Methodology - Panama (2026)

Educational model - not a DGI assessment, not a tax return, not tax advice. Currency USD (the balboa circulates at par with the US dollar).

Employee (relacion laboral)

Income tax (ISR) is annual and progressive on the Codigo Fiscal art. 700 scale: 0% up to USD 11,000; 15% on the excess from 11,000 to 50,000 (so USD 5,850 accrued at 50,000); 25% on the excess over 50,000. Rates apply marginally to the slice in each band.
The income-tax base is the gross salary MINUS the employee CSS (9.75%) and Seguro Educativo (1.25%) contributions. This standard model applies none of the art. 709 personal deductions (USD 800 basic, mortgage interest, medical, education, private pension); a filer with eligible deductions pays less.
Employee contributions: CSS 9.75% + Seguro Educativo 1.25% = 11.00% of gross. No salary ceiling on the contribution base.
Employer cost: CSS 13.25% (Ley 462 de 2025 staged rate, in force for all of 2026) + Seguro Educativo 1.50% + Riesgos Profesionales (PROVISIONAL 0.56% minimum; varies 0.56% - 6.25% by activity).
Out of scope: the decimo tercer mes (13th-month, with its own reduced CSS and ISR treatment) and territorial-source rules beyond assuming Panama-source salary.

Income tax is progressive on net profit (revenue minus deductible expenses), on the same Codigo Fiscal art. 700 scale as employment: 0% up to USD 11,000; 15% to 50,000; 25% above.
PROVISIONAL: self-employed CSS - mandatory IVM 9.36% on net taxable income (Ley 462 de 2025); enforcement for independents is being phased in. The Enfermedad y Maternidad (REM) 8.5% is voluntary and is not included by default.
Out of scope: ITBMS (VAT), the art. 709 personal deductions, the voluntary 8.5% REM, and partial-year activity.