The single biggest financial decision-driver for retirees and remote workers choosing between the two countries. The systems are structurally different, not slightly different. Colombian thresholds are expressed in UVT (Unidad de Valor Tributario), set annually by DIAN; the 2026 UVT is $52,374 COP per Resolución DIAN 238 of 2025-12-15.
| Panama City | Medellín | |
|---|---|---|
| Tax system | Territorial. Only Panama-source income is taxed. Foreign pensions, foreign investment income, and foreign rental income are not taxed. | Worldwide income for tax residents per Estatuto Tributario (Colombian Tax Code) Art. 9. Non-residents are taxed only on Colombian-source income. |
| Residency trigger | Tax residency is largely a status decision tied to your immigration status; presence alone is not the trigger. | Physical presence over 183 days in any 365-day window OR center-of-vital-interests test per Estatuto Tributario Art. 10. |
| Income tax rate (residents) | 0% on the first $11,000 USD/yr, 15% to $50,000, 25% above. Foreign-source income excluded entirely. | Progressive 0% to 39% per Estatuto Tributario Art. 241. 2026 brackets in UVT: 0% to 1,090 UVT (~$57M COP, $15K USD), 19% to 1,700 UVT, 28% to 4,100 UVT, 33% to 8,670 UVT, 35% to 18,970 UVT, 37% to 31,000 UVT, 39% above (top bracket starts ~$1.6B COP, ~$430K USD). |
| Capital gains (ganancia ocasional) | 10% on Panama-source capital gains. Foreign-source capital gains not taxed. | 15% flat rate per Estatuto Tributario Art. 313, raised from 10% by Ley 2277 of 2022 (Reforma Tributaria). Sale of primary residence has a partial exemption up to 13,000 UVT of value (~$680M COP) under Art. 311-1. |
| Foreign pensions and US Social Security | Not taxed under Panama's territorial system. Foreign Social Security and pensions are entirely outside the Panamanian tax base. | Exempt up to 1,000 UVT per monthly payment (~$52.4M COP, ~$14,000 USD/month at 2026 UVT). Ley 2381 of 2024 Art. 84(5) extended the historical Colombian-pension exemption to foreign pensions, confirmed by DIAN Concepto 6606 of 2024. For most US retirees on Social Security alone, this means the full benefit is exempt; only the portion of monthly pension income above ~$14K USD is taxed at the cédula de pensiones progressive schedule. |
| Dividends from foreign companies | Not taxed. | Taxed under the cédula general schedule (Colombia's consolidated income schedule for non-pension ordinary income) for residents, post-2022 reform. Foreign-tax credit available per Art. 254 in many cases. Specific treatment depends on the source country and treaty network. |
| Property tax (Predial) | Recently reformed. New construction often qualifies for 20-year exemption; older inventory has limited exemptions. | Annual municipal tax, rate set per Acuerdo Municipal each year, typically 0.5% to 1.6% of cadastral value (avalúo catastral). Cadastral value often runs below market value, partially offsetting the higher rate band. Medellín, Bogotá, and Cartagena rates differ. |
| VAT (sales tax) | ITBMS (Impuesto de Transferencia de Bienes Muebles y Servicios / Panama VAT) 7% standard rate. | IVA (Impuesto sobre las Ventas / Colombian VAT) 19% standard rate per Estatuto Tributario Art. 468. Reduced rates for some essentials; many basic foods exempt. |
| Wealth/net worth tax | None. | Impuesto al Patrimonio: declarable from 40,000 UVT (~$2.09B COP, ~$560K USD) under Decreto Legislativo 1474 of 2025 (emergency tax reform). Progressive rate 0.5% to 5%. The threshold was lowered and rates increased from the prior framework. Decreto 1474 is under constitutional review by the Corte Constitucional and could be modified or struck down, so verify the rule currently in force before relying on a long-term plan. |
| US-tax-treaty status | No US-Panama tax treaty. FATCA reporting applies. | No US-Colombia income tax treaty. FATCA reporting applies. US citizens use Foreign Earned Income Exclusion and foreign-tax credit mechanics for any Colombia-side tax paid. |