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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 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

税率降低的产品类别

No specific digital goods or services with reduced tax

免税产品类别

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

Tax ID validation required

Yes

When do you have to register

Registration is necessary regardless of the turnover

可在线注册

Yes

Local representative needed

注册流程

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
软件即服务 (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

No threshold, non-resident companies must register for VAT

Filing interval

Monthly

Filing deadline

By the 15h day of the following reporting month

E-invoicing requirements

Not mandatory

记录保存

Records must be kept for at least 5 years

VAT Rates and Exemptions in Panama

The standard VAT rate in Panama stands at 7%. Notably, non-resident companies directly selling to customers are exempt from VAT (ITBMS – Impuesto de Transferencia de Bienes Muebles y Servicios).

VAT Filing, Record-Keeping, and E-Invoicing in Panama

VAT returns must be filed monthly, with payments due by the 15th day of the following month. Businesses are required to maintain records for at least 5 years. While e-invoicing is not mandatory, it is highly recommended for efficient record-keeping and compliance.

What are the basics of SaaS sales tax for businesses in Panama?

The standard VAT rate for SaaS in Panama is 7%. Non-resident companies directly selling to customers are exempt from VAT. Businesses must file VAT returns monthly, with payments due by the 15th of the following month. Records must be kept for at least 5 years. E-invoicing is not mandatory but highly recommended.
How can SaaS companies comply with sales tax regulations across different regions?

SaaS companies operating in multiple regions should research and understand the specific VAT regulations of each jurisdiction. Consulting with tax professionals in each region is vital for ensuring compliance and avoiding penalties. Additionally, utilizing automated tax software can help manage compliance across different jurisdictions.
How does customer location affect SaaS sales tax obligations in Panama?

The customer’s location determines whether your SaaS offering is subject to VAT in Panama. If the customer is located in Panama, VAT applies unless the company is exempt. If the customer is located outside of Panama, no VAT is charged.

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