Panama is one of the Western Hemisphere's most established expat destinations, and for good reason. Its territorial tax system means that income earned outside Panama is simply not taxed by the Panamanian government. Its currency is the US dollar (alongside the Panamanian balboa at a fixed 1:1 rate), eliminating currency risk for dollar-earners. Its residency programmes — particularly the Pensionado visa — are among the most generous in the world. And its strategic location at the junction of the Americas, with non-stop flights to major global hubs, makes it a genuinely viable base for internationally mobile individuals.
Panama City itself is a modern, cosmopolitan city with a population of over a million, international schools, private hospitals, luxury residential towers, and a financial sector that handles more than three thousand international companies. Beyond the capital, the highlands of Boquete and the Pacific coast attract retirees and nature-seekers.
This guide covers everything UK nationals need to know about Panama's tax system, residency pathways, cost of living, and the practical considerations for relocating.
Panama's territorial tax system
Panama's most distinctive financial feature is its purely territorial approach to income tax. The system operates as follows:
What is taxed
Only income derived from Panamanian sources is subject to Panamanian income tax. "Panamanian-source" income includes:
- Income from employment based in Panama
- Business income from activities carried out in Panama
- Rental income from Panamanian property
- Income from the sale of goods or services consumed in Panama
What is not taxed
Income earned outside Panama is completely exempt from Panamanian income tax, regardless of where the recipient is resident. This includes:
- Dividends from foreign companies (even if the company is incorporated in Panama but all its activities are outside the country)
- Interest from foreign bank accounts or foreign bonds
- Capital gains from the sale of shares in foreign companies
- Rental income from foreign property
- Pensions from foreign sources
The implications for UK expats
A UK national resident in Panama who receives UK rental income, UK pension income, dividends from UK shares, and capital gains from UK investments pays no Panamanian tax on any of it. The only Panamanian tax applicable would be if they took Panamanian-source employment or ran a Panamanian business.
UK domestic tax rules still apply to some income regardless of where you live (UK rental income is always UK-taxable; some pension income may have UK withholding). And the UK Statutory Residence Test must be carefully managed — establishing non-UK residence before moving is essential to avoid continuing UK worldwide tax liability. Panama does not have a comprehensive double taxation treaty with the UK, which makes planning more complex.
Panamanian income tax rates
For the income that is Panamanian-source:
- Up to $11,000: exempt
- $11,000–$50,000: 15%
- Above $50,000: 25%
Social security contributions: employees pay 9.75% of salary; employers pay 12.25%. Self-employed individuals pay 13.5%.
Residency pathways for UK nationals
Panama has one of the most accessible and diverse menus of residency programmes in the world.
The Pensionado Visa (Retiree Visa)
The flagship Panama residency programme for retirees:
- Requires proof of lifetime pension income of at least $1,000/month from a recognised source (government pension, occupational pension, private annuity).
- UK state pension, UK occupational pensions, and SIPP annuities all qualify.
- Benefits include a remarkable array of discounts: 20–50% on airfares, 25% on utility bills, 15–25% on medical procedures and hospitalisations, 15% on dental and eye care, and many more.
- Permanent residency is granted from the outset.
- The Pensionado visa does not allow the holder to work for Panamanian entities, but foreign-source income is unrestricted.
The Qualified Investor Visa
- Investment of at least $300,000 in Panamanian real estate, or
- Investment of $500,000 in government securities or approved investments.
- Permanent residency is granted, and the investment must generally be held for at least five years.
- Note: the $300,000 real-estate threshold is scheduled to rise to $500,000 from 16 October 2026, so timing matters for anyone considering this route.
The Friendly Nations Visa
Panama has designated approximately 50 "friendly nations" whose citizens can apply for Panamanian residency, and the UK is on this list. Note that this route was substantially reformed in August 2021: it no longer grants immediate permanent residency on the basis of a small bank deposit and an "economic tie". Under the current rules an applicant must first obtain two years of temporary residency by qualifying through one of three economic solvency routes — a real-estate investment of at least $200,000, a fixed-term deposit of at least $200,000 in a Panamanian bank, or an employment contract with a Panamanian company — before being eligible to apply for permanent residency. Take current legal advice, as the Friendly Nations route is now closer to an investment/work-based programme than the simple pathway it once was.
The Specific Country Reforestation Visa
Investment of at least $80,000 in a certified teak or other reforestation project qualifies for a temporary residency permit (renewable). This is a lower-cost entry point but involves illiquid, specialist investments.
Processing
All residency applications are processed by the National Immigration Service (Servicio Nacional de Migración). Using a Panamanian immigration lawyer (prices typically $1,500–$3,000) is highly advisable to navigate the document requirements (apostilled birth certificates, police clearance, financial statements, medical certificates). Processing times have ranged from a few months to over a year historically; the Qualified Investor and Friendly Nations routes tend to be faster.
Banking in Panama
Panama is a major international banking centre with over 70 licensed banks, including branches of HSBC, Citibank, Scotiabank, and many specialist private banks. However, opening accounts as a foreign national has become more stringent since 2016 under FATF pressure and compliance reforms.
A Panamanian bank account is highly advisable for managing local expenses, paying bills, and receiving rental income from Panamanian property. Opening requirements typically include:
- Passport
- References from your current bank (original, signed)
- Proof of address in Panama
- Proof of income source
- Business or residency documentation
Local banks (Banistmo, Banco General, BAC Credomatic) are generally more accessible for new residents than international private banks. Expect a compliance-heavy onboarding process and allow several weeks.
Cost of living in Panama
Panama City is significantly less expensive than comparable Latin American capitals such as Santiago or São Paulo, and dramatically cheaper than London.
As of 2026:
- Renting a two-bedroom apartment in a modern tower in the Marbella, El Cangrejo, or San Francisco districts: approximately $1,000–$1,800/month.
- Buying a two-bedroom apartment in the same areas: approximately $200,000–$400,000.
- Healthcare at quality private hospitals (Hospital Punta Pacífica, Hospital Nacional): excellent standard at 40–60% of US costs.
- Groceries: broadly comparable to UK costs, though imported goods are more expensive; local produce and fish are very affordable.
- Domestic staff (housekeepers, drivers): significantly more affordable than in the UK.
- No property tax on primary residences of a value up to approximately $120,000 (higher if purchased new and qualifying for the 20-year exoneration).
Boquete
The highland town of Boquete (population approximately 25,000, elevation 1,160m) is popular with retirees for its cooler temperatures, coffee farms, hiking, and tight-knit international community. Rental costs are significantly lower than Panama City; property can be purchased for $150,000–$400,000 for a well-appointed house.
Healthcare in Panama
Panama City has excellent private hospitals serving the international community. Hospital Punta Pacífica (affiliated with Johns Hopkins Medicine International) is the flagship; Hospital Nacional and the Clinica Hospital San Fernando are also well-regarded. Medical standards and equipment are at international levels.
International private medical insurance (IPMI) is essential — there is no universal state health system for foreign residents. Annual premiums for a comprehensive IPMI plan covering a 50-year-old in Panama typically range from $2,500–$6,000 depending on coverage and deductible.
Pensionado visa holders benefit from discounts on medical procedures and hospital stays, which meaningfully reduces out-of-pocket costs for minor and moderate procedures.
UK financial affairs from Panama
- UK state pension: receivable in Panama; the UK does not uprate the state pension for residents of Panama (unlike some countries where uprating agreements exist — check the current DWP list). The pension amount freezes at the rate payable on the date you become Panamanian resident.
- UK private pensions: taxable in the UK under UK domestic rules on SIPP/personal pension drawdown for non-residents in a non-treaty country. Some UK pension income will have UK tax withheld; the specific treatment depends on the pension type and the absence of a UK–Panama DTA.
- UK rental income: always UK-taxable; not taxed by Panama.
- UK investments: capital gains and dividend income from UK investments are not taxed by Panama. Note that as a non-UK resident, UK dividends generally fall within the "disregarded income" rules, and UK non-resident CGT (which applies mainly to UK land and property) should be considered.
- UK ISAs: the tax-free wrapper is a UK concept and is not recognised by Panama, so ISA income and gains are simply treated as ordinary investment income/gains. They are not taxed by Panama under its territorial system; the UK does not generally impose a withholding tax on dividends paid to individuals.
The absence of a UK–Panama DTA is a significant planning factor. UK domestic law on non-resident taxation applies directly, and the interaction can sometimes be less favourable than under treaty countries.
Compliance caveat
Panama's tax and residency rules are subject to change, and the country has been subject to international pressure on financial transparency through FATF and CRS frameworks. The territorial tax system is well-established but the precise conditions under which income is "Panamanian-source" versus "foreign-source" can require professional assessment. UK non-residence planning is separately complex. Always take professional advice from advisers qualified in both UK and Panamanian law before relying on any tax planning.
How Global Investments Can Help
Panama's territorial tax system and generous residency programmes make it one of the world's most straightforward legal tax planning destinations for internationally mobile individuals. But the absence of a UK–Panama double tax treaty, combined with the need to properly manage UK non-residence, means that the planning must be done carefully.
Global Investments helps clients evaluate whether Panama suits their financial profile, model the tax impact of the move, review UK pension and investment arrangements, and connect with specialist Panamanian immigration and tax advisers. Whether you are drawn to Panama City's cosmopolitan energy or Boquete's highland lifestyle, our advisers can help you structure the move efficiently.
Contact Global Investments today to start the conversation.
This guide is for general information only and does not constitute financial, legal or tax advice. Rules, fees and regulations change frequently; verify current requirements with a qualified adviser before acting.