Panama has become an attractive destination for international citizens and location-independent entrepreneurs, thanks to its Friendly Nations Visa program. This article will explore the benefits, requirements, and taxation implications of this residency program to help you decide if it’s the right choice for you.
What is the Panama Friendly Nations Visa?
The Panama Friendly Nations Visa is a special immigration program designed for citizens of selected countries who have professional or economic ties with Panama. These individuals are eligible to apply for permanent residency, obtain a Panamanian ID, and request a work permit indefinitely as long as they meet the program’s requirements.
Provisional and Permanent Residency
Before obtaining permanent residency, applicants receive a provisional residency, valid for two years. After this period, if they have maintained the requirements, they can request permanent residency. This visa application can include the main applicant and optional dependents, such as a spouse, parents, and children up to 25 years old.
To obtain an indefinite work permit, the person must be a naturalized Panamanian and have lived in the country for at least 10 years since obtaining their provisional residence.
Establishing Professional or Economic Ties with Panama
To qualify for the Friendly Nations Visa, residents of the 50 eligible nations must forge an association with Panama based on commerce or other forms of professional or economic activity. There are two primary methods to achieve this:
1. Create or Purchase a Panama Corporation
Applicants can establish an economic activity by creating or purchasing a Panama Corporation, which will conduct business in the country. However, foreigners are not permitted to own retail businesses in Panama.
2. Become an Employee of an Established Panama Corporation
Applicants can demonstrate professional activity by working for a reputable Panamanian firm, securing a work visa, and registering with the country’s social security system. However, some occupations, such as lawyers, architects, and engineers, are off-limits to non-Panamanian citizens.
Financial Solvency Requirements
Proof of economic solvency is required for both options mentioned above. Opening a bank account in Panama and depositing at least $5,000, plus about $2,000 for each dependent, satisfies this criterion. The question of whether an applicant is financially stable enough is left up to the immigration officials’ judgment.
Understanding Tax Residency in Panama
With the Friendly Nations Visa, Panama offers permanent residency, not tax residency. Becoming a permanent resident of Panama and spending the required one day every two years to maintain your immigration status does not exempt you from paying taxes elsewhere.
Becoming a Tax Resident of Panama
To be considered a tax resident of Panama, you must meet two criteria:
- Spend at least 183 days in the country during the calendar year
- Provide proof that you have a permanent home in Panama
If you meet these qualifications, you can request a tax residency certificate.
Taxation for Panama Residents
Panama residents are required to pay income tax, but almost 90% of the population does not pay direct taxes because the first $11,000 of taxable income is exempt from taxation. For those who earn more, income tax rates are as follows:
- 15% income tax for earnings between $11,000 and $50,000
- 25% income tax for earnings over $50,000
There is no capital gains tax, inheritance, or wealth taxes in Panama. However, there is a small withholding tax of 5% on foreign revenue from a Panamanian company and 10% on dividends distributed out of domestic profits. If interest and royalties are paid to a non-resident, the withholding tax rate increases to 12.5%.
Is the Panama Friendly Nations Visa Right for You?
The Panama Friendly Nations Visa program can be an excellent opportunity for those seeking a second residency, offering numerous benefits such as permanent residency, the possibility of tax residency, and a chance to diversify your portfolio. However, it’s essential to understand that this program may not be suitable for everyone.
Before making any decisions, it’s crucial to evaluate how a Panamanian residency would fit into your holistic, personalized strategy. Professional assistance can help you navigate the complexities of the program and ensure that it aligns with your long-term goals.
If the Panama Friendly Nations Visa seems like a good fit for your needs, it’s time to start planning your move. Reach out to our team of experts to learn more about how the Panama Friendly Nations Visa can benefit you and take the first step toward your new life in this vibrant, welcoming country.