Countries › Panama › Guide › 6. Taxes › Withholding on payments abroad from Panama: 12.5 percent effective on services, royalties and interest, and the treaty and registration exceptions

Withholding on payments abroad from Panama: 12.5 percent effective on services, royalties and interest, and the treaty and registration exceptions

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

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

When a person in Panama pays a non resident for a service, royalty, know how or similar act that is deducted against Panamanian source income, it withholds the general income tax rate on 50 percent of the payment, which for a foreign company is 25 percent of half, 12.5 percent effective. The same 50 percent base applies to interest, commissions and financing charges paid to foreign lenders. Withholding is remitted within ten days and does not apply if the foreign recipient registered as an income taxpayer with the DGI.

Panama's currency, the balboa (B/.), is at par with the US dollar, which circulates freely 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

Effective withholding on services paid to foreign companies (25 percent on 50 percent)	12.5 %Código Fiscal art. 694 literal e and art. 733 literal k, as of 2026-10-29 · in force
Effective withholding on royalties paid to foreign companies	12.5 %Código Fiscal art. 694 literal e, as of 2026-10-29 · in force
Effective withholding on interest paid to foreign lenders	12.5 %Código Fiscal art. 701 literal h, as of 2026-10-29 · in force
Tax on gross payments to foreign film and TV producers and distributors	6 %Código Fiscal art. 701 literal c, as of 2026-10-29 · in force
Days to remit tax withheld on payments abroad	10 daysCódigo Fiscal art. 733 literal k, as of 2026-10-29 · in force
Double taxation treaty with Argentina in force	No textDGI list of treaties, 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. Panamanian source income includes income received by persons domiciled abroad for any service or act, documented or not, that benefits persons located in Panama, including fees, copyrights, royalties, goodwill, trademarks, patents, know how and trade secrets, to the extent they bear on producing or preserving Panamanian source income and were deducted by the payer. Any Panamanian source income paid to a non resident by public entities, non taxpayers or loss making taxpayers is also taxable. The beneficiary in Panama applies the general rates of art. 699 or 700 to 50 percent of the amount remitted; the duty does not apply if the foreign recipient registered as an income taxpayer with the DGI. Payments for goods and services financed, contracted or performed entirely outside Panama that are needed to generate income declared in Panama are not taxable and need no withholding.
Example: A royalty of B/.100,000 paid to a foreign company: 25 percent on B/.50,000, B/.12,500 withheld. / US$100,000 royalty, US$12,500 withheld.Código Fiscal art. 694 parágrafo 1 literal e as worded by Ley 27 de 2015 art. 1 (the paragraph on operations performed entirely abroad comes from Ley 8 de 2010 art. 2), art. 694 parágrafo 1 literal e, 2015-05-04 official text · verified 2026-10-29

2. Anyone remitting to a non resident Panamanian source income of any kind other than dividends must withhold, when remitting, the general rate of art. 699 or 700 and deliver it to the tax collector within ten days, under the same deductibility condition; withholding is computed by adding all amounts paid to the recipient in the year and applying the rate to 50 percent of the total, less prior withholding (art. 733 literal k and closing paragraph).Código Fiscal art. 733 literal k as worded by Ley 27 de 2015 art. 4, art. 733 literal k, 2015-05-04 official text · verified 2026-10-29

3. Interest, commissions and other charges on loans or financing paid or credited to a foreign creditor bear income tax at the general rates of art. 699 or 700 on 50 percent of the amount, withheld by the payer, save the exemptions of art. 708.
Example: Interest of B/.200,000 to a foreign parent: 25 percent of B/.100,000, B/.25,000 withheld. / US$200,000 of interest, US$25,000 withheld.Código Fiscal art. 701 literal h as worded by Ley 8 de 2010 art. 13, art. 701 literal h, 2010-03-15 official text · verified 2026-10-29

4. Foreign producers and distributors of films and radio and television programs exploited in Panama pay 6 percent on the total amount paid or credited (art. 701 literal c). Foreign artists, athletes and professionals who come to Panama and earn taxable income there pay 15 percent on the total amount paid (art. 701 literal g).Código Fiscal art. 701 literals c and g as worded by Ley 6 de 2005 art. 18, art. 701 literals c and g, 2005-02-02 official text · verified 2026-10-29

5. Where a special law exempts payments abroad of dividends, interest, royalties or fees, the exemption does not apply if the recipient can credit the Panamanian tax in its country of residence; the recipient keeps the exemption only by proving, through a formal opinion of an independent tax expert of its country, that no credit would be granted (art. 733-A).Código Fiscal art. 733-A as restored by Ley 27 de 2015 art. 7, art. 733-A, 2015-05-04 official text · verified 2026-10-29

Payment	Taxable base	Rate	Tax	Rule
Management or technical services	50 percent	25 percent	US$12,500	Art. 694 e, 733 k
Royalty or know how	50 percent	25 percent	US$12,500	Art. 694 e
Interest to a foreign lender	50 percent	25 percent	US$12,500	Art. 701 h
Film or TV rights	100 percent	6 percent	US$6,000	Art. 701 c
Services fully performed and contracted abroad for income declared in Panama	Not taxable	None	Nil	Art. 694 parágrafo 1

Panamanian withholding on a US$100,000 (B/.100,000) payment to a foreign company without a treaty or DGI registration.

Worked example

A Panamanian operating company pays its foreign parent B/.300,000 (US$300,000) of management fees and B/.200,000 (US$200,000) of loan interest in 2026, all deducted in Panama.
Management fees: 25 percent of B/.150,000, B/.37,500. Interest: 25 percent of B/.100,000, B/.25,000. Total B/.62,500 (US$62,500), each amount remitted within ten days of withholding.
If the parent were resident in a treaty country, the treaty's interest and royalty articles could cap the rate; Argentina is not on the DGI list of treaties, so payments to Argentine companies use the domestic rates, and the Argentine side is covered in the Argentine guide.

Step by step

Classify each payment abroad and check that it is deductible and linked to Panamanian source income.
Check the recipient's treaty status and whether it has registered with the DGI as an income taxpayer.
Withhold on payment or credit and remit within ten days; keep the yearly running total per recipient.
Report payments to non residents in the annual return and keep contracts and invoices.
Review special law exemptions against art. 733-A before skipping withholding.

Common traps

Loss making payers and non taxpayers still withhold on Panamanian source payments abroad.
Services rendered remotely from abroad are Panamanian source if they benefit a person in Panama and are deducted there.
The 50 percent base applies to the gross remittance, not to the recipient's profit.
Failing to withhold makes the payer liable and may cost the deduction.

Sources

Related: Panama country profile · live dashboard · central bank and release calendar · our posts on X · where Argentina is involved, see The Argentine Thread guide

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