On 17 December 2020, Panama has published Law No. 189 which introduces reduced income tax rates for companies and individuals qualifying as SMEs with effect from 1 January 2020, subject to the following conditions:

  • The SME’s gross annual income does not exceed PAB 500,000;
  • The SME is registered as such before the authority; and
  • The SME is composed of (owned by) individuals.

Where a company is a qualifying SME, the following progressive rates apply:

  • up to PAB 11,000 – 7.5%;
  • PAB 11,000.01 up to 36,000 – 10.0%;
  • PAB 36,000.01 up to 90,000 – 12.5%;
  • PAB 90,000.01 up to 150,000 – 15.0%;
  • PAB 150,000.01 up to 350,000 – 20.0%; and
  • PAB 350,000.01 up to 500,000 – 22.5%.

Where an individual is considered a qualifying SME, the progressive rates are as follows:

  • up to PAB 11,000 – 0.0%;
  • PAB 11,000.01 – 36,000 – 7.5%;
  • PAB 36,000.01 – 90,000 – 10.0%;
  • PAB 90,000.01 – 150,000 – 12.5%;
  • PAB 150,000.01 – 350,000 – 17.5%; and
  • PAB 350,000.01 – 500,000 – 22.5%.