Can You Live in Panama and Pay ZERO Tax?

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Panama is one of the most popular countries in the offshore world.
It is one of the most developed countries in Central America, and it is home to many global entrepreneurs and digital nomads.
One of the biggest advantages of Panama is their tax system.
Panama has territorial tax system, which is appealing to many foreigners who make their income abroad.
So, how does territorial tax system work? This is where we run into issues, as it's not as simple as it may seem at first.
Today we are going to debunk all the myths regarding Panama's territorial tax system. Are you taxable in Panama as an entrepreneur or digital nomad or you can get away with not paying taxes?
Who are we and what do we do?
We are Offshore Citizen team. We help people become global: get a second passport, set up a second residency, pay less taxes, do banking abroad, etc.
We have lots of interesting articles on different topics, we have relevant information up to date.
Author: Michael Rosmer
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[@dankerchum]

I remember talking to a colleague from Panama and I told him he probably loves the fact they got territorial taxation, and he was all confused and said "I don't know man, I pay a lot in taxes here". So I had to look into the definition of "foreign-source income". In short, income is almost never "foreign-source" if you're actually working in the country, even if the income is coming from clients abroad. Could still be structured properly, but for most people the juice ain't worth the squeeze.

[@PolarBearPredator]

He must be an idiot then because I know lots of people that legally pay zero tax with the territorial tax system. Nice try though.

[@terrasoar9548]

Off topic. Would you consider a video on Gibraltar? I've heard you dismiss it in a past video (when you were in Portugal I think?) but it appears to tick a lot of boxes for me - UK based, African clients, finance industry. Thank you for the work and time you spend on these videos.

[@OffshoreCitizen]

Good suggestion, sure

[@KeepingItRealBro]

Careful. Look at latest budget speech from 06/22. Poison

[@300rivers7]

Even after having ditched the Friendly Nations option (bummed we missed out on that), Panama still, to my knowledge has the pension visa which makes spending time there easy and quite affordable... As I understand it. Thank you, sir. Always a pleasure to see what you have to say.

[@OffshoreCitizen]

Yes. Could you see yourself living there?

[@300rivers7]

@@OffshoreCitizen Yeah, but not for more than a few months a stretch. January through March maybe.

[@p.c.h.6721]

As far as I know (I talked to a Panamanian lawyer yesterday) they still have the friendly nations options, meaning that you can invest $200,000 in Panama (like buy a home) and you’ll get the residency, if you don’t have a passport from a friendly nation then the investment is $300K

[@gn2650]

Leading a company as CEO from Panama can make this company's income be considered local?

[@AWM369]

If I’m a contractor getting paid from US am I all good

[@HombreNomada]

Could speak about Paraguay? Thanks

[@rundns]

It's a strange place to live. Visited friends there that had permanent residency. It‘s fun for a week or two but then the heat and humidity starts to slow you down. None of my friends lasted longer than a couple of years although they told me they would never leave 😂

[@OffshoreCitizen]

This is also our experience :D

[@kylegonzales1402]

So every country in the tropics is terrible and unlivable by this description.

[@WolfF2022]

@@kylegonzales1402 no, they have higher altitude regions like Boquete or Volcan, which are the whole year at good temperatures, the same in Costa Rica, or regions in Colombia, Mexico, and so on.

[@Polydea]

Thanks for the clarification!

[@OffshoreCitizen]

Always a pleasure. What do you think of Panama?

[@pak74x]

Is it possible to open bank account for panama company outside pamana?

[@shangooroochurn7098]

yes, highly recommended to do so.

[@jimshomecomforts8505]

What about going to Panama as a retired person? Thanks

[@goofballbiscuits3647]

If you're looking for citizenship by investment, he has a bunch of videos on that. Panama, if memory serves, varies by single/married but is somewhere in the ballpark of $100k in a real estate investment gets you there.

[@jimshomecomforts8505]

@@goofballbiscuits3647 I'm going single, not interested at the time in buying. Retired from Canada.

[@OffshoreCitizen]

You can do it

[@MrBCWalker01]

There's a different channel all about that topic here on KZbin, and it has _nothing at all_ to do with this one (or me, for that matter). Search for "Panama Relocation Tours" and you'll find it.

[@Cacheola]

...with a sizeable portfolio

[@happyperson8964]

I watched your previous video ...in which u said don't get American passport...cause double taxation....what about only until getting green card.....only

[@aq6451]

Same rules apply as a US Citizen unless you give up your green card.

[@SeanTwizeIl]

Hey Michael, i am thinking about relocating, will a 30 minutes meeting provide me with a plan on how to setup a residency to pay less tax ?

[@OffshoreCitizen]

Hi Sean, depends on the complexity of your current circumstances (if any businesses are involved, etc.). Feel free to message us first through the website

[@MyLatinLife]

Panama is great 🇵🇦🇵🇦🇵🇦

[@OffshoreCitizen]

What do you think makes Panama great?

[@mariogross]

What about capital gains in stocks and crypto?

[@Aer0xander]

That should be simpler, if it's non-Panamanian stock its not taxed

[@robinrickards7483]

If a person is retired in Panama and receives income from bank deposit interest, pension and off-shore investments, is that income all tax-free (as long as that person is not a US citizen)?

[@WolfF2022]

@@robinrickards7483 good question, I think yes, I think they have also a limit of income at which taxation starts.

[@mattball7074]

I think this should be clarified. Panama has no CFC rules and is a Territorial tax country. 100% that a Panama company with clients or operations or whatnot abroad still may be on the hook if you control it locally from Panama, hence the Panama "source". Although, gets a little confusing cause while you run the risk of your Panama company being treated locally, how would a Cayman company be taxed in Panama if there's no CFC rules?? Switzerland, Monaco same boat. So basically Panama is a good hub to manage investments, just not Panamanian ones haha.

[@OffshoreCitizen]

This is somewhat inaccurate. People tend to confuse the 3 sets of rules (corporate residency, source income and CFC) and group them together. Each of these is it's own set of rules that concerns different things. Controlling from Panama doesn't mean all the income is sourced locally. Panama is somewhat permissive on corporate residency rules. Not great but moderate. Then there's the big thing people overlook with Panama, which is dividend withholding taxes.

[@mattball7074]

@@OffshoreCitizen So its 5% on foreign source profits you pay yourself as a Panama resident? I guess im confused with management and control, CFC and Territorial Tax Territorial is great for Passive income. CFC is great for foreign companies not getting zinged but what places do not have management and control rules to not always have to be moving about? To clarify my objective is to reside in Panama (under friendly nations visa) be an employee of a local Panama corp but have the biggest chunk of wealth be in a foreign Nevis company.

[@timlewis2605]

Under a territorial taxation system, do online workers living in the country who earn a salary from a foreign employer outside the country have to pay income taxes?

[@Aer0xander]

If you are an employee under that company, it should be foreign sourced income, but if you are an contractor you will have to pay taxes. So then if you are a Panama business owner you want to do the opposite - hire international contractors to do the work for you to make it foreign sourced income.

[@johnnyralston4696]

Most developed country and most trash in streets, even nice streets have garbage . Is it worth it ?

[@OffshoreCitizen]

Why do you think that is?

[@Cacheola]

​@@OffshoreCitizen Seems you have a BOT set up to reply with random questions to massage the algorithm

[@viktorosipov4076]

Yeah, don't move to Panama. Stay away from it👍