Italian resident in Panama? 2025 Tax Return

The question as to whether a Italian resident in Panama The tax return must be completely valid, especially if you come from a country like Italy, where the tax system taxes all income worldwide, no matter where it is generated.

In Panama, the logic is completely different: the country applies the principle of fiscal territoriality. This means that only income that originates is taxed. within of Panamanian territory. Therefore, if you only receive income from abroad — for example, property income in Italy or investments in Europe — and you don't generate local income in Panama, In principle you are not required to declare taxes in Panama.

Now, to have a residence permit or even E-card (Panamanian identification document for foreigners) It doesn't automatically make you a taxpayer. The tax obligation is activated when you generate income from a Panamanian source, such as:

• Wages for formal work in Panama
• Income from rentals of properties located in Panama
• Fees for professional services provided within the country
• Dividends from Panamanian companies

In these cases, you must submit your Tax return in Panama and possibly pay taxes in accordance with established brackets.

What happens if you are retired or live on foreign income? In these scenarios, you are probably not required to declare or pay local taxes, as long as your income comes from outside and is not related to operations in Panamanian territory.

However, it's essential to understand that while you may not have to file taxes locally, you international tax situation —especially with Italy—is still relevant. For example, you could still be considered Italian tax resident living in Panama if you don't make the formal change in Italy and you still have tax ties there.

The recommendation for those who have doubts is to consult a local accountant who understands both Panamanian law and the aspects of double taxation with Italy. Although many foreigners do not pay taxes in Panama, That doesn't mean there aren't rules to follow.

Panama applies a clear and simple approach to its residents and businesses: only those who generate income pay taxes Within the country. This principle is known as fiscal territoriality and it's one of the most attractive aspects of tax system for foreigners in Panama.

Unlike other countries where world income is taxed regardless of its origin, in Panama you don't have to declare or tax money generated outside its borders. This includes foreign salaries, pensions, income or dividends. For example, if you have a property in Rome that generates monthly income, that income will not be considered taxable by the Panamanian tax authorities.

What is considered Panamanian-sourced income?

For tax purposes, it is understood that income is from a Panamanian source if it comes from activities carried out within the country. Some common examples are:

• Work in person or provide services in a Panamanian company
• Rent an apartment in Panama City or any other area of the country
• Selling products or services to customers within Panama
• Receive dividends from companies registered and operating in the national territory

In any of these scenarios, income must be reported to the Panamanian treasury through a income statement annual. This document calculates the tax to be paid, according to the corresponding tranches.

What if I run a company from Panama but sell to Europe?

A typical intermediate case is that of digital entrepreneurs or consultants who they reside in Panama but sell services to clients outside. In this type of activity, if the service is fully provided from Panama, it can be considered local income. However, if the operation and execution of the work occurs outside the country (that is, the economic benefit is produced outside), then the income It may not be taxable according to certain legal interpretations.

This has created a legal vacuum that many people use strategically, but it is always recommended to obtain professional opinion and to remain within the rules of the Directorate General for Revenue (DGI). Having a clear and well-advised legal structure will help avoid future sanctions.

In short, the Panama model is favorable to those who they live in the country but generate money abroad. This feature attracts many professionals, retirees, digital nomads and entrepreneurs to set up their tax residence here.

The system of fiscal territoriality in Panama explained in simple terms boils down to the following: pay taxes only if the money comes from local operations. If this is not your case, you may be able to live legally in the country without declaring income. Even so, it will be worth confirming with a certified professional.

In Panama, not all people with residence permit are automatically required to submit a tax return. The system is designed so that only those who exceed certain income thresholds or have local business activities must comply with this obligation. If you are Italian resident in Panama, it is key that you understand the level of income from which you must declare to the Directorate General of Revenue (DGI).

Who is required to declare income in Panama?

The requirement to submit a income statement in Panama It is mainly active when you receive income generated within the country. Under the principle of fiscal territoriality, only income from Panamanian sources is taxed, not income earned abroad.

As a general rule, if you are a tax resident —that is, if you lived in Panama more than 183 days in the fiscal calendar or if you established your business center here— and your income from a Panamanian source exceeds US $11,000 annually, you will be required to file a declaration.

• Income under $11,000 per year: No declaration is required (although sometimes you can submit it voluntarily if you want official reports).
• Income between $11,000 and $50,000: Mandatory declaration; the tax is calculated progressively starting at 15%.
• Income greater than $50,000: A 25% rate applies to the surplus.

For example, a retired Italian who receives a pension transferred from Italy, without working or invoicing locally in Panama, probably won't need to file a return if he doesn't generate local income. On the other hand, if you offer professional services in Panama —even if it's as a freelancer or consultant—, you must declare that income.

What type of income is considered to be from a Panamanian source?

For tax purposes, revenues generated by:

• Services provided within Panamanian territory
• Properties leased in Panama
• Business transactions with locally domiciled companies
• Agricultural, industrial or professional activities carried out in Panama

That is, the approach is not based on your nationality or your passport, but on Where does the income originate. This is central to understanding the tax system for foreigners in Panama.

If your activities are oriented abroad and you don't generate income from within the country, you may not have a local tax obligation. Even so, in these cases, it is advisable to have accounting support and to submit supporting documentation in case of an audit.

Additionally, for fiscal year 2025, the return form (Form 174) is expected to maintain its usual structure, although minor reforms may apply. Being up to date on changes is key, so in some cases it's useful to consult an accountant.

Now that you know the income limits, let's see how much it costs to become fiscally oriented in Panama and what you should consider when hiring accounting advice.

Hiring an accountant in Panama is not required by law, but it is highly recommended, especially if you are a foreigner with legal residence which generates income in the country. Understand the local tax system, declare within established deadlines and comply with your tax obligations in Panama can be complex without professional advice.

How much does a tax accountant cost in Panama?

Accounting fees in Panama are competitive compared to Europe. Expenses depend on the volume of transactions, the type of economic activities you handle and whether you are required to keep accounting books, issue invoices or submit monthly reports.

Broadly speaking, these are the estimated ranges for natural persons:

• Basic personal statement: between US$100 and US$250 annual, ideal for residents with simple local incomes (for example, rents or consulting).
• Monthly accounting services: since US$80 to US$200 per month if you run a small business or bill on a recurring basis.
• International tax advice: If you need to evaluate Italy-Panama double taxation, fees can range from US$300 and US$800 by specialist consultation.

It's worth clarifying that if you don't have taxable income in Panama — for example, if you only receive pensions from abroad — you might not need recurring accounting services. However, having a professional opinion can prevent errors and make it easier to justify your situation to the DGI.

What do basic accounting services include?

A good accountant in Panama must offer:

• Evaluation of your tax obligations based on your immigration status and economic activity
• Preparing the tax return corresponding (Form 174)
• Representation before the Directorate General of Revenue if any observation or requirement arises
• Advice on local billing and requirements for registering professional activities

Some professionals also handle the opening of RUC (Single Taxpayer Registry), a necessary step for those starting to bill in Panama.

For Italian residents, it is advisable to select an accountant with experience in Panamanian fiscal territoriality and on issues of double taxation between Panama and Italy. This can help you optimize your tax structure without falling into default in either country.

Before hiring, be sure to request references, learn about your experience with foreign clients and confirm that you are registered with the Association of Authorized Public Accountants of Panama.

In short, the cost of an accountant can be seen as an investment to properly comply with the Tax return in Panama and avoid future complications. In the next section, we will see if you must also file a tax return in Italy while residing in Panama, and how fiscal ties between the two countries are managed.

One of the most common questions among those who have obtained a residence permit in Panama and they have ties with Italy, that is if they also have to do a Tax return in Italy. The answer depends primarily on your status of tax resident in Italy and whether you generate income inside or outside the country.

What determines if you keep your tax residence in Italy?

Italy, unlike Panama, applies a global taxation system. This means that the Italian tax residents they must declare and pay taxes on their global income, no matter where they were generated.

A person is considered to be a tax resident in Italy if, for more than 183 days a year, they meet at least one of these criteria:

• It is registered in the Resident population register (civil registration of residents in Italy).
• You have your legal address or the main center of your economic and personal interests in Italy.
• You have not effectively demonstrated your change of tax residence to another country not included in the white list of the Italian Tax Agency.

It is important to mention that Panama has been considered, in some contexts, as a “low tax” jurisdiction. This could lead to greater scrutiny by the Italian Treasury if you're not well documented.

What happens if you live in Panama and break up your Italian tax residency?

If you have moved to Panama and have resided there for more than 183 days a year - and you have also completed the correct procedure for transfer of tax residence to the Revenue Agency— then you will most likely lose your status as a tax resident in Italy.

In that case, you should only be required to declare in Italy if you generate income from Italian sources (for example, properties, rents, shares in local companies, etc.). These are considered “Italian-sourced” income and must be reported on a limited return called RW framework or other specific sections of the Italian tax model.

This can create a double tax obligation if you must also declare in Panama. However, to avoid the double taxation, Italy and Panama have signed the Agreement to Avoid Double Taxation, although it has not yet been ratified and actively implemented in many cases.

How to avoid problems with the Italian Treasury?

To protect yourself and keep your finances clear from both tax authorities, the ideal is to:

• Cancel your registration in the Italian registry if you plan to live permanently in Panama.
• Sign up for the AIRE registration (registration of Italians residing abroad).
• Keep proof of your effective residence in Panama (rent, bills, local bank accounts, etc.).
• Consult with a specialized accountant in international taxation or with experience in Italy-Panama cases.

Living in Panama doesn't automatically exempt you from your tax obligations in Italy. Everything will depend on your legal situation, your effective tax residence and how you declare your income. If you hold assets, accounts, or investments in Italy, it's critical to meet reporting requirements, even if you don't live there.

In addition, if you hold Italian nationality and have assets abroad (such as bank accounts, properties or companies in Panama), you may be subject to the obligation to submit the RW framework, an informational statement about assets outside the country.

In short: if you are legal resident in Panama And if you successfully cut tax ties with Italy, your obligation to declare in the European country is reduced. But if you keep elements there — fiscal or economic — it's very likely that you'll have to continue complying with specific reports in Italy.