Live a Tax-Free Lifestyle in Panama

Because of the pandemic, many businesses allow their employees to continue working from home even though some offices are partially open again.  All you need to be able to work from home is a good internet connection.   You can use Zoom or Skype to stay in touch with the office.

Your “home” can be in Panama!

Working from home in Panama could result in big tax savings. I’ll explain more below.

You or your company may want to permanently move to Panama to reduce taxes and enjoy a better lifestyle.

If you work from home, why continue living close to the office? Or close to the city? Or the same state? Or even the same country?

You could live anywhere!

If going into the office is no longer necessary, you could work from home in Panama. Many areas in Panama have fiber optics with 100-600+ Mbps internet!

Moving to Panama may significantly reduce your housing costs, even for a year or two. A nice furnished two-bedroom condo facing the Pacific Ocean in Coronado costs about $1000-$1500 a month. Imagine waking up every morning to walk on the beach before you start your workday.

Or you could live on Balboa Avenue in Panama City with an ocean view for a furnished apartment for about $1200 a month.  There is so much to see and do in Panama City.  You’ll find plenty of others working from home in the City, too, and they have frequent get-togethers.

You may prefer a laid-back lifestyle in the heart of cultural events in the Azuero Peninsula. For $700 a month, you can get a great furnished two-bedroom house close to town or live in a beach community about 10 minutes outside town.

If you prefer cooler Spring-like weather without an air conditioner, you could live in Boquete, surrounded by spectacular mountains ideal for hiking, for about $800 a month for a furnished two-bedroom house. 

If you love the beach, surfing, and diving, you may want to try living on the Caribbean side of Panama in Bocas del Toro.  It has a bohemian vibe.   Recently, I’ve seen cute furnished two-bedroom houses close to the beach for about $800 a month.

Panama is a small yet very diverse country. You may want to try several different areas instead of just picking one!

How to Pay No Taxes!

As a bonus, if you live in Panama and are a United States citizen, you could qualify for the Foreign Earned Income Exclusion, which means you pay NO TAXES in the United States on the first $130,000 of your income (2025 rate).  (sorry, the FEIE is only available to people from the US).

You will not owe any taxes in Panama if you are not selling products or services in Panama.  

If you make $130,000 a year or less, you get to keep every single penny you make! (check with your CPA or the IRS website for details about qualifications for the Foreign Earned Income Exclusion)

It’s like getting a raise if you move to Panama full-time!

Here’s an example: In 2025, you may claim the Exclusion for up to the first $130,000 ($126,500 in 2024) you earn. This means that if you earn $150,000 in 2025, you would pay federal income taxes for only $20,000! $150,000 (your income earned) MINUS $130,000 (the maximum exclusion if you live overseas) = so….$20,000 is all you would pay taxes on!

There are two ways to qualify for the Foreign Earned Income Exclusion:

To qualify for the FEIE and filing Form 2555, you must meet two essential criteria: the tax home test and either the bona fide residence test or the physical presence test. Tax Home Test: Your tax home must be in a foreign country.

1. You meet the physical presence test if you are physically present in a foreign country or country for 330 full days for 12 consecutive months, including some part of the year at issue. The 330 qualifying days do not have to be consecutive.
2. You meet the bona fide residence test if you are a bona fide resident of a foreign country or country for an uninterrupted period, including an entire tax year. If you are a calendar year taxpayer, the whole year is from January 1st through December 31st. During your bona fide residence in a foreign country, you may leave that foreign country for brief or temporary trips back to the United States or elsewhere so long as you intend to return to your foreign residence or to a new foreign bona fide residence without unreasonable delay.

Once you establish bona fide residency in a foreign country for an uninterrupted period that includes an entire tax year, you will qualify as a bona fide resident starting with the date you began the residency and ending with the date you abandon your foreign residence. This means you could qualify as a bona fide resident for parts of one or two other tax years in addition to the full tax year(s) of bona fide residency.

Passive income, such as Social Security, investments, dividends, capital gains, pensions, rental income, 401k, etc., does NOT qualify for foreign-earned Income.

Only active earned income qualifies for the Foreign Earned Income Exclusion.

Move To A Place Where You Can Reduce Taxes, Too!

Foreigners who sell products or services in Panama need a work permit.

However, you will not need a work permit if you work remotely from your home in Panama.  But you must get a residency Visa to live in Panama full-time.  Panama has a unique Friendly Nations Visa that would be ideal. Tourists can stay in Panama for six months (if they’re not driving).   

Miami is less than a 3-hour flight from Panama City, but you must be careful not to be in the United States for more than 30 days, or you will lose your Foreign Earned Income Exclusion.

While you can work from home, why not work from home in Panama? You can also reduce your cost of living and taxes and explore the amazing life in Panama. It’s the best of both worlds.

While you’re working from home in Panama, it’s also a great way to explore the country as a potential retirement destination!

What are you waiting for?

Move to Panama to LIVE BETTER for LESS…and reduce taxes too!

We can help!

The Online Panama Relocation Guide has everything you need for a smooth, hassle-free move to Panama! Yes, you can bring your pets too!