Tax Obligations: US + Panama (Territorial System)
Panama uses a territorial tax system — only income earned inside Panama from Panamanian sources is subject to local tax. This is confirmed by the DGI (Dirección General de Ingresos). Your US pensions, Social Security, remote work for foreign clients, and investment income from abroad are all tax-free in Panama.
However, US citizens owe US tax on worldwide income regardless of where they live (IRS Publication 54). Moving to Panama does not end your IRS obligations — you file Form 1040 every year, plus additional forms (FBAR, FATCA, FEIE) depending on your situation.
Panama's Income Tax Rates (Panama-Source Income Only) — 2026
| Income Range | Tax Rate | Example on $40,000 Panama-Source |
|---|---|---|
| $0 – $11,000 | 0% | $11,000 × 0% = $0 |
| $11,001 – $50,000 | 15% | $29,000 × 15% = $4,350 |
| $50,001+ | 25% | Amount above $50k × 25% |
| Non-residents (Panama-source only) | 15% flat | Applied to all Panama-source income |
Key rule: These rates only apply to income earned from Panamanian clients, a Panama employer, or Panama-based businesses. All foreign-source income — US pensions, Social Security, remote work for US clients, dividends, capital gains — is $0 taxable in Panama. For a full tax strategy comparison, see our Best US Expat Tax Strategy in Panama guide →
No Tax Treaty, No Totalization — What It Means for You
The United States and Panama have no income tax treaty and no totalization agreement as of 2026. This has two major consequences that every American in Panama must understand.
| Protection | Panama | Portugal | Mexico |
|---|---|---|---|
| Income tax treaty | ❌ None | ✅ Yes | ✅ Yes (1992) |
| Totalization agreement | ❌ None — full SE tax exposure | ✅ Yes — saves $7K–$20K/yr | ❌ None |
| SE tax on self-employment | Full 15.3% on up to $184,500 | Can avoid with totalization | Full 15.3% |
| Pension treaty protection | None — rely on FEIE/FTC only | Article 17 protections | Article 17 protections |
Practical impact for retirees: If your only income is US Social Security and pensions, Panama doesn't touch it and the US taxes it normally — manageable. For freelancers: the lack of totalization means you owe the full 15.3% SE tax on net earnings up to $184,500, even though Panama charges zero. At $120,000 net income, that's ~$16,955 in SE tax alone. Compare with Portugal (totalization saves $7K–$20K) or Costa Rica (also no totalization).
FBAR & FATCA Penalties for Americans in Panama
Two separate US reporting requirements apply to Americans with Panama bank accounts. Panama signed a FATCA intergovernmental agreement with the US — every Panamanian bank that accepts Americans reports account balances to the IRS automatically.
FBAR (FinCEN Form 114)
If your Panama bank accounts exceed $10,000 in aggregate at any point during the year, you must file an FBAR. The $10,000 threshold applies to the combined maximum balance across all foreign accounts, not per-account.
| Violation | Penalty | Notes |
|---|---|---|
| Non-willful failure to file | Up to $16,994 per account/year | Adjusted annually for inflation |
| Willful failure to file | Greater of $129,210 or 50% of account balance | Per account, per year |
| Criminal willful non-filing | $250,000 fine + 5 years imprisonment | Per 31 USC §5322 |
Filing deadline: April 15, with automatic extension to October 15. Filed electronically through FinCEN BSA E-Filing — separate from your tax return.
FATCA (Form 8938)
| Filing Status | End-of-Year Threshold | Any-Time-During-Year Threshold |
|---|---|---|
| Single / Married Filing Separately | $200,000 | $300,000 |
| Married Filing Jointly | $400,000 | $600,000 |
FATCA is filed with your tax return (Form 1040). Penalty for non-filing: $10,000 per year, plus $10,000/30 days after IRS notice (max $50,000). For the complete FBAR/FATCA walkthrough with Panama examples, see our FATCA & Banking guide →
How to Avoid Double Taxation — FEIE vs FTC
Since Panama taxes little to nothing on foreign income, FTC rarely provides large credits. FEIE is often the better tool for most Panama-based Americans.
| Factor | FEIE (Form 2555) | FTC (Form 1116) |
|---|---|---|
| Max benefit (2026) | $132,900 excluded from US tax | Dollar-for-dollar credit for Panama taxes paid |
| Income types covered | Earned income only | All income types (earned + passive) |
| SE tax relief? | No — still owe 15.3% SE tax | No — FTC cannot offset SE tax either |
| Panama benefit | High — Panama charges $0, FEIE zeros out US income tax | Low — little Panama tax = little credit |
| Best for in Panama | Most Americans — earned income under $132,900 | Only useful if you earn Panama-source income taxed locally |
Panama-specific strategy: Most Americans use FEIE to zero out US income tax. FTC is only useful if you have Panama-source income that's taxed locally. For the full comparison, see our FEIE vs FTC for Americans in Panama guide →
Visa Options & Income Thresholds — 2026
Panama has one of the most welcoming immigration systems in Latin America for Americans. US citizens enter visa-free for up to 180 days and have multiple pathways to permanent residency.
| Visa Type | Duration | Requirement | Key Notes |
|---|---|---|---|
| Tourist entry | Up to 180 days | None (US passport) | No work permit. Proof of onward travel + $500 solvency. |
| Pensionado (retirement) | Immediate permanent residency | $1,000/mo lifetime pension | 97% approval. Lifetime discounts 25–50%. 1 day/year minimum. |
| Friendly Nations | 2-yr provisional → permanent | $200,000 property or employment or $200K CD | Most popular for working-age Americans. |
| Qualified Investor (Golden) | Immediate permanent residency | $300,000+ real estate or $500K stocks or $750K CD | 30–90 days processing. Strategic 2026 window. |
| Digital Nomad | 18 months (non-renewable) | Proof of foreign income | Remote work only. Zero Panama tax. |
| Self-Economic Solvency | Temporary → permanent | $300,000 time deposit | 4–6 months processing. |
Pensionado highlights: Lifetime discounts mandated by law — 50% off entertainment and hotels (Mon–Thu), 25% off airline tickets and utilities, 15–25% off restaurants and healthcare, tax-exempt import of one new car every 2 years. See our Pensionado Visa guide →
Cost of Living by City — Comparison Tables (2026)
These figures represent realistic monthly costs for an American couple living a comfortable lifestyle in Panama. Panama uses the US dollar — no exchange rate risk. All figures in USD.
| Category | Panama City | Boquete | Coronado |
|---|---|---|---|
| Rent (1BR, furnished, safe area) | $900 – $1,500 | $600 – $1,200 | $800 – $1,500 |
| Utilities (electric + water + internet) | $120 – $280 | $70 – $120 | $100 – $200 |
| Groceries (couple) | $350 – $600 | $300 – $500 | $350 – $550 |
| Dining out (2–3×/week) | $200 – $400 | $120 – $250 | $150 – $300 |
| Transport | $100 – $200 | $80 – $150 | $100 – $180 |
| Private health insurance (age 50) | $150 – $350 | $100 – $250 | $100 – $250 |
| Entertainment + misc | $150 – $300 | $100 – $200 | $120 – $250 |
| Total (frugal couple) | $2,000 – $2,800 | $1,600 – $2,200 | $1,800 – $2,500 |
| Total (comfortable couple) | $3,000 – $5,000+ | $2,200 – $3,200 | $2,500 – $3,800 |
Panama City has world-class restaurants, modern towers, and the best healthcare — but Punta Pacífica and Costa del Este rival US city prices. Boquete offers cool mountain weather (15–22°C / 59–72°F), no A/C needed, and a strong expat community. Coronado is 90 minutes from the capital with beach access. For detailed breakdowns, see our Panama City vs Boquete Cost of Living guide →
Which Panama Banks Accept Americans in 2026
Panama is Central America's largest banking center with 80+ banks — and the US dollar is the currency. But FATCA compliance makes opening accounts as an American more complex. Every Panamanian bank reports American accounts to the IRS automatically.
| Bank | Accepts Americans? | Min. Deposit | Key Notes |
|---|---|---|---|
| Banistmo | ✅ Yes — most recommended | $500 – $3,000 | Panama's largest private bank. Branches nationwide. |
| Mercantil Bank | ✅ Yes — popular with expats | $500 | Manageable documentation requirements. |
| Banco General | ✅ Yes — very stable | $500 – $1,000 | May require residency card for full services. |
| Banesco Panama | ✅ Yes — lower entry | $250 – $500 | Good for non-residents starting residency. |
| Credicorp Bank | ✅ Yes — advance appointment | $1,000+ | References must be under 30 days old. |
| Citibank Panama | ✅ Yes (easier with US Citi) | Varies | Existing Citibank clients preferred. |
| Banco Nacional | ⚠️ Limited | Varies | Government bank — requires permanent residency. |
Required documents: Passport, second ID, two bank reference letters (under 30 days old), proof of income, source-of-funds statement, and IRS Form W-9. Most banks take 3–5 business days.
US accounts to keep: Do not close US accounts. Keep Charles Schwab Investor Checking (no foreign ATM fees — Panama is dollarized), at least one US credit card with no foreign transaction fees, and your US brokerage accounts. See our FATCA & Banking guide →
Property Rules: Titled vs Right of Possession
Foreigners can own titled property in Panama freely — no trust structure required. But the distinction between titled (finca) property and Right of Possession (ROP) land is the most important real estate concept in Panama.
| Factor | Titled (Finca) | Right of Possession (ROP) |
|---|---|---|
| Legal status | Full legal title at Registro Público | Government holds title — you hold a use right |
| Can be mortgaged | ✅ Yes | ❌ No |
| Legal protection | Strong — courts enforce | Weak — government can reclaim |
| Foreign buyers | Freely purchased | Risky — many foreigners have lost investments |
| Where found | Urban areas, modern developments | Coastal areas, rural, islands (Bocas del Toro) |
| Cost | Amount | Notes |
|---|---|---|
| Transfer tax (ITBI) | 2% of purchase price or cadastral value | Paid at closing via DGI Form 106 |
| Buyer closing costs (total) | 2–5% of purchase price | Lawyer, notary, registration, escrow |
| Annual property tax | 0% under $120K; 0.50% $120K–$700K; 0.70% above $700K | Very low by international standards |
| Rental income tax | 10% flat on gross Panama rental income | Only Panama properties |
Full walkthrough in our Buying Property in Panama guide →
Healthcare Options & Costs
Panama has world-class private hospitals in Panama City — including Hospital Punta Pacífica, the only hospital in Latin America affiliated with Johns Hopkins Medicine International.
| Option | Monthly Cost | Coverage | Best For |
|---|---|---|---|
| Local Panama plan | $80 – $175 | Panama providers (ASSA, MAPFRE, BlueCross) | Expats staying in Panama; lower premiums |
| International plan | $200 – $500 | Worldwide incl. US (Cigna, Allianz, IMG) | Frequent travelers; US access needed |
| Catastrophic + pay-as-you-go | $100 – $200 | High deductible + cash for routine care | Healthy expats with cash reserves |
| MiniMed Expat | $22/mo | 14 Panama City clinics; no exclusions | Supplement; 25% off Santa Fe Hospital meds |
Cost savings: GP visit $20–$50 (vs $150–$300 US). Specialist $50–$100 (vs $200–$400). Major surgery 25–50% of US cost. Pensionado holders receive 15–20% off doctor/hospital fees and 20% off prescriptions — mandated by law. See our Pensionado Discounts guide →
First Month in Panama — Checklist
This is the condensed version. The PDF includes the complete checklist with specific addresses, required documents per step, and ready-to-send email templates.
Week 1: Arrival & Orientation
- Get entry stamp — confirm 180-day tourist entry. Carry proof of onward travel + $500 solvency.
- Buy a local SIM card — Claro or Tigo prepaid at Tocumen airport (~$10–15/month).
- Open a Panama bank account — bring all apostilled documents. Banistmo or Mercantil recommended.
- Load a MiBus/Metro card — $0.35/ride on Panama City's modern metro system.
- Locate nearest private clinic — save the emergency number (911 in Panama City).
Week 2: Financial Setup
- Set up Wise account — for cheap USD-to-USD transfers from US to Panama banks.
- Contact a Panama-specialist CPA — determine FEIE vs FTC strategy for your income.
- Notify US bank of Panama address — required for FATCA compliance.
- Calculate FBAR threshold — if $10K+ in Panama accounts, note April 15 filing requirement.
- Open Charles Schwab Investor Checking if needed — no foreign ATM fees in dollarized Panama.
Week 3–4: Legal & Settling In
- Hire an immigration attorney if applying for Pensionado, Friendly Nations, or any visa.
- Get international health insurance — private hospitals require payment guarantees.
- File IRS Form 8822 — notifies the IRS of your new mailing address.
- Register with US Embassy — Smart Traveler Enrollment at step.state.gov.
- Review state tax obligations — CA, NY, NJ, VA may still tax you.
- Start FBAR tracking — record maximum balance in every Panama account for FinCEN 114.
The PDF guide includes the complete first-month checklist with specific addresses for Panama City, Boquete, and Coronado — plus ready-to-send email templates for banks, accountants, and immigration lawyers.
Get the Panama Guide — $19 $27