Benefits of a Tax Certificate in Panama 💰🔍

Panama operates on a territorial tax system, which means that individuals and businesses are taxed only on income generated within the country. There is no personal income tax for income earned outside of Panama, making it an attractive destination for expatriates and foreign investors. Are you curious about the advantages of obtaining a tax certificate in Panama? Let’s explore how this article can benefit you or your business.

A tax certificate in Panama is an official document issued by the tax office of Panama (IRS of Panama) certifying that an individual or entity has their tax obligations in the country. It serves as proof of compliance with Panama’s tax laws and regulations and to avoid the double taxation in other countries.

In many instances, individuals holding a tax number in Panama utilize the tax certificate to streamline their income tax filing process within the country, eliminating the need to file returns in their home country. This practice prevents taxpayers from facing the burden of paying or filing taxes twice, a scenario commonly referred to as double taxation agreement (DTA).

To address this concern, Panama has established double taxation treaties with various countries. These treaties serve to regulate tax obligations for individuals and businesses operating internationally, ensuring fair taxation and preventing duplicative tax burdens.

Below is a list of countries with which Panama has enacted double taxation treaties to date:

Barbados
South Korea
Katar
Mexico
United Arab Emirates
Spain
France
Portugal
Luxembourg
Netherlands
Ireland
Israel
Italy
Singapore
Czech Republic
United Kingdom

Possible 100% tax optimization: Holding a tax certificate ensures that you are filing a tax return in Panama and this will give you the advantage of not paying taxes in Panama since your income is from abroad and on the other hand, you will not pay them in your country of origin since they were filed or “paid” in Panama.

Business Credibility: Possessing a tax certificate enhances the credibility and trustworthiness of your business in the eyes of clients, partners, and stakeholders.

Access to Government Contracts: Many government contracts and tenders in Panama require bidders to present a tax certificate as part of the qualification process. Having this document readily available opens up opportunities for your business to engage in government projects.

You can apply for bank loans: Banks and financial institutions often request a tax certificate when opening accounts or processing financial transactions but having this document will give you even more opportunities to obtain a bank loan, as long as you submit income tax returns with certain financial characteristics.

Interestingly, Panama doesn´t have a legal regulation to obtain a tax residency certificate. Rather, this is a request that will ultimately be approved or declined by the director of the Panama tax office.

Based on information available on the DGI website and our expertise as tax advisors in Panama, we can outline some key factors to consider when applying for a tax certificate in Panama. To qualify for a tax certificate, applicants typically need to meet the following criteria:

• Tax file returns: Applicants should have submitted at least two income tax returns in Panama.
• Representation by a CPA: It’s required to apply through a Certified Public Accountant (CPA) in Panama.
• Local Bank Account: Applicants must possess a bank account within the country.
• Physical Address: A physical address in Panama is necessary for the application process.
• Corporate Requirements: If the applicant is a company, additional documentation pertaining to the company may be required.

By fulfilling these criteria, applicants can enhance their chances of obtaining a tax certificate in Panama. You can read more on the DGI website: https://dgi.mef.gob.pa/Preguntas/Conve.php.

Navigating the process of obtaining a tax certificate can be intricate, especially for those unfamiliar with Panama’s tax system. Seeking guidance from a qualified tax advisor can provide valuable assistance and ensure a smooth experience throughout the process. At Agroup, we have tax advisors in Panama who are ready to assist you in obtaining your tax residency quickly and easily. Feel free to get in touch with us!

In conclusion, a Panama tax certificate offers several advantages, such as the freedom of not paying taxes worldwide or obtaining a bank loan in Panama in a simpler way. If you are from any of the countries mentioned in this article, congratulations! You can easily obtain a tax certificate in Panama. ✅