Editing Economy of Panama (section)

==Taxation==
Taxation in Panama, which is governed by the Fiscal Code, is on a territorial basis; this is to say, that taxes apply only to income or gains derived through business carried on in Panama itself.<ref>[http://www.panamataxes.com/ "Panama Taxes Explained", ''Panama Taxes''] Feb, 2012.</ref>  The existence of a sales or administration office in Panama, or the re-invoicing of external transactions at a profit, does not of itself give rise to taxation if the underlying transactions take place outside Panama. Dividends paid out of such earnings are free of taxation.

In February 2005, Panama's unicameral legislature approved a major fiscal reform package in order to raise revenues from new business taxes, and increases the country's level of debt. The legislature voted 46 to 28 in favour of the measures, which include a new 1.4% tax on companies’ gross revenues, and a 1% levy on firms operating in the Colón Free Trade Zone – the largest free port in the Americas.

===Further reforms===
[[President of Panama|President]] [[Ricardo Martinelli]] had promised to implement a [[flat tax]] system with a flat tax of 10% and which promised to raise revenues, put inflation under control and which will allow enormous [[real wage]] gains.{{Citation needed|date=December 2009}} Instead the Martinelli government increased sales tax to 7% from 5%, as well as increasing other taxes, in order to finance many infrastructure projects around the country.

The current VAT rates are: 7% (standard rate); 15% (tobacco); 10% (alcohol and hotels); 5% (essential goods). The corporate tax rate is 25%, while the highest marginal income tax rate is 27%.

=== As tax haven ===
{{Excerpt|Panama as a tax haven}}