Panama Income Tax Calculator 2026
Last updated: January 2026
The Income Tax (ISR) in Panama for 2026 is calculated with progressive brackets established by the DGI. The first $11,000 annually is exempt. The bracket from $11,001 to $50,000 is taxed at 15%, and income over $50,000 is taxed at 25%. Panama uses the US dollar for all calculations (the balboa is pegged 1:1). Employee deductions include CSS (social security) at 9.75% and educational insurance at 1.25%, totaling 11%. The employer contributes CSS 12.25% + educational insurance 1.5% + workplace risk 1.62% = 15.37%. ISR is withheld monthly by the employer. Panama has relatively simple brackets with only two rates, making it one of the most straightforward income tax systems in Central America.
FAQ
What are the income tax brackets in Panama 2026?
Panama has 3 brackets: up to $11,000 annually exempt, $11,001-$50,000 at 15%, and over $50,000 at 25%. Panama uses the US dollar (balboa = 1 USD). The system is one of the simplest in Central America.
What is the CSS employee deduction in Panama?
CSS (social security) employee contribution is 9.75% of salary, plus 1.25% educational insurance, totaling 11%. These are deducted before income tax calculation. The employer contributes 12.25% CSS plus other charges totaling 15.37%.
How is ISR withheld monthly in Panama?
The employer calculates projected annual ISR using the two brackets, subtracts the $11,000 exemption and CSS contributions, and divides by 12 or remaining pay periods. Monthly withholding is reported to the DGI. Year-end reconciliation adjusts any over/under payment.
What income is exempt from ISR in Panama?
ISR-exempt in Panama: the first $11,000 annually, décimo tercer mes (13th month), severance pay, vacation compensation, disability benefits from CSS, retirement pensions, and seniority premiums. Educational insurance benefits are also exempt.
Does Panama tax foreign income?
Panama uses a territorial tax system — only income generated within Panama is taxable. Income from foreign sources is generally not subject to Panamanian ISR, regardless of the taxpayer's residency. This makes Panama attractive for international professionals.