Panama Tax Residence Certificate

In principle, tax residency certificates only apply to residents of countries with which Panama has signed Treaties to avoid Double Taxation. These countries are Mexico, Barbados, Qatar, Spain, Luxembourg, Holland, Singapore, France, Korea, Portugal, Ireland, the Czech Republic, United Arab Emirates, and the United Kingdom.

According to the current legislation, individuals and legal entities must prove their tax residence based on standardized and duly recognized evidence by the Authority. Moreover, having a permanent residence does not mean the Panamanian Government will grant us tax residency.

A. Who are tax residents:

Under the provisions of the Tax Code (Law 52 of 2012, Art. 722-N) Fiscal Residents are:

• Natural persons who remain in the national territory for more than one hundred eighty-three (183) consecutive or alternate days in a fiscal year or in the immediately preceding year shall be considered tax residents of the Republic of Panama. 
• Those natural persons who have established their permanent residence in the territory of the Republic of Panama.
• Legal entities incorporated under the laws of the Republic of Panama and having material means of management and administration within the Panamanian territory. 
• Juridical persons constituted abroad with material means of management and administration within the Panamanian territory and duly registered in the Public Registry. 

B. Who can require a tax resident certificate:

• Natural Persons. Those who have remained in the Panamanian territory for 183 consecutive or alternate days. Or those who have established their permanent residence in the Republic of Panama.

• Juridical persons. Those constituted according to Panama's laws and who have their means of direction and administration within the Panamanian territory.

C. Definition of Permanent Residence:

The regulations and the General Directorate of Revenue (DGI) in Panama interpret the concept of permanent residence as the place or site where the natural person retains their core interests, whether familial or economic. Therefore, the simple act of having a house at his disposal, whether he rents it or is the owner, does not represent, for the DGI, sufficient evidence of a person's eligibility for Panamanian tax residency. 

In other words, the person must have an active and habitual personal or family relationship in Panama. Therefore, the time of active occupation of such housing on an annual basis is important.

When it comes to the second scenario, where it is said that natural persons who have established their permanent residence on Panamanian territory are considered tax residents, there is a significant component that depends on the state entity responsible for attributing it.

The natural person who requests tax residency on the grounds that Panama is the center of his or her family and business life must typically guarantee a minimum presence in Panama of 70 to 90 days per year (this is not required by any legislation).

C. Where to submit your application:

You must visit Panama's General Revenue Directorate's (DGI) Correspondence Section. Your request will then be forwarded to the General Directorate of Revenues of Panama's International Taxation Department for evaluation and resolution.

D. Requirements:

According to the provisions of Resolution No 201-0354 of 1/13/2016, published in the Official Gazette No 27951-A of 1/19/2016, the applicant must state in the memorial submitted the legal reasons that support its request. The minimum information that must be included in the application, according to the provisions of the resolution, is the following:

• Clear and express identification of the applicant (full name, company name, and general information).
• Address in the Republic of Panama.
• The economic activity carried out in the Republic of Panama.
• Specification of the Treaty or Agreement to avoid international double taxation to which the applicant wishes to adhere when applicable.
• The fiscal year for which the tax certificate is requested

As supporting documentation, the interested party or applicant must attach the following to his application:

• Power of attorney, in case he/she submits his/her application through legal proxy.
• Original certificate from the Public Registry (in the case of legal entities) with an issue date no older than three months.
• Copy of identity card or complete passport of the applicant, duly authenticated before a notary, in the case of natural persons. Nationals must provide a copy of their passport.
• Authenticated copy of the identity card or passport of the legal representative in the case of a legal entity.
• Other corresponding proofs.
•  Prove that the applicant has remained in Panamanian territory for more than 183 alternate or continuous days during a fiscal year or in the immediately preceding year.

The other corresponding proofs refer to all those documents that support the petition, such as:

• An original work letter issued by a suitable person of the foreigner's employer company. 
• In the case of independent investors, a copy of the affidavit of income in Panama must be provided
• Notarized copy of the lease contract, by means of which the physical address of the applicant in the Republic of Panama is proved.
• Proof of receipt of payment of public services of the house (water, electricity, or telephone bills).
• Copy of the sworn declaration of the income tax of the fiscal year requested.
• Copy of notice of operations in case of legal entities.

E. Processing Time: 5 months or longer. 

F. Legal sources: Law 33 of June 2010, amended by Law 52 of August 28, 2012, Resolution No. 201-10860 of August 26, 2013, and Executive Decree No. 958 of August 7, 2013, regulate the issuance of Tax Residency Certificate in Panama.

https://www.gacetaoficial.gob....

G. Legal Assistance:

Although it is a procedure that, in the case of natural persons, can be managed directly by the interested party without needing a legal representative, we recommend that you always rely on an expert. 

In the case of legal entities, the intervention of a lawyer or legal representative is required by law. Therefore, do not hesitate to contact us to help you.

This contain general information only, and Lill Martinez Law and Real Estate Office, www.kerycruz.com, none of her workers, associate, affiliates, employees or subsidiaries is by means of this information, rendering professional advise or services. Before making any decision or taking any action that may affect your finances or your business, you should consult the Fiscal Codes of Panama and related Laws, Decrees and Resolutions issued by the Tax Authorities and a qualified professional adviser. Lill Martinez and the aforementioned shall not be responsible for any loss whatsoever sustained by any person who relies on this information.