Countries › Panama › Guide › 11. Real estate and land › Rental income in Panama: territorial income tax at 0 to 25 percent for individuals and 25 percent for companies, and 7 percent ITBMS on commercial and short leases

Rental income in Panama: territorial income tax at 0 to 25 percent for individuals and 25 percent for companies, and 7 percent ITBMS on commercial and short leases

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

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

Panama taxes income produced in its territory wherever it is received, so rent from Panamanian property is taxable for residents and non residents alike. Individuals pay 0 percent up to B/.11,000 of net taxable income, 15 percent up to B/.50,000 and 25 percent above; companies pay 25 percent. Commercial leases bear 7 percent ITBMS; home leases are exempt only if the contract runs more than six months.

Panama's currency, the balboa (B/.), is at par with the US dollar, which circulates as legal tender; the Superintendencia de Bancos states that the balboa's value is on a par with the US dollar (checked 29 October 2026). USD figures therefore equal the balboa figures.

Key facts

Top personal income tax rate	25 %Código Fiscal art. 700, as of 2026-10-29 · in force
Personal income tax zero rate band	11000 PABCódigo Fiscal art. 700, as of 2026-10-29 · in force
ITBMS standard rate	7 %Código Fiscal art. 1057-V parágrafo 6, as of 2026-10-29 · in force
Minimum lease term for the ITBMS home lease exemption	6 monthsCódigo Fiscal art. 1057-V parágrafo 8, as of 2026-10-29 · in force
Exchange rate used for USD conversions	1 PAB per USDBalboa at par with the US dollar (Superintendencia de Bancos), as of 2026-10-29 · in force

The rule

1. Income tax applies to taxable income produced, from any source, within the territory of Panama, wherever it is received; the taxpayer is the natural or legal person, Panamanian or foreign, who receives it.Código Fiscal art. 694 as restored by Ley 1 de 2014 art. 3, art. 694, 2014-01-08 official text · verified 2026-10-29

2. Individuals pay income tax on net taxable income at 0 percent up to B/.11,000, 15 percent on the excess from B/.11,000 to B/.50,000, and B/.5,850 plus 25 percent on the excess above B/.50,000.
Example: Net rental income of B/.18,000: 15 percent of B/.7,000, B/.1,050. / US$18,000 net rent, US$1,050 tax.Código Fiscal art. 700 as worded by Ley 8 de 2010 art. 10, art. 700, 2010-03-15 official text · verified 2026-10-29

3. Legal persons pay income tax on net taxable income at 25 percent from fiscal year 2011 (27.5 percent in 2010), save the sectors listed in the article.Código Fiscal art. 699 as worded by Ley 8 de 2010 art. 9, art. 699, 2010-03-15 official text · verified 2026-10-29

4. ITBMS is 7 percent from 1 July 2010; lodging in all kinds of public establishments bears 10 percent.
Cost to do it: 7 percent on taxable rent.
Example: Office rent of B/.5,000 a month: B/.350 ITBMS. / US$5,000 rent, US$350 ITBMS.Código Fiscal art. 1057-V parágrafo 6 as worded by Ley 8 de 2010 art. 76, art. 1057-V parágrafo 6, 2010-03-15 official text · verified 2026-10-29

5. Leases and subleases of property used exclusively as the tenant's home are exempt from ITBMS only if the contract term exceeds six months; a shorter lease is treated as non residential and taxed. Administrators of horizontal property buildings must report leases under six months to the DGI, owners must give them the contract details within fifteen calendar days of the following month or the administrator may not hand over keys or allow the tenant access, and home owners must keep a record of the rental activity.Código Fiscal art. 1057-V parágrafo 8 literal b numeral 2 as worded by Ley 8 de 2016 art. 65, art. 1057-V parágrafo 8 b 2, 2016-04-04 official text · verified 2026-10-29

6. Panama's tax treaty list published by the DGI does not include Argentina, so rent earned in Panama by an Argentine resident is not covered by a treaty.Dirección General de Ingresos, list of tax treaties, Listado de Convenios, 2026-10-29 official text · verified 2026-10-29

Worked example

An individual investor rents a Panama apartment for B/.2,000 (US$2,000) a month on a one year lease, B/.24,000 a year, and has B/.6,000 of deductible costs.
Net taxable income of B/.18,000 gives income tax of 15 percent on B/.7,000, B/.1,050; the one year home lease is exempt from ITBMS.
Renting the same unit for three months at a time would make the rent subject to 7 percent ITBMS and to reporting by the building administrator.

Step by step

Register with the DGI and declare rental income in the annual return.
Charge 7 percent ITBMS on commercial leases and short home leases if registered for ITBMS.
For short stays in a condominium, give the administrator the contract details within fifteen days of the following month.
Keep records of income and deductible costs for each property.

Common traps

Living abroad does not take Panamanian rent out of the tax; the territorial rule looks at where the income is produced.
A home lease of six months or less is taxed as a non residential lease for ITBMS.
Condominium administrators can refuse access to short stay tenants if the owner has not filed the lease details.

Sources

← Leases in Panama: freedom of contract for commercial and most residential leases since 1995, the written contract, the one month deposit held by the Ministry of Housing, and the legacy protections of Ley 93 de 1973Condominiums in Panama (propiedad horizontal): owners' assembly, monthly common fees, a 20 percent late surcharge cap, a 1 percent reserve fund and the paz y salvo needed to sell →

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