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FINANCIAL ISSUES
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Panama uses the US dollar as its official currency. Called "Balboa," the bills are in the same denominations as used in the United States; the terms are also interchangeable. Coins are the same sizes and denominations as in the US as well. Coins of US$0.50 are called "peso" and US$0.05 coins are called "real." Any amount of foreign or Panamanian currency can be taken in or out of the country.

Banking Services
Panama has no central bank, but the National Banking Commission and Banco Nacional de Panama, a state-owned commercial bank, jointly perform that function. Panama and Panama City in particular are home to a large offshore banking industry; there are over 130 first-rate international banks. Panama's financial mecca, as well as its free trade, attract people from so many areas of the world.

Banks in Panama have strict rules for opening bank accounts. In order to open an account, foreign nationals need a recommendation from their current bank in their home country, as well as one additional reference.

Because of Panama's strong international trade population, Panama City exchanges many forms of currency. To avoid additional exchange rate charges, keep travellers cheques in US dollars.

Banking Hours
Banking hours are open from Monday to Friday, 8:00 a.m. to 1:00 p.m. or 3:00 p.m. Most are open on Saturday, from 9:00 a.m. to Noon.

Credit Cards
American Express®, Mastercard and Visa are widely accepted, and Diners Club can be used at select locations. Check with your credit card company for details of acceptability and any other features your account may offer.

Automatic Teller Machines
There are many 24-hour ATM locations in Panama City and in other large cities, including Colón. At least one can usually be found in the smaller cities.

Local Taxation
As an expatriate, you are required to pay taxes to your home country. It is also recommended that you contact a resident tax expert upon your move abroad. Panama's fiscal year ends in December. However, some companies go by the fiscal year of the headquarters' country.

Tax Requirements for Living in Panama
The taxation structure of Panama is based on territory. This means that both residents and non-residents are subject to taxation on all Panama-source income. Although there are no statutory residence rules, individuals are considered to be residents of Panama if they are physically present in the country for 180 days in any tax year. The Panamanian government authorises all residents.

Sources of Taxable Income
Individuals residing in Panama are subject to progressive tax rates on the total income earned from Panamanian-sources. This includes income from employment, independent personal services, business activities, capital gains and investments. All indemnities of employment, as well as some other sources of income, are taxed at reduced rates.

Sources of Non-Taxable Income
There a few sources of income that are not subject to taxation in Panama. These include: foreign-source income, interest on savings accounts, term deposits and government securities.

Deductions/Tax Relief
An individual residing in Panama may deduct any interest from loans for home mortgages and education if properly documented. Medical expenses are also deductible if they were incurred in Panama. In addition, charitable donations and health insurance premiums are deductible. Currently there are no double-tax treaties with any country in Panama, and foreign- source income is not subject to tax.

Tax Structures
Resident taxpayers are subject to progressive tax rates based on the total taxable income. These can range from 4 to 33 percent. A married couple is considered to be a single unit and taxed on joint income. This can be avoided if each spouse chooses to file separate tax returns.

Other Taxes
In addition to the income tax, residents of Panama are subject to a variety of other taxes. A real-estate tax of 1.4 to 2.1 percent as well as a municipal tax are excised on both the employer and the employee.

Both the employer and the employee must contribute to Panama's Social Security Fund. Employees will have to contribute 7.25 percent of their salaries and wages, and employers will have to contribute 10.75 percent.

In addition, both employer and employee will have to contribute a portion of their salaries and wages to an educational fund - 1.5 percent and 1.25 percent respectively.

A standard rate of five percent, ten percent for liquor and cigarettes, is excised on the transfer of personal property through sale or purchase. Imported goods are also taxable based on the commercial value of the product.

Exemptions from VAT include: inheritances, legacies, gifts, transfers of shares and exports. Food, medicine and fuel is exempt if transferred from the free zones.  

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