US tax for Americans in Panama
There is no US–Panama income tax treaty — the 2010 agreement is about information exchange — and no totalization agreement. Panama taxes territorially, so income earned outside Panama is generally untaxed there and the exclusion does the work, exactly as it does in the Gulf. Owning a Panamanian company is a different conversation entirely.
An information-exchange agreement is not a treaty
The 2010 agreement improves transparency between the two governments. It contains no residency article, no pension article, no reduced withholding and no relief of any kind for a taxpayer. It is not something you can claim a position under.
What it does mean is that information about Panamanian accounts and structures moves more freely than it used to — which is worth knowing for anyone whose planning assumed otherwise.
Territorial taxation makes this a Gulf-shaped return
Panama taxes Panamanian-source income and generally leaves foreign-source income alone. For a remote worker or a retiree living on US income, the result is the same as Kuwait or Qatar: no local tax, therefore no credit, and the exclusion carries the return with the housing exclusion behind it.
Panamanian-source income is taxed at rates to 25%, so local clients or a Panamanian business create a creditable tax where none existed before.
Self-employment tax applies in full
With no totalization agreement, 15.3% self-employment tax applies to net earnings whatever the exclusion does to income tax. For the remote workers and consultants who make up much of the American population here, that is the entire US liability in a typical year.
A residency visa is not a tax status
The Friendly Nations visa and similar routes are immigration status. Holding one changes nothing about a US filing obligation, which follows citizenship — and nothing about whether the exclusion applies, which follows the tax home and the qualifying period.
Owning a Panamanian company is a different return
Panama's role as a corporate domicile means US owners of Panamanian entities should expect Form 5471, and possibly Form 8938 and a PFIC analysis, along with the controlled foreign corporation rules that can tax undistributed income currently.
That is a materially different engagement from a simple remote-worker return, and it is worth saying so before the year is over rather than at filing.
A worked example, tax year 2025
A single American consulting for US clients from Panama City, $95,000 of net self-employment earnings, with no Panamanian-source income.
Scroll the table sideways
IRC §911, §1401, §1402 and §951–965; the 2010 US–Panama tax information exchange agreement; Social Security Administration totalization agreement list; IRS Publication 54; IRS Form 2555, Form 5471 and Form 8938 instructions; Panamanian territorial taxation; Rev. Proc. 2025-32; 31 CFR 1010.350. US figures are tax year 2025. Checked 22 September 2026.
Questions Americans in Panama ask
Does the US have a tax treaty with Panama?
No. The 2010 agreement covers information exchange, not double taxation. It contains no residency article, no pension article and no relief you can claim.
Is my US income taxed in Panama?
Generally not — Panama taxes territorially, so foreign-source income is usually outside its tax. That also means no Panamanian tax to credit, so the exclusion is the relief that matters.
I own a Panamanian company. What does that add?
Form 5471, probably Form 8938, and the controlled foreign corporation rules, which can tax undistributed income currently. It is a materially different return from a straightforward remote-worker one.
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.
I have not filed for several years while in Panama. What now?
If the failure was non-willful — which describes most people in this position — the Streamlined Foreign Offshore Procedures waive the failure-to-file, failure-to-pay and FBAR penalties: three years of returns, six years of FBARs, and Form 14653.
Living in Panama, or holding a company there?
Twenty minutes separates the simple case from the Form 5471 one — they are not the same return.