🇵🇦 Panama for Traders

The Republic of Panama taxes under the territorial principle: in general, only income from a Panamanian source is taxable. Everything earned outside Panama — foreign capital gains, dividends, interest, gains from offshore portfolios — remains tax-free (0 %) locally, for residents and non-residents alike. For the private trader who trades a portfolio of US, European or other foreign securities and options from Panama, these gains are not taxable in Panama. Panama also uses the US dollar as legal tender (the national currency, the balboa, is pegged 1:1 to the USD and exists in practice only as coinage) — which places the location close to the US dollar.

Only Panamanian-source income is taxed: gains from the sale of Panamanian securities are subject to a capital gains tax of 10 % (with a withholding-tax prepayment of 5 % of the sale price); ongoing Panamanian earned income is taxed progressively (0 % up to USD 11,000, 15 %, 25 % from USD 50,000). For a trader who trades exclusively foreign instruments, this generally plays no role.

Crucial, and gladly omitted from marketing brochures: from a German/Austrian/Swiss perspective, Panama is a third country, and no double taxation treaty exists with Germany, Austria or Switzerland — Panama maintains comprehensive treaties with only around a dozen states (including Spain, Portugal, France, Italy, the Netherlands, Luxembourg, Ireland, Mexico, Singapore, the UAE), not with Germany, Austria or Switzerland. Without a treaty, there is no treaty-based protection against double taxation, and Germany applies its domestic law (including § 2 and § 6 AStG) without mitigation. An exchange of information, however, does exist: Panama participates in the automatic exchange of information (CRS) — account balances and capital income are reported to the state of residence.

⚠️ Not tax advice. This chapter is a factual orientation, not a substitute for individual advice. Tax classifications depend on the individual case (instruments, trading intensity, remaining ties to Germany, Austria or Switzerland). Before emigrating, always consult an advisor specialized in Panama and your country of origin.

Because of the territorial principle, only the source of income determines Panamanian tax liability — not the trader's residency:

A trader who trades a foreign portfolio from Panama earns income from a foreign source — this is not taxable in Panama (0 %), regardless of trading intensity. There is no risk of reclassification into "commercial trading" with Panamanian tax consequences, as long as the source remains foreign.

⚠️ US withholding tax still applies. Panama's territorial 0 % treatment does not exempt you from US withholding tax on US dividends. Because there is no comprehensive tax treaty between Panama and the US, the full statutory rate of 30 % applies to US dividends (Form W-8BEN with the broker). A German resident, by contrast, would only pay 15 % under the Germany–US tax treaty. Anyone holding many US dividend stocks loses out noticeably here compared with a treaty country. This does not affect pure capital gains (no US withholding) or most option premiums.

📌 Substance rules from 2027 (Law No. 526). In 2026, Panama adopted economic substance requirements for foreign passive income (effective from tax year 2027, partly with an eye on the EU list). These affect Panamanian companies within multinational groups that receive foreign passive income (dividends, interest, royalties, capital gains) — a final tax of 15 % can apply where substance is lacking. The private trader, who holds their own portfolio without an interposed corporate structure, is not covered by this under the current rules. Anyone using a Panamanian company should, however, have the substance question reviewed.

Panama has several practically relevant residency routes for wealthy individuals — the Friendly Nations Visa, based on investment or a bank deposit, and the lifelong Pensionado visa for retirees. The right of residence and tax residency must be strictly distinguished here.

⚠️ Right of residence ≠ tax residency vis-à-vis the German tax authorities. A Friendly Nations or Pensionado status establishes a right to live there, but does not automatically terminate unlimited tax liability in Germany. The Pensionado one-day minimum is nowhere near enough for a clean departure: what counts is the actual relocation of your center of life — giving up residence in Germany, Austria or Switzerland and genuine physical presence in Panama (generally more than 183 days plus local housing). A purely paper residence while staying on in Germany does not hold up.

The 0 % treatment of foreign gains is real — the decisive hurdles lie in the missing tax treaty, the substance and presence requirements, and § 2 AStG:

• No tax treaty with Germany, Austria or Switzerland. This is the central pitfall. Without a treaty, protection against double taxation is missing, and Germany applies its domestic law (§ 2 and § 6 AStG) without mitigation. The full 30 % US withholding tax on US dividends (no US tax treaty) also hits the portfolio directly.
• § 2 AStG — a textbook case. Panama is explicitly named in German advisory practice as a low-tax country without a tax treaty (alongside Hong Kong and the UAE). If substantial domestic interests continue, extended limited tax liability can subject certain German-source income to extended taxation for up to 10 years after emigration — without treaty mitigation.
• Proof of substance and presence vis-à-vis the German tax office. The tax advantage only holds up with genuine residency. A "Panama residence on paper" (say, relying only on the Pensionado one-day minimum) while continuing to live in Germany is a sham-residence trap and does not terminate unlimited tax liability.
• 2027 substance rules for corporate structures. Anyone routing trading through a Panamanian company within a corporate group must observe the new economic substance requirements (Law No. 526) from tax year 2027 — otherwise a final tax of 15 % can apply to foreign passive income. The purely private portfolio trader is not affected by this under current rules.

🌍 Panama is a third country with no tax treaty with Germany, Austria or Switzerland. All EU benefits of exit taxation (the former unlimited interest-free deferral for EU/EEA departures, the Austrian non-assessment concept) do not apply. Moreover, there is no treaty-based protection against double taxation at all.

🇩🇪 Germany

No tax treaty: there is no double taxation treaty between Germany and Panama; a CRS exchange, however, exists. § 6 AStG (exit taxation): applies on emigration if a shareholding of 1 % or more in a corporation (§ 17 EStG) is held; since 2025, a provision modeled on § 6 AStG in § 19 InvStG also covers investment fund/ETF units (from a 1 % share or acquisition costs above €500,000 per fund). For the typical trader with a minority holding below these thresholds, § 6 does not apply. The formerly unlimited interest-free deferral was abolished in 2022 — the tax is assessed on emigration, payable on request in seven equal annual installments (generally against security). § 2 AStG (extended limited tax liability): Panama is regarded in advisory practice as a classic low-tax country without a tax treaty. If substantial domestic interests continue (a business, a shareholding, substantial domestic income) and given German citizenship as well as at least 5 years of unlimited tax liability within the last 10 years, Germany can subject certain income to extended taxation for up to 10 years. A purely private portfolio trader without a continuing business/shareholding tie is generally not captured even so — but the review is real, and without a tax treaty there is no mitigation.

🇦🇹 Austria

No tax treaty between Austria and Panama. Austrian exit taxation on capital assets under § 27(6) EStG has a non-assessment concept only for departures within the EU/EEA. For the third country Panama, it does not apply — the exit tax is assessed and due immediately upon emigration (installment payment over up to seven years possible on request, no deferral as with an EU move).

🇨🇭 Switzerland

Switzerland has no general exit taxation on private securities gains — private capital gains are tax-free in any case. For the typical private trader, emigrating from Switzerland to Panama is largely tax-neutral (special cases: professional securities trading, real-estate gains). No comprehensive tax treaty exists between Switzerland and Panama; ongoing income therefore enjoys no treaty-based protection.

✅ Suits traders who genuinely relocate their center of life to Panama (giving up residence in Germany, Austria or Switzerland, genuine presence of more than 183 days), who earn predominantly capital gains and option premiums from foreign instruments in their own portfolio, who can afford a residency route via the Friendly Nations Visa (real estate or a term deposit from USD 200,000) or the Pensionado visa, and who are looking for a location with the US dollar as legal tender. For them, foreign capital gains, dividends and interest remain not taxable (0 %) locally, and with minority holdings below the § 6 thresholds, the departure can generally be structured without exit tax.

❌ Less suited to traders with a high proportion of US dividends (full 30 % US withholding tax without a treaty instead of 15 % from a treaty country), to investors who predominantly trade Panamanian securities (10 % local capital gains tax), to holders of shareholdings of 1 % or more or large ETF/fund positions (German exit taxation, without EU deferral for a third country; due immediately in Austria), as well as to Germans with continuing substantial domestic interests (§ 2 AStG genuinely applies for up to 10 years given Panama's status as a low-tax country without a tax treaty). Anyone who only pursues a paper residence while actually remaining in Germany does not terminate unlimited tax liability in any case.

Snapshot of all figures: July 2026. The figures and rules reflect the territorial principle (0 % on foreign-source income), the 10 % capital gains tax on Panamanian securities (5 % withholding-tax prepayment), the progressive income tax on Panamanian-source income (0/15/25 %), the substance rules for foreign passive income adopted in 2026 (Law No. 526, effective from tax year 2027, 15 % consequence for group companies), the residency routes (Friendly Nations Visa after the 2021 reform from USD 200,000 real estate/term deposit, Pensionado from a USD 1,000/month pension), tax residency (more than 183 days or center of life), the missing tax-treaty status vis-à-vis Germany, Austria and Switzerland, and CRS participation. All sources accessed 2026-07-22. Not tax advice — obtain a professional assessment of your individual case before emigrating.

📊 Compare all focus countries side by side →

• PwC Worldwide Tax Summaries — Panama, Other taxes (securities capital gains 10 %, 5 % withholding tax): https://taxsummaries.pwc.com/panama/individual/other-taxes
• Golden Harbors — Panama Taxes 2026 (territorial principle, foreign source 0 %): https://goldenharbors.com/articles/panama-taxes
• Immigrant Invest — Panama Tax Rate Guide 2026 (progressive rates 0/15/25 %, 183-day/center-of-life rule, 10 % local): https://immigrantinvest.com/blog/panama-tax-rate/
• Baker McKenzie — Panama: New Economic Substance Rules for Foreign Passive Income (Law No. 526, from FY2027, group scope, 15 %): https://www.bakermckenzie.com/en/insight/publications/2026/05/panama-new-economic-substance-rules-for-foreign-passive-income
• KPMG TaxNewsFlash — Panama: New economic substance law for foreign-source passive income (scope: multinational groups, 15 % final tax): https://kpmg.com/us/en/taxnewsflash/news/2026/06/panama-economic-substance-passive-income.html
• ExpatDen — Panama Friendly Nations Visa 2026 (2021 reform: real estate/term deposit from USD 200,000, employment contract, two-stage): https://www.expatden.com/panama/panama-friendly-nations-visa/
• Global Citizen Solutions — Pensionado Visa Panama Guide 2026 (USD 1,000 pension, USD 750 with real estate, permanent residence): https://www.globalcitizensolutions.com/pensionado-visa-panama/
• OECD — Panama, Information on Tax Residency (more than 183 days or center of life): https://www.oecd.org/content/dam/oecd/en/topics/policy-issue-focus/aeoi/panama-tax-residency.pdf
• Pardini & Asociados — Guide of Double Taxation Treaties signed by Panama (treaty list without Germany, Austria or Switzerland): https://www.pardinilaw.com/EN/padela/articles/85/foreign-investment/guide-of-double-taxation-treaties-signed-by-panama/
• Rödl & Partner — Extended limited tax liability / low-tax country (Panama as a low-tax country without a tax treaty): https://www.roedl.com/insights/beschraenkte-steuerpflicht-niedrigsteuerland-niedrigsteuergebiet-belastungsvergleich/
• IRS — Form W-8BEN / US withholding tax on US income without a tax treaty (30 %): https://www.irs.gov/forms-pubs/about-form-w-8-ben