Moving to Panama

Panama is the most financially frictionless relocation in Latin America for Americans. The country uses the US Dollar as its everyday currency — the local Balboa is pegged 1:1 and circulates only as coins — so there is no exchange rate to watch, no conversion fees on your rent, and no mental math at the grocery store. Panama City is a genuine international hub: a skyline of glass towers, a metro system, US-style malls and supermarkets, and one of the busiest airports in the Americas linking you to Miami in about three hours.

The real draw is the tax structure. Panama runs a territorial tax system — income earned outside Panama is simply not taxed, regardless of your residency status. Combined with a stable, dollarized economy and immigration programs that are unusually generous to retirees and remote workers, Panama has become the default choice for Americans who want a warm, low-tax, US-adjacent base. Beyond the capital, mountain towns like Boquete and beach communities like Coronado host large, well-established expat communities where English gets you a long way and the cost of living drops sharply.

US Tax Obligations

As an American citizen or green card holder, you must keep filing US federal taxes no matter where you live. The two main tools for avoiding double taxation are the Foreign Earned Income Exclusion (FEIE), which lets you exclude up to $132,900 (2026) of earned income, and the Foreign Tax Credit (FTC). To claim the FEIE you must pass either the Physical Presence Test (330 days outside the US in a 12-month period) or the Bona Fide Residence Test.

Panama's Territorial Tax System — The Headline Benefit

Panama taxes only Panama-sourced income. Income you earn from outside Panama — a US pension, US dividends, a remote salary paid by a foreign company, an online business serving foreign clients — is not taxed by Panama at all, regardless of whether you are a tax resident. This is the core reason Panama attracts location-independent Americans: your foreign income is effectively tax-free locally. Only income actually generated inside Panama (a local salary, a Panamanian business, local rental income) falls into Panama's income tax, which is progressive up to 25%.

Tax Residency & the 183-Day Rule

You generally become a Panamanian tax resident by spending more than 183 days in the country in a year (or by establishing your center of economic interest there). But because of the territorial system, becoming a tax resident does not create Panamanian tax on your foreign income — it can actually be advantageous, and Panama can issue a tax residency certificate.

No US–Panama Tax Treaty & No Totalization Agreement (Read This Carefully)

Unlike Portugal or Spain, the US and Panama have NO income tax treaty and NO Social Security Totalization Agreement. Two practical consequences for Americans:

• There is no treaty to reduce US withholding on US-sourced passive income or to arbitrate residency disputes — you rely on the FEIE and Foreign Tax Credit instead.
• Self-employment tax is not covered. The FEIE erases US income tax on qualifying earnings but does NOT touch the 15.3% US self-employment tax that funds Social Security and Medicare. With no totalization agreement, a self-employed American in Panama typically still owes that 15.3% to the US and cannot offset it with Panamanian contributions. Budget for it.

Given these gaps, work with a cross-border tax advisor who handles both US and Panamanian rules — firms like Greenback Expat Tax Services or Bright!Tax specialize in exactly this situation. Affiliate disclosure: we may earn a commission if you use our Greenback link, at no extra cost to you.

FBAR & FATCA Reporting

If your Panamanian (or any foreign) bank accounts exceed $10,000 in aggregate at any point in the year, you must file an FBAR (FinCEN Form 114). Larger asset thresholds also trigger Form 8938 under FATCA. These are informational filings, but the penalties for missing them are severe — do not skip them.

A Two-Tier System Built for Expats

Panama runs a public system (through the Caja de Seguro Social and the Ministry of Health) alongside a strong private sector. Public hospitals are heavily subsidized and effectively low-cost, but most expats use private care, which is modern, fast, and inexpensive by US standards. Panama City in particular has become a legitimate medical-tourism destination.

Private Hospitals & Medical Tourism

Panama City's Punta Pacifica district is the hub of top private medicine — Hospital Punta Pacifica was historically affiliated with Johns Hopkins Medicine, and hospitals like Hospital Nacional and The Panama Clinic offer US-trained, English-speaking doctors and modern equipment. A specialist consultation typically costs $60–$100 out of pocket; procedures run a fraction of US prices, which is why Americans fly in for dental work, elective surgery, and diagnostics. Outside the capital, David's Hospital Chiriquí and Mae Lewis serve the western highlands, and Coronado has its own private hospital.

Health Insurance

Private health insurance for an American in their 30s–40s typically runs $70–$200/month; for those over 60, expect $200–$400/month depending on coverage and pre-existing conditions. Local insurers (like ASSA and PALIG) and international plans (Cigna Global, Bupa) are both widely used — international plans travel with you and avoid Panama's age-based enrollment cutoffs, which matter if you are older. Note that many local policies stop accepting new enrollees around age 65–70, so lock in coverage before you reach the cutoff.

Pensionado Discounts on Healthcare

Retiree-visa holders get Law 6 discounts that apply directly to medical costs: 20% off doctors' fees and professional medical services, 15% off hospital bills (and dental and eye exams), and 10% off prescription medicines. For retirees on a fixed income, these are a meaningful ongoing saving on top of already-low prices.

Prescriptions & Dental

Pharmacies are plentiful and many medications that require a prescription in the US are available over the counter. Dental care is a bargain and a common reason for medical tourism — a cleaning runs $30–$50 and major work is 50–70% cheaper than in the US, at clinics that cater specifically to American patients.

The Reality: Panama Banks Are Strict with Americans

Panama is a major regional banking center, but opening a personal account as a US citizen is notoriously slow and paperwork-heavy. Panamanian banks apply rigorous due diligence — expect to provide multiple bank reference letters, professional reference letters, proof of the lawful source of your funds, tax returns, and proof of income. Because of FATCA (Foreign Account Tax Compliance Act), which forces foreign banks to report US-held accounts to the IRS, many Panamanian banks are simply reluctant to take on American clients at all. Approval can take several weeks, and having a local immigration attorney or a relationship banker introduce you makes a real difference.

Which Banks & What You'll Need

Major banks include Banco General (the largest and often the most approachable for residents), Banistmo, Global Bank, and BAC Credomatic. To open an account you generally need your passport, a Panamanian residency card or proof of an in-progress residency application, two bank reference letters, a professional reference letter, proof of income, and proof of a local address. Having residency (e.g. via Pensionado) dramatically smooths the process — tourists and pre-residency applicants face the most friction.

Wise (Recommended for Transfers)

Because everything in Panama is priced in USD, you avoid currency conversion entirely for day-to-day spending. But for moving larger sums and holding money before your local account is approved, Wise (formerly TransferWise) is the tool most expats rely on. Wise gives you US account details, a multi-currency balance, and a debit card that works across Panama with low, transparent fees — invaluable during the weeks or months it can take to get a Panamanian account opened. Set up your Wise account while still in the US so verification goes smoothly.

Practical Tips

• Keep a US bank account open. Charles Schwab, Fidelity, and Capital One are popular among expats for no-foreign-transaction-fee debit cards and fee-free international ATM withdrawals.
• Because Panama uses USD, US debit/credit cards work everywhere with no conversion fee — many expats delay opening a local account until residency is granted.
• Report any Panamanian account over $10,000 on your FBAR every year (see Taxes) — non-compliance carries steep penalties.
• Yappy (by Banco General) is Panama's dominant peer-to-peer mobile payment app — the local equivalent of Venmo/Zelle — but it requires a local account to use fully.