Salary deductions in Panama

How to calculate salary deductions in Panama?

If your real question is "how much do I take home?", you are in the right place: this is the mother page (clear, stable and useful).

Here you will see the path from gross pay to net pay, with a quick table, an example and an FAQ block.
The idea: exact calculations + content aimed at long-tail searches, without cannibalizing, and with maximum usefulness.

Salary calculator in Panama (gross to net)

Quick table: what they normally deduct from you

Nerd but practical rule: before income tax, an employee usually sees approx. CSS (9.25%) + Education Insurance (1.25%) = 10.5% in "base" deductions.

Note: your employer may have "employer" contributions that do not reduce your net, but they do appear on the payroll. The employer-rate debate changes with reforms; your net should not "move" because of that.

CSS / taxes: what each one is and how it affects your net

1) CSS (Caja de Seguro Social): the biggest deduction

On the payroll, the worker's deduction usually appears as CSS (or "Social Security"). The public reference that is most often cited for the worker's contribution is 9.25%.

What to check on your pay stub:

• That the % applied is consistent (if you see more than expected, ask for a breakdown).
• The base on which they calculate it (base salary + recurring bonuses, etc., depending on how they pay you).

2) Education Insurance: small, but fixed

Education Insurance is normally withheld at 1.25% of the worker's salary (and the employer pays an additional 1.50%).

3) Income tax (ISR): appears when you "cross the threshold"

For employees, Panama uses a typical annual scale like this:

• Up to $11,000: exempt
• From $11,000 to $50,000: 15% (on the taxable portion)
• Over $50,000: fixed tax on the first 50k + 25% on the excess

Human translation: if your monthly salary is low/mid, you may see zero income tax; when it goes up, income tax kicks in and your net "drops" even though gross is the same.

Gross to net: the formula (no fluff)

• Think of your salary as an onion (yes, you cry in the end):
• Net ≈ Gross − CSS − Education Insurance − Income tax − (other authorized deductions)

Quick estimate (useful so you don't fool yourself)

• If we ignore income tax (because it depends on threshold), then:
• Net ≈ Gross × (1 − 0.0925 − 0.0125) = Gross × 0.895 So you keep ~89.5% of gross, before income tax and other deductions.

Example pay stub: real numbers, step by step

Teaching example (rounded): Monthly gross salary = $1,500

Step 1: CSS (9.25%) 1,500 × 0.0925 = $138.75

Step 2: Education Insurance (1.25%) 1,500 × 0.0125 = $18.75

Step 3: Income tax (depends on annual) Annual gross: 1,500 × 12 = 18,000 Exempt portion: 11,000 Approximate taxable base: 7,000 Estimated annual income tax (15%): 7,000 × 0.15 = 1,050 Estimated monthly income tax: 1,050 / 12 = 87.50 Result (approx.) Gross: 1,500.00 CSS: −138.75 Education Insurance: −18.75 Income tax: −87.50 Approximate net: 1,255.00

If your salary were, for example, $900/month (10,800/year), you would typically see 0 income tax for being below the annual threshold. To not live on approximations: Salary calculator

Payroll mistakes: the 9 classics (and how to spot them)

1. They deduct CSS/Education Insurance on an amount you don't understand
   Ask for: "calculation base by concept" (in writing).

2. Income tax withheld incorrectly (especially if you changed salary mid-year)
   Ask for: monthly detail of base and withholding.

3. Duplicate deductions (happens more than it should)
   Compare 3 consecutive pay stubs: if it "goes up and down" for no reason, investigate.

4. Deductions "just because" (uniform, damages, petty cash)
   Practical rule: without authorization/support, question it.

5. Loans/advances recorded incorrectly
   Ask for the loan statement (balance, installment, months).

6. They change your net for "adjustments" with no explanation
   An adjustment with no note = red flag.

7. Withholding for pension/garnish with wrong data
   Verify order/decree number.

8. Bonuses paid as "expense" with no breakdown
   If the bonus is recurring, check how it affects base and withholdings.

9. They don't give you the full breakdown
   This is fixed with insistence: "I need breakdown by concept to validate".

Express checklist (your counter-matrix)

Is CSS = 9.25%? Is Education Insurance = 1.25%? Does income tax appear only if you cross the annual threshold? Does each "extra" deduction have a document or authorization?

FAQ

How much do they deduct for CSS in Panama?

Typically, 9.25% is deducted from the worker (and the employer contributes separately).

Is Education Insurance always deducted?

In salaried employment, normally yes: 1.25% from the worker and 1.50% additional from the employer.

From what salary do I pay income tax?

It depends on accumulated annual income: typically the first $11,000 are exempt; then the 15% bracket applies (and higher up it changes).

Why does my net change every month if my gross is the same?

Three usual suspects:

1. Income tax (withholding adjusting)
2. Variable deductions (loan, hours, "adjustments")
3. Different base (bonuses, commissions)

Can they deduct uniforms, damages or "fines"?

It can be disputed if there is no clear support/acceptance. Always ask for the document that supports it and the breakdown.

I have two jobs: what happens with income tax?

Normally the annual calculation becomes more sensitive because each employer withholds "their part" without seeing the total. In those cases, it helps to keep track with a calculator or advice.

Short note (but important): this is informational guidance, not legal/accounting advice. If your case has unusual variables (two jobs, non-resident, mixed income), the correct solution is breakdown + calculation (and that's where the utility page rules).

Sources & Foot Notes

[1] Caja de Seguro Social (CSS) — Official site
[2] DGI (Dirección General de Ingresos) — Official site
[3] MEF Panama — Official site