The object of this tax is the taxable income produced from any source within the territory of Panama, whichever may be the place where it is received. Income from the work of a person when it consists of wages and other remunerations that the State provides to its diplomatic or consular representatives or to other persons to whom the performance of functions outside the country is assigned, will be considered taxable income produced within the territory of Panama.
Income from the work of a person remunerated through wages, salaries, personal expenses and other remunerations in money contracted due to the practice of a profession or trade will also be considered income tax.
Also, within this category is the income obtained by international transportation companies from charter, travel tickets, cargo and other services whose origin or final destination is Panama, independently of the place of establishment or domicile.
Income derived from charter, travel tickets and services to passengers or in transit cargo in the territory of Panama is not considered taxable income. Income derived from maritime travel tickets and other services will not be considered taxable income produced within the territory of the Republic of Panama if such services are obtained by international companies that operate cruisers that have their base of cruiser port or home port in the Republic of Panama.
Income received by a natural or legal person whose domicile is outside of the Republic of Panama resulting from any service or act, documented or not, that benefits natural or legal persons, national or foreign, located within the Republic of Panama which includes, but is not limited to, fees and income due to copyrights, royalties, premiums, commercial or manufacturer’s trademarks, patents, know how, technological and scientific knowledge, industrial or commercial secrets, insofar as such services have incidence in the production of income of a Panamanian source, or in the conservation of such income, and the giving of such services has been considered to be deductible expenses by the persons who received them, is considered taxable income. Income from the following activities will not be considered to be produced within the territory of Panama.
a) Invoicing, from an office established in Panama, the sale of merchandise or products for an amount higher than the amount for which such merchandise or products have been invoiced against the office established in Panama as long as such merchandise or products are only distributed abroad.
b) Directing, from an office established in Panama, transactions that are perfected, consumed or have effects abroad; and
c) Distributing dividends or shares of legal persons that do not require an Operation Notice or do not generate taxable income in Panama, as long as such dividends or shares arise from income that is not produced within the territory of the Republic of Panama, including income arising from the activities mentioned in literals a and be of this paragraph. (Art. 694) Taxable income of the taxpayer is the difference or balance resulting from deducting from his/her gross income, or general income, income from a foreign source, exempted and/or not taxable income, as well as costs, expenses and deductible expenditures. (Art. 695)