In recent years, the Panamanian tax office, Dirección General de Ingresos or DGI, has begun offering residents the opportunity to request tax residency certificates. These documents can be used to prove your tax status as a resident in Panama to other nations. The tax residency certificate can be a beneficial tool and is especially powerful for citizens of countries which have conventions for the avoidance of double taxation with Panama.
The tax residency certificate program was primarily designed for use in countries which Panama has signed agreements for the avoidance of double taxation (DTAAs). Such nations include Mexico, Spain, France, the Netherlands, the United Kingdom, Germany, Singapore, and the United Arab Emirates. The conventions vary some. However, many citizens of these nations will find that residency in Panama combined with a tax residency certificate will help to reduce their tax burden signficantly.
Even though the tax residency certificate program was created for use with DTAAs, these certificates are available to all residents of Panama and individuals from any country can request the tax residency certificate.
A Tax Residence Certificate could help reduce your tax burden
The process to request and obtain a tax residency certificate can be relatively simple depending on how you meet the requirements. There are two ways to qualify for a tax residency certificate. If you have spent a total of 183 days or more in one year in Panama, then you will need to show evidence of your time in Panama. This evidence could include a copy of your passport or documentation from the migration office. The 183 days do not need to be consecutive.
If you have not 183 days or more in Panama in a single year, you will need to provide other documentation. These additional documents may include grocery receipts, receipts from restaurants and purchases in Panama, utility bills, a rental contract, proof of children´s enrollment in local schools, or other documents that prove a vital economic or familial interest in Panama.
To request the tax residency certificate, you will need to provide the following:
- Full copy of passports (notarized)
- Proof of address in Panama, such as a utility bill, rental contract or lease
- Evidence of economic activity that generates income in Panama, such as contracts or employment
- Evidence of residency status
- Details of the tax treaty to be applied
- Tax year for which the certificate is requested
In this process, the burden of proof is on the applicant. Other relevant documents may be submitted to strengthen your application. In addition, the tax residency certificate must be reapplied for every year.
This program is based on article 762-N of the Tax Code, executive decree 958 of 2016, issued by Dirección General de Ingresos.