Tax rate by region Panama

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The information provided on this page is intended for general informative purposes only. It should not be interpreted as tax advice, nor is it meant to be. For advice on your particular tax responsibilities, consult with an experienced tax expert. PayPro Global does not assume any responsibility for any action taken or not taken based on the information presented here.

Navigating SaaS Sales Tax in Panama: A Comprehensive Guide for Businesses

Panama, adopting a Value Added Tax (VAT) system in 2010, has streamlined tax compliance and boosted public revenue. Businesses offering Software as a Service (SaaS) in Panama must adhere to specific VAT regulations. This guide provides a detailed overview of SaaS sales tax in Panama, assisting businesses in navigating compliance requirements and optimizing tax management.

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Panama

Panama adopted a VAT system in 2010 to improve tax compliance and enhance public revenue.

Official government link: Dirección General de Ingresos

7.00%

E-products and services VAT/Sales tax rate

Reduced tax rate product categories

No specific digital goods or services with reduced tax

Exempted product categories

Non-resident companies selling directly to costumers are exempt of VAT (ITBMS – Impuesto de Transferencia de Bienes Muebles y Servicios)

Reverse charge mechanism for B2B sales

Applies, but not for all B2B sales

Tax ID validation required

Yes

When do you have to register

The PAB 36,000 threshold applies to resident businesses. Non-resident providers without a permanent establishment are generally not required or able to register.

Online registration possible

Yes

Local representative needed

No

Registration procedure

To become a VAT payer in Panama, businesses need to register with the General Directorate of Revenue (DGI). This can be done either online or in person. As part of the registration process, businesses must apply for a national Panamanian tax registry number, known as the RUC (Registro Único de Contribuyentes). It’s important to note that all documents submitted for registration must be in Spanish.

List of digital and electronic services liable for tax

E-books, audiobooks, and other digital publications
Music downloads and streaming services
Movies, TV shows, and other video content (downloads or streaming)
Games and in-app purchases
Online courses and educational materials
Digital art, photos, and other visual content
Downloadable software and applications
Software as a Service (SaaS)
Cloud-based storage and other cloud services
Web hosting and domain registration
Online advertising and marketing services
Online marketplaces and platforms
Social media platforms and communication tools
Online gaming and gambling services
Online consultations and professional services
Digital subscriptions and memberships
Online ticketing and booking services

Penalties

Late Filing and Payment: A penalty of PAB 10 (about EUR 9) is imposed for late filing or late payment of VAT returns.
Repeated Violations: If you are repeatedly late with your filing or payments, fines ranging from PAB 500 to PAB 5,000 (approximately EUR 470 to EUR 4,700) may be imposed.
Fraud: Committing VAT fraud can result in a hefty fine of five to ten times the amount of tax owed, plus imprisonment for a period of one month to one year. In certain circumstances, even more severe penalties could be applied.

Registration threshold

Registration is mandatory for resident businesses with an annual gross income exceeding PAB 36,000.

Filing interval

Monthly

Filing deadline

By the 15h day of the following reporting month

E-invoicing requirements

SFEP is mandatory for Panamanian taxpayers but not for non-resident SaaS sellers.

Record keeping

Records must be kept for at least 5 years

How-To Guides: Panamanian SaaS VAT

Step: 1 Threshold

Panama’s VAT system (ITBMS) is governed by the Fiscal Code, as amended by Law No. 8 of March 15, 2010, which established the modern ITBMS framework.
Generally, registration is mandatory for businesses with an annual gross income exceeding PAB 36,000. Note: Non-resident entities without a permanent establishment (PE) typically cannot register for ITBMS and instead rely on the reverse charge system.
The PAB 36,000 threshold applies to resident businesses. Non-resident providers without a permanent establishment are generally not required or able to register.

Step: 2 Business Registration

Handled by the Dirección General de Ingresos (DGI). Entities with a local presence can register for ITBMS.

Step: 3 TIN/VAT Number

The Tax ID is known as the RUC (Registro Único de Contribuyentes) issued by the DGI.

Step: 1 Rate

The standard ITBMS rate in Panama is 7%.

Step: 2 Formula

To calculate your tax amount, use the following formula:

 

Tax Amount = Net Price x 7%

Step: 3 Reverse Charge (B2B)

It applies. For cross-border SaaS, the Panamanian B2B customer must self-assess the 7% ITBMS. The foreign provider does not charge ITBMS on the invoice if they have no local presence.

Step: 1 Selling B2C

For B2C digital services, ITBMS is typically collected via withholding by financial intermediaries (e.g., banks, card issuers) rather than by the foreign supplier.

Step: 2 Selling B2B

Tax is not charged by the foreign supplier. The buyer self-assesses. You must obtain the buyer’s RUC to verify their business status.

Step: 3 Invoice Requirements

Invoices must include:

  • Supplier Name/Address
  • Date
  • Sequential Invoice Number
  • Description of SaaS/Services
  • Total Amount (USD)Buyer’s RUC (for B2B).

Electronic invoicing (SFEP) is mandatory for local taxpayers.

Step: 1 Filing Interval

Taxes should be filed: 

Monthly (standard) or Quarterly (for certain independent professionals).

Step: 2 Filing Deadline

Taxes should be filed on the 15th day of the following month (e.g., January’s return is due February 15).

Step: 3 Submission

Taxes should be filed via the e-Tax 2.0 online portal. Payments can be made via local bank transfers or authorized collection points using the “Boleta de Pago.”

Step: 4 Record Keeping

Documents must be retained mandatory for 5 years (as per Law 52/2016 and subsequent amendments). Records must be available for DGI inspection.

PayPro Global Solution: Simplified Registration & Fiscal Representation

Navigating VAT registration and fiscal representation in Panama can be daunting. PayPro Global acts as your Merchant of Record, handling these complexities, including VAT registration and fiscal representation where needed, so you can focus on your business.

Learn more about our MoR services.

FAQ

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