Immigration Residence Vs. Tax Residence

Many clients believe that once the applicant obtains his / her immigration residency, he automatically becomes a tax resident, which is quite far from reality. There are two separate procedures, before different institutions and with different requirements.

Immigration residence can be divided into temporary residents and permanent residents. In the case of the friendly countries visa, which is a permanent residence visa, because its grants a Panamanian identity card as a resident, the person is not obligeted to adopt Panama as his or her fiscal residence. Each case is different and different scenarios may exist, such as, for example;

• - The applicant resides in Panama and carries out commercial activities through a corporation whose profits are produced outside of Panama, for which reason it would be considered as a source of foreign income. The company in this case would not be obliged to declare and therefore to income tax on their earnings, for which reason, although the shareholder residing in Panama does not have the right to apply for a fiscal residence.
• - The applicant resides in Panama, is a shareholder of a company which operates offshore and receives dividends from said company. Dividends are the result of an extra-territorial activity, so the shareholder could choose to declare income as a natural person.
  According to the Fiscal Code, article 762-N establishes:
• - "Tax residents of the Republic of Panama are considered natural persons who remain in the national territory for more than one hundred and eighty-three (183) consecutive or alternate days in a fiscal year or in the immediately preceding year. Likewise, fiscal residents of the Republic of Panama will be considered those natural persons who have established their permanent home in the territory of the Republic of Panama.
• - Tax residents of the Republic of Panama are also considered to be legal persons constituted according to the laws of the Republic of Panama and who have material means of management and administration within the Panamanian territory.
• - Likewise, fiscal residents of the Republic of Panama are considered to be legal persons incorporated in foreigners who have material means of management and administration within Panamanian territory and who are duly registered in the Public Registry. "

In order for a natural or legal person to apply for the tax residence, certain conditions must be met, for example;

For legal entities;

• Have a permission to operate license.
• Be on good standing with the Seguro Social.
• Be on good standing with the Municipality of Panama.
• Having declared rent.
• Have a commercial address.
• Have an active bank account (bank certification is require)

For natural persons;

• Copy of Panamanian Id.
• To Have more than 186 consecutive or alternate days in the year in Panama.
• If registered in Social Security, an authentic copy of the last slip.
• Rental Declaration
• Bank certification
• Water, electricity or telephone bill
• Work contract ( if you have it)

For more information, please contact us.