Panama: Withholding tax on foreign remittances

Panama: Withholding tax on foreign remittances

Measures enacted earlier in 2015 require the withholding of income tax on payments remitted for services provided by nonresidents, whether inside or outside the Panamanian territory, to taxpayers in a “loss position,” to governmental institutions, and to organizations not considered to be income taxpayers. A subsequently issued executive decree (Decreto Ejecutivo No. 263) clarifies these rules.

Related content

For instance, the executive decree No. 263 clarifies that individuals and corporations that, because of their international activities, will not be required to withholding tax on payments made for certain goods or services provided abroad. The decree also expands the types of organizations that are not subject to the rules on withholding.

The decree also clarifies what information must be included in an opinion from a “tax specialist” to support the taxpayer’s position that withholding tax is not required in situations of payments of dividends, interest, royalties, professional fees, or payments of a similar nature.

The decree further clarifies that concerning accounts payable to parent companies or affiliates located abroad, capital reductions can be made once the total earnings subject to dividend taxation are distributed and shareholders have cancelled any outstanding accounts payable to the corporation by the time the capital reduction takes place (i.e., paid capital without the retained earnings subject to dividend taxation).

 

Read an August 2015 report (English) [PDF 338 KB] (Spanish) [PDF 276 KB] prepared by the KPMG member firm in Panama: Withholding tax on remittances abroad

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG's new digital platform