ITBMS (VAT) Tax in Panama

Overview

ITBMS is an indirect tax that is levied on the sale of movable goods (including imports) and services provided on Panamanian soil. Along with income taxes and import fees, it functions as a value-added tax (VAT) and is a significant source of income for the Panamanian government.

This tax must be collected from end consumers and paid by those that import taxable items, transfer movable goods, or perform services to or within Panamanian territory.

Transactions subject to ITBMS include:

1. The realization of works with or without delivery of materials.
2. Brokerage in general
3. The use of personnel by the owner, partners, directors, legal representatives, dignitaries or shareholders of the company, of the services provided for this.
4. The leasing of real and personal property or any other convention or act that implies or is intended to give the use or enjoyment of the good.
5. Public shows, events, seminars, conferences, talks, presentations by artistic or musical groups, artists, singers, concert performers, sports professionals and professionals in general, not free, held within the territory of the Republic of Panama.
6. Local and international passenger air transport.
7. The granting of ownership or proprietary rights over movable goods to a receiver.
8. Importing tangible products, regardless of where they are going.
9. The rendering of services within Panamanian territory, with or without deliverables, which ordinarily comprise renting out movable and immovable property.

The obligation to pay this tax arises in the provision of services, with any of the following acts, whichever occurs first:

• The issuance of the corresponding invoice.
• Termination of the service provided.
• Perception of total or partial payment of the service to be provided.

Tax base and rates

Although the tax base will vary depending on the transaction being carried out, it is typically the net sale price of the good or service.

ITBMS will be applicable for all transfers of commodities up until they arrive at their intended location.

The ITBMS tax is not applied to the reimbursement of expenses.

Specific ITBMS rates:

• Medicine, Food and Books 0%
• Goods and Services 7%
• Alcoholic beverages, accommodations, and lodging 10%
• Tobacco Products 15%

Other dispositions

This tax must be collected from end consumers and paid by those that import taxable items, transfer movable goods, or perform services to or within Panamanian territory. Non-residents will likewise be required to pay ITBMS tax on services provided locally and to pay the tax in accordance with the law to the National Treasury subject to Panama’s territoriality principle.

Following a proper assessment by the tax authorities, people or businesses whose average monthly gross income is less than US$3,000 during the previous year, or whose annual income is less than US$36,000 during the previous year, are not required to collect ITBMS during the following year.

Filing requirements

By submitting Form 430 on or before the 15th of each month, the ITBMS tax collected must be paid to the tax authorities.

Remember, professional service providers are allowed to submit their return and the ITBMS tax on a quarterly basis.