Advantages of Living and Benefiting from Panama's Tax System for Spanish Citizens

Panama offers a unique migration system that makes it easier for Spanish citizens to obtain residency through the Friendly Nations Agreement. This agreement simplifies both the process and the requirements, making it quicker to obtain permanent residency compared to other countries.

• Permanent Residency: Spaniards can apply for permanent residency by demonstrating economic or employment ties in the country.
• Streamlined Process: Simplified requirements, such as presenting a criminal background check, Spanish identification documents, and proof of economic activity in Panama.

Additionally, the competitive cost of living, a wide range of quality services, and the opportunity to avoid double taxation are also appealing to those looking to settle in Panama.

One of the most important aspects to understand when moving to Panama is the difference between permanent residency and tax residency. Although the two terms might seem similar, they have clearly different purposes and requirements:

Permanent Residency:

• Allows Spaniards to live and work in Panama indefinitely.
• Requires periodic visits to Panama to maintain the active status.

Tax Residency:

• Applies to individuals who spend more than 183 days a year in Panama.
• Provides advantages related to Panama's territorial tax system, where only income generated within the country is taxed.

It is crucial to assess which of these options aligns best with your personal and financial goals.

Panama’s tax system is notable for being territorial, meaning that only income generated within Panamanian territory is taxed. This is particularly advantageous for entrepreneurs, freelancers, and retired Spanish citizens.

How do Spaniards benefit from Panama’s tax system?

• Exemption on Global Income: Income earned outside of Panama is not taxed.
• Avoiding Double Taxation: Thanks to the treaty between Spain and Panama, Spanish citizens can avoid paying taxes twice.
• Simple Taxation: Tax rates in Panama are competitive, with a maximum tax bracket significantly lower than that of Spain.

This tax structure makes Panama an attractive destination, whether for retirement or business expansion.

The Friendly Nations Agreement is one of the main reasons Spaniards choose Panama as a destination. This decree allows citizens of allied countries to quickly obtain permanent residency, provided they meet the minimum requirements:

1. A valid Spanish passport.
2. Proof of economic activity in Panama (such as opening a business or local employment).
3. Criminal background certificates and proof of financial solvency.

This agreement not only facilitates migration procedures but also offers additional benefits, such as quick bank account openings and opportunities to develop businesses in key sectors.

Permanent residence in Panama is accompanied by certain obligations. One of the most important is to maintain the validity of the immigration status through periodic visits.

What happens if you don't meet the requirements?

• If you don't visit Panama for a period of more than 2 years: There is a risk of losing permanent residence.
• If you haven't resided in Panama for more than 6 years: Residency can be canceled, unless they apply to rehabilitation processes.

In this case, the rehabilitation of the Permanent Residence Permit is an option, but it requires additional efforts and proof that there were valid reasons for the extended absence.

To avoid problems, keep regular visits and, in case of complications, consult Limitless Legal to ensure compliance with Panamanian immigration law.