Panama has an information-exchange agreement, not a tax treaty — and taxes territorially.
There is no US–Panama income tax treaty. There is a tax information exchange agreement, which is a different thing entirely: it lets the two authorities share information and gives you no relief. Panama taxes territorially, so foreign-source income is generally untaxed there — no local tax, and therefore no foreign tax credit.
Tax snapshot — Panama
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Sources: IRS Publication 54; IRS Form 2555, Form 5471 and Form 8938 instructions; the 2010 US–Panama tax information exchange agreement; Social Security Administration totalization agreement list; Panamanian territorial taxation; Rev. Proc. 2025-32; 31 CFR 1010.350. Checked 22 September 2026.
What that means on your return
An information exchange agreement is not a treaty. The 2010 TIEA improves transparency between the two governments; it contains no residency article, no pension article, no reduced withholding and no credit. Do not let its existence be presented as treaty coverage.
Because Panama taxes territorially, income earned outside Panama is generally not taxed there. For a remote worker or retiree on US income the result is the same as the Gulf: the exclusion does the work and above it there is nothing to credit.
Panamanian-source income is taxed at rates to 25%, so local clients or a Panamanian business create a creditable tax where none existed before.
The Friendly Nations visa and similar residency routes are immigration status, not tax status. Holding one changes nothing about your US filing obligation.
Panama's role as a corporate domicile means US owners of Panamanian entities should expect Form 5471 questions, and possibly Form 8938 and PFIC analysis. That is a materially different conversation from a salaried return.
Questions I get about Panama
Does the US have a tax treaty with Panama?
No. There is a tax information exchange agreement from 2010, which allows the two tax authorities to share information. It provides no residency tie-breaker, no pension article and no relief from double taxation.
Is my US income taxed in Panama?
Generally no, because Panama taxes on a territorial basis. The practical consequence is that there is no Panamanian tax to credit against your US liability above the exclusion.
I own a Panamanian company. What does that add?
Potentially Form 5471, and depending on the assets held, Form 8938 and PFIC analysis. It is worth raising on the call rather than after a return is prepared.
Does a Friendly Nations visa change my US tax position?
No. It is immigration status, not tax status. The US filing obligation follows citizenship, and whether the exclusion applies follows your tax home and qualifying period.
When is my return due?
15 June, under the automatic extension for filers living abroad. Form 4868 moves it to 15 October, and I file the extension free.
Do I have to file an FBAR for my Panamanian bank account?
If your foreign accounts together passed $10,000 at any point in the year, yes. You can file it free through FinCEN's own system. The non-willful penalty for not filing is $16,536.
I have not filed for several years. What now?
The Streamlined Foreign Offshore Procedures: three returns, six FBARs and Form 14653 certifying non-willfulness. Penalties are waived. Note that the IRS terminated the separate Delinquent FBAR Submission Procedures around 1 July 2026.
Filing from Panama this year?
Fifteen minutes with the Enrolled Agent who will prepare and sign it. Complete return, $599.
An IRS Enrolled Agent working only on US tax for Americans living abroad. I prepare and sign every return myself — 14 years in practice, 11 of them as an Enrolled Agent.