How to Deduct School Expenses in Panama

Deduct your school expenses in Panama it doesn't have to be complicated if you follow the right steps. Here's a clear and detailed breakdown to help you:

1. Identify eligible expenses: Make sure that tuition, monthly fees, school supplies and school transportation expenses are properly documented.
2. Check your role as a taxpayer: Only those registered as parents or legal guardians of minor dependents (or students up to age 25 if they are pursuing higher education) qualify for these deductions.
3. Prepare your Affidavit of Income (DJR): This document is essential for claiming any tax deduction. Later we will explain how to complete it correctly.
4. Save each invoice: Check that the bills include the name of the student, the name of the school, and the corresponding RUC.
5. Consult with a tax expert: If you're still in doubt, having the right advice can prevent potential errors and maximize available deductions.

La Affidavit of Income (DJR) It is a mandatory form that you must submit to the Panamanian tax authorities if you want to deduct school expenses, among other tax deductions. This document serves as the basis for determining your taxable income and calculating the taxes you must pay.

Since 2020, Law 37 of June 2018 allows taxpayers to include certain educational expenses as deductibles, but doing so requires specifying them in the DJR. Here are some key points:

• Periodicity: It is filed once a year, usually before March 15 of the year following the tax year.
• Required Content: It must include an itemized list of income and deductions, in addition to the documents that support each expense.
• Benefit: It allows you to optimize your tax payment, reducing your tax base by the allowable deductible amounts.

If you're not familiar with DJR, our team at Limitless Legal can support you in preparing and delivering this document.

La Law 37 of June 2018 clearly states what type of school expenses can be deducted in Panama. These are:

• Tuition and monthly payment: It includes enrollment costs and recurring payments for school or university attendance.
• School supplies: From backpacks to textbooks, all materials needed for learning fall into this category.
• Uniforms: The costs of school clothes commonly required by educational institutions.
• School Transportation: Whenever it is provided or contracted directly by the school.

It is important to emphasize that only expenses incurred within Panama qualify for these deductions. In addition, it must be justified that these payments were made in institutions legally registered in the country.

To ensure that your deduction request is approved, make sure you have the following documents complete and ready when you file your Income Tax Return:

• Invoices with full details: Name of the student, educational institution, amount paid and RUC of the institution.
• Proof of transportation expenses: If applicable, include school transportation receipts.
• Tax Code Reference: This allows each expense to be associated with applicable tax law.
• Formal list of dependents: Include a document that confirms that those included as dependents are part of your family unit.
• Additional documentation for higher studies: If the dependent is between 18 and 25 years old, you will need documents that certify that they are still active in their higher education.

We recommend archiving physical and digital copies of all of this documentation to avoid inconvenience during a potential tax audit.

In addition to meeting the basic requirements, follow these recommendations for Maximize your tax benefits related to school expenses:

• Establishes an organized system for filing invoices and receipts since the beginning of the year.
• Pre-calculate your deductions using online tools or with the help of a professional.
• Take advantage of other tax benefits within the Panamanian Tax Code that can be combined with this deduction.
• Check promptly and regularly for legal updates, as tax regulations may change.

At Limitless Legal, we can help you implement customized tax strategies that optimize your financial situation.