While Panama is known for its lower tax pressure compared to other countries, it is not a tax-free nation. It’s important for newcomers to make their tax declarations timely, whether for personal or corporate purposes. The Income Tax Return (ISR) is a document where individuals and legal entities report their income and expenses during a fiscal year in Panama. This declaration is mandatory annually for anyone or any entity generating income in the country.
Deadlines for income tax declaration in Panama
Individuals have until March 15th each year to submit their declaration, while legal entities must do so before March 31st. Extensions of one month are possible but must be requested timely to avoid penalties.
First-year tax declaration in Panama
It’s important to differentiate between the tax declaration and the tax payment. The declaration is a document to be filled out and submitted online, and based on the declared income and expenses, a payable tax amount may or may not be generated.
It’s vital to consult with a competent accountant and advisors who are familiar with the various types of tax declarations, as the type of declaration to be submitted will differ based on the status or activity of the company or individual. For example, if it’s your first year of declaration and you started your activities during the fiscal year, you’ll need to submit an “Original Declaration.” If your business had no activities but wasn’t officially closed, you’ll need to submit a “No operations Declaration.” If you made an error in the previous declaration, you’ll need to submit an “Amending Declaration.” Finally, if your business has definitively ceased its activities, you’ll need to submit a “Final Declaration.”