Americans in Panama

U.S. taxes for Americans in Panama: what to file, and how to catch up.

Panama’s pensionado program and dollar economy make it a favorite for American retirees, and all of them still file a U.S. return every year once their income is over the filing threshold. Panama taxes only Panamanian income, so there is usually little local tax to credit. The traps are Panamanian corporations and foundations, which bring their own U.S. forms. Most people who fell behind can catch up under the Streamlined procedures, with no penalty if they qualify.

Reviewed by Lewis Grunfeld, CPA

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Panamanian tax yearJanuary – December

Panamanian return dueMarch 15, if required

Usual U.S. toolForeign earned income exclusion

FATCA dataShared by Panamanian authorities

Tax treatyNo

Sound familiar?

You moved to Panama on a pensionado visa.
Your property is held in a Panamanian corporation.
A lawyer set up a private interest foundation for your assets.
Your Panamanian bank asked you to fill in a W-9.

How does the IRS treat Panamanian companies, foundations and accounts?

Accounts go on your FBAR once they add up to more than $10,000. What differs is how the IRS taxes them.

Item	U.S. treatment
Panamanian corporations (S.A.)	If you own one, even just to hold property, you may need Form 5471 each year.	Watch out
Private interest foundations	Could be treated as a foreign trust, which can mean Forms 3520 and 3520-A, depending on how it’s set up.	Watch out
Bank accounts	Interest is taxable for the U.S., and the accounts count toward your FBAR total. Panama uses the dollar, so there’s no currency conversion.	Taxable
Remote work income	Taxable for the U.S. The foreign earned income exclusion often covers it, up to $132,900 for 2026.	Mostly friendly
Property	Rental income goes on your U.S. return, and U.S. tax may apply when you sell.	Plan ahead
U.S. Social Security and pensions	Taxed by the U.S. as usual. Panama doesn’t tax foreign income, so there’s nothing to credit.	Report it

Why do Panamanian companies and foundations matter to the IRS?

Panama is known for corporations and private interest foundations, and many Americans were advised to hold a house, a car or savings in one. For U.S. tax, they bring yearly forms of their own:

A corporation you own usually needs Form 5471 each year, even if it only holds property. The penalty for a missing one is $10,000 per form, per year.
A foundation could be treated as a foreign trust, with Forms 3520 and 3520-A, or as a corporation, depending on how it’s set up and who controls it.
Under the Streamlined procedures, penalties for those missed forms are waived if you qualify, which is often the main reason to catch up properly.

Investment funds sold through Panamanian banks are usually PFICs, with their own form too.

Is there a U.S.–Panama tax treaty?

No. The U.S. and Panama have no income tax treaty and no social security agreement, though they do share tax information. U.S. law does the work:

The foreign earned income exclusion covers remote work pay for people who meet the 330-day or residence test.
The foreign tax credit applies to any Panamanian tax on Panamanian income, like local rent.
No social security agreement means a self-employed American owes U.S. self-employment tax, and the exclusion doesn’t reduce it.

Because Panama taxes only income from Panama, double tax is rare here. The bigger risk is missing U.S. forms.

When are Panamanian and U.S. taxes due?

Both tax years run January to December, so each Panamanian year lines up with one U.S. return, and everything is already in dollars.

	Panama	United States
Tax year	January to December	January to December
Annual return	March 15, if you have Panamanian income beyond a local salary	April 15, moved to June 15 automatically when you live abroad, or October 15 with an extension
Paying the tax	Withheld on Panamanian salaries, or with the return	April 15, even if you file later
Foreign accounts	No report, as foreign income isn’t taxed	The FBAR, due October 15, filed online

Foreign tax credit or exclusion: which wins in Panama?

Remote workers use the foreign earned income exclusion: Panama doesn’t tax their foreign pay, so there’s nothing to credit.
Pensionados on U.S. Social Security, pensions and IRAs use neither: that’s U.S. income, outside the exclusion, and Panama doesn’t tax it.
Landlords and local business owners pay Panamanian tax on that income, and the foreign tax credit applies to it.
Freelancers still owe U.S. self-employment tax, even when the exclusion covers the income tax.

How we compare the exclusion and the credit.

A worked example: pensionados in Boquete

Frank and Carol moved to Boquete on pensionado visas in 2018. They live on Social Security and a company pension. Their lawyer put their house in an S.A. and set up a private interest foundation for their savings at a Panamanian bank. They stopped filing when they moved.

Item	How it’s handled
Social Security and pension	Taxable on their U.S. return as usual; the pension alone requires filing.
The S.A.	A foreign corporation they own: Form 5471 for each year filed.
The foundation	Depending on its rules, likely a foreign trust: Forms 3520 and 3520-A, and the savings on the FBAR.
Catching up	Three years of returns and six FBARs under the Streamlined procedures, with the missing forms included and no penalty if they qualify.

Catching up from Panama

Most Americans in Panama who fell behind without meaning to can catch up under the Streamlined Foreign Offshore Procedures: three years of returns, six years of FBARs and, if you qualify, no penalties. If only FBARs are missing, or you’ve moved back to the U.S., another route may fit better. See every IRS catch-up option for expats, compared.

Common questions

I only get U.S. Social Security. Do I need to file?

Possibly not, if Social Security is your only income. Add a pension, interest or rent and you often do. Our filing checker gives a quick answer.

Do I pay U.S. Social Security tax in Panama?

Usually not if you work for a local employer. There’s no U.S.-Panama social security agreement, though, so self-employment tax can still apply if you work for yourself, and FICA if you work for a U.S. company.

Without a tax treaty, will I be taxed twice?

Rarely, since Panama doesn’t tax foreign income. The bigger risk is missing U.S. forms for Panamanian companies or foundations, and the Streamlined procedures can catch those up too.

My lawyer set up a foundation. Is that a problem?

It can be, if no one has filed the U.S. forms. A foundation could be treated as a foreign trust, with Forms 3520 and 3520-A each year. We read the foundation’s rules before deciding how to report it.

Does Panama tax my U.S. pension?

No. Panama taxes only income from Panama, so your U.S. pension and Social Security are taxed by the U.S. alone.

Should I close my S.A.?

Maybe. Dissolving it or moving the property into your own name has Panamanian costs and U.S. consequences. We’ll compare that with simply filing the yearly forms.