified: 2026-10-29 · Status: Stable

Panama is open to foreign capital, uses the US dollar and taxes only Panamanian source income, yet several habits that are normal abroad do not work here. Retail trade is reserved to Panamanians, 90 percent of ordinary staff must be Panamanian, dismissal needs a just cause after two years, salary is paid at least fortnightly and cannot be cut, and a thirteenth month is mandatory. Every sale must go through a fiscal device or the national electronic invoicing system. Each point below links to its own page with the rule, costs and traps.

Panama's currency, the balboa (B/.), is at par with the US dollar, which circulates freely; the Superintendencia de Bancos states that the balboa's value is on a par with the US dollar and that the dollar circulates without restrictions in commercial and financial transactions (checked 29 October 2026). USD figures therefore equal the balboa figures.

Key facts

Retail trade by foreigners	Reserved to Panamanians by birth, qualifying naturalised Panamanians and companies formed by them textConstitución Política art. 293, as of 2026-10-29 · in force
Minimum share of Panamanian ordinary staff	90 %Código de Trabajo art. 17, as of 2026-10-29 · in force
Maximum pay period	15 daysCódigo de Trabajo art. 148, as of 2026-10-29 · in force
Territorial income tax	Yes: only Panamanian source income is taxed textCódigo Fiscal art. 695, as of 2026-10-29 · in force
Mandatory electronic invoicing	Yes: fiscal devices or the national electronic invoicing system textLey 76 de 1976 art. 11 (Ley 256 de 2021), as of 2026-10-29 · in force

The rule

1. Retail trade (selling to consumers, and acting as agent or representative of producers or traders) is reserved to Panamanians by birth, qualifying naturalised Panamanians and companies formed by them; wholesale trade is open to all.
Cost to do it: Structural: a partner or wholesale model is needed for consumer sales.
Example: A wholly foreign owned company can supply supermarkets but cannot run its own stores. / Same for any investment size.Constitución Política (texto único, Gaceta Oficial 25176 de 15 de noviembre de 2004), arts. 293 and 294, 2004-11-15 official text · verified 2026-10-29

2. At least 90 percent of ordinary staff must be Panamanian (or foreigners with a Panamanian spouse or ten years of residence) and foreign specialists may not exceed 15 percent of the workforce; fines reach B/.15,000 on a third offense.
Cost to do it: B/.500 to B/.15,000 (US$500 to US$15,000) in fines for breaches, doubled for ten or more workers.
Example: With 40 workers, at most 6 foreign specialists. / US$500 per unauthorised foreign worker on a first offense.Código de Trabajo art. 17; art. 20 as worded by Ley 59 de 2017 and Ley 237 de 2021, arts. 17 and 20, 2021-09-16 official text · verified 2026-10-29

3. An indefinite contract cannot be ended without a just cause, except mainly for workers with under two years of service and small businesses, who still receive the indemnity and 30 days' notice; every indefinite contract earns a seniority premium of one week per year.
Cost to do it: Indemnity of 3.4 weeks a year for the first ten years plus the seniority premium.
Example: Five years on B/.1,500 a month: B/.7,615.38 for unjustified dismissal. / About US$7,615.38.Código de Trabajo arts. 211, 212, 224 and 225 as amended by Ley 44 de 1995, arts. 211, 212, 224, 225, 1995-08-14 official text · verified 2026-10-29

4. Salary must be paid at intervals of no more than a fortnight and the agreed salary cannot be reduced, even with the worker's consent.
Cost to do it: Twice monthly payroll.
Example: A B/.3,000 salary is paid as B/.1,500 each fortnight. / US$1,500 twice a month.Código de Trabajo art. 148; art. 159 as replaced by Ley 44 de 1995, arts. 148 and 159, 1995-08-14 official text · verified 2026-10-29

5. Employers must pay a thirteenth month of one day of salary per eleven days worked, in three equal installments, two of them on 15 August and 15 December.
Cost to do it: About one extra month of salary a year.
Example: 132 days worked at B/.50 a day earn B/.600. / About US$600.Decreto de Gabinete 221 de 1971 arts. 1 to 3; Ley 17 de 1983 art. 1, arts. 1 to 3, 1971-11-18 official text · verified 2026-10-29

6. Only Panamanian source income is taxed: foreign source income is deducted from gross income, but costs tied to foreign source income are not deductible.
Cost to do it: 25 percent on Panamanian source net income.
Example: B/.200,000 local revenue out of B/.1,200,000 total: tax B/.25,000 if costs are B/.600,000. / About US$25,000.Código Fiscal arts. 695 and 697 as worded by Ley 8 de 2010, arts. 695 and 697, 2010-03-15 official text · verified 2026-10-29

7. Every sale by a resident must be documented with a DGI authorised fiscal device or the national electronic invoicing system; new taxpayers since 1 January 2022 must invoice electronically.
Cost to do it: Free DGI tool available; fines of B/.500 to B/.25,000.
Example: A new subsidiary invoices only through the electronic system. / US$500 to US$25,000 in fines.Ley 76 de 1976 art. 11 as worded by Ley 256 de 2021, art. 11, 2021-11-26 official text · verified 2026-10-29

8. The balboa is at par with the US dollar, which circulates freely; there is no forced circulation paper money; foreign investors enjoy free repatriation of capital, dividends, interest and profits.
Cost to do it: No FX approvals or conversion costs.
Example: A dividend goes abroad without FX approval, after tax. / B/.1 equals US$1.Constitución Política art. 262; Ley 54 de 1998 art. 2, art. 262; art. 2, 1998-07-22 official text · verified 2026-10-29

Common practice abroad	Panamanian rule	Cost or limit	Rule	Page
Foreign owned retail chain	Retail reserved to Panamanians	Wholesale open to all	Constitution art. 293, 294	normal-abroad/retail-trade-reserved-to-panamanians
Hire any nationality with a visa	90 percent Panamanian ordinary staff; 15 percent specialist cap	Fines of B/.15,000 on a third offense, doubled for ten or more workers	Código de Trabajo art. 17, 20	normal-abroad/ninety-percent-panamanian-staff
Dismissal at will	Just cause needed after two years	3.4 weeks a year plus one week premium	Código de Trabajo art. 211 to 225	normal-abroad/no-dismissal-at-will-after-two-years
Monthly payroll and agreed pay cuts	Fortnightly pay; no salary cuts	Even with consent	Código de Trabajo art. 148, 159	normal-abroad/fortnightly-pay-and-no-salary-cuts
Discretionary year end bonus	Mandatory thirteenth month	One day per 11 days worked	DG 221 de 1971	normal-abroad/thirteenth-month-salary
Worldwide corporate tax	Territorial tax	25 percent on local net income	Código Fiscal art. 695, 699	normal-abroad/territorial-tax-foreign-income-not-taxed
PDF invoices	Fiscal device or electronic system	Fines B/.500 to B/.25,000	Ley 76 de 1976 art. 11	normal-abroad/mandatory-electronic-invoicing
Local currency and FX rules	US dollar circulates; free repatriation	No FX approval	Constitution art. 262; Ley 54 art. 2	normal-abroad/us-dollar-and-free-repatriation

Normal abroad, different in Panama: quick reference (B/. equals US$).

Worked example

A US group opening a Panamanian distribution and service company with 30 staff: it can own 100 percent and sell wholesale, but needs Panamanian partners for consumer stores; it can bring up to 4 foreign specialists (15 percent of 30 is 4.5); it pays fortnightly plus a thirteenth month; it invoices through the electronic system; and it pays 25 percent tax only on Panamanian source profit, with profits repatriated in dollars.
Investors also active in Argentina face very different FX, tax and labor rules there; The Argentine Thread guide covers the Argentine side.

Step by step

Check whether any revenue line is retail trade before choosing the ownership structure.
Plan staffing against the 90 percent and 15 percent tests and the labor authorisation for each foreign hire.
Set up fortnightly payroll, thirteenth month accruals and cesantía fund contributions from the first hire.
Register for the RUC and electronic invoicing before the first sale.
Map revenue by source to apply territorial taxation and the cost allocation cap.

Common traps

Nominee structures for retail trade are what the Constitution asks the law to sanction.
A voluntary pay cut letter is void.
Seniority premium is owed on every termination of an indefinite contract, including resignation.
Territorial taxation does not cover services that benefit Panamanian payers.

Sources

← Who pays after exit: director, liquidator and shareholder liability in PanamaRetail trade is reserved to Panamanians →

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