Panama
The country profile includes data on the income taxes paid by workers, their social security contributions, the family benefits they receive in the form of cash transfers as well as the social security contributions and payroll taxes paid by the employers. Results reported include the average and marginal tax burdens for eight different family types.
It also describes the personal income tax systems, all compulsory social security contribution schemes and universal cash transfers as well as recent changes in the tax/benefit system.
The national currency is the Balboa (PAB) which is equivalent to the USD. In 2013, the average worker earned PAB 9 202.49.
The Report includes estimates of the tax wedge over the whole of the income distribution ordered by deciles of total labour income of formal wage earners derived from the household surveys.
1. Personal income tax system
The fiscal year is the calendar year.
1.1. Central government income tax
The sources of income liable to income tax include employment income consisting of wages, salaries, bonuses, pensions, fees and other payments in exchange for services. Education allowances plus, self-employment, business and investment income are also liable.
Exempt income:
The most noteworthy types of exempt income relating to employment include:
-
Sums received as compensation or indemnification for accidents or injuries at work and benefits paid by the Social Security Fund.
-
Money donated to charitable institutions.
-
Bonuses paid to public sector workers adhering to a voluntary retirement plan.
-
Severance pay and other bonuses up to PAB 5 000.
1.1.1. Tax unit
Members of the family are taxed separately.
Personal income tax applies to all residents and non-residents receiving income in the country, regardless of the nationality of the individual and the origin of the payment. A legal resident for tax purposes is a person who has resided or remained in the country for 183 days during the calendar year.
1.1.2. Tax allowances and tax credits
1.1.2.1. Standard tax allowances and tax credits
-
When filing jointly, a married couple may deduct PAB 800.00
1.1.2.2. Main non-standard tax allowances and tax credits
-
Interest paid on mortgages on the purchase or improvement of a taxpayer’s main residence in Panama up to PAB 15 000.
-
Interest paid on loans to finance the education of the taxpayer.
-
Interest paid on loans granted by the Human Resources Training and Formation Institute (IFARHU).
-
Medical expenses paid within the country subject to documentation being provided.
1.1.3. Tax schedule
The annual personal income tax liability schedule was calculated on the taxable income according to the following schedule in 2013:
1.2. State and local taxes
No state or local taxes are levied on wages.
2. Compulsory social security contribution to schemes operated within the government sector
2.1. Employee contributions
The employee contributions are levied on gross wages. The monthly lower earnings threshold for the old age and healthcare programs was PAB 1 200 in 2013. There was no lower earnings threshold for the education insurance. The contribution rate to the old age, disability and death program was reduced to 7.25% for the annual 13th month bonus for the old age program.
2.2. Employer contributions
Employers are required to contribute to the following public programs.
The employer contributions are levied on the payroll. A 10.75% contribution rate for the old age, disability and death program is levied on bonuses paid to the employees.
The work injury contribution rate corresponds to a grade 6 risk activity.
3. Universal cash transfer
3.1. Amount for spouse and for dependent children
None.
4. Main changes in tax/benefit since 2013
None.
5. Memorandum items
5.1. Identification of an AW
The data refer to the earnings of workers within the formal sector. The average worker’s wage was calculated using microdata from the national household surveys.