What Taxes Will a US Citizen Have to Pay in Panama?

Bob S. Says:

I’m thinking of selling my home in North Carolina and moving to Panama. I will only have the proceeds from the house and my Social Security. What type of taxes would I have to pay?

IL Panama Editor Jessica Ramesch Says:

Hi Bob,

Panama actually doesn’t tax savings or your foreign income. So, if you deposit the proceeds from the sale of your home in a bank account here in Panama, those funds won’t be taxed. 

You’ll want to make sure you continue to pay whatever you owe to Uncle Sam every year, however. Your US tax expert can help you determine what you’ll owe the US government as an expat living abroad. 

Here in Panama you’ll be liable for income tax only if you earn income on Panamanian soil—if you own a restaurant here, say, or a B&B or vacation rental. 

If you buy a new primary residence in Panama you’ll also need to pay property tax, but many homes here come with exemptions and, once the exemptions run out, property taxes are low at between 0.5 and 0.6% on most homes. 

My 1,130-square-foot apartment, for example, is exempt till 2030. After that I will pay less than $400 a year in property taxes. 

Since I don’t derive my income from any source here on Panamanian territory but rather from overseas, I pay zero income tax. 

Aside from sales tax at stores (7% on most things except food and medicine, which are exempt, and 10% on luxuries like wine), I’m pretty much living here tax free… for now. 

If and when I sell my apartment, there will be a transfer tax and capital gains tax (that will likely be 2% and 10%, respectively).

Hope that helps explain how things work. If you want more details, and an on-hand resource you can refer to at will, I recommend picking up a copy of our detailed Escape to Panama guidebook, which I wrote.

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