Panama Accounting & Tax Glossary
12 Panama-specific terms explained in plain English. Every entry cites Dirección General de Ingresos (DGI), Ministry of Economy and Finance (MEF) or Registro Público de Panamá.
Aviso de Operación
The Aviso de Operación is the business-operation notice or licence required before a company can legally trade in Panama. It is separate from the RUC and is not itself a tax ID.
Formulario 430 (ITBMS Return)
Formulario 430 is the monthly ITBMS return filed through the DGI's e-Tax 2.0 portal. It is due on the 15th of the month following the reporting period.
RUC (Registro Único de Contribuyente)
The RUC is Panama's primary tax identifier for both individuals and companies, issued by the DGI. It appears on invoices and on ITBMS and income tax filings.
S. de R.L. (Sociedad de Responsabilidad Limitada)
The S. de R.L. is Panama's LLC-equivalent, with no minimum capital requirement and managed by one or more gerentes (managers). It is the common choice for small and medium businesses.
Tasa Única (Annual Franchise Tax)
The tasa única is a flat annual corporate franchise tax of US$300 owed by every Panamanian corporation and private interest foundation. It is paid to the Registro Público, not the DGI, and it is not an income tax.
CAIR (Alternative Minimum Income Tax)
CAIR (Cálculo Alterno del Impuesto sobre la Renta) is an alternative minimum tax for companies with gross taxable income above US$1,500,000 a year. The company pays the higher of the standard 25% calculation or 4.67% of gross taxable income.
Dividend Tax (Panama)
Dividends paid out of Panama-source income are subject to a 10% withholding tax. Dividends paid out of foreign-source income or export income are taxed at a reduced 5%.
Income Tax (ISR, Panama)
Impuesto Sobre la Renta (ISR) is Panama's corporate income tax. It is a flat 25% on net taxable Panama-source income for resident companies such as the S. de R.L. and the S.A.
ITBMS (Panama VAT-equivalent)
ITBMS (Impuesto de Transferencia de Bienes Muebles y Prestación de Servicios) is Panama's VAT-equivalent. The standard rate is 7%, with 10% and 15% applying narrowly to specific items such as alcohol and tobacco.
Territorial Tax System
Panama taxes only Panama-source income. Foreign-source income, meaning activities, contracts or transactions completed or having effect outside Panama, is exempt from Panamanian tax even when it passes through a Panamanian company.
CSS (Caja de Seguro Social)
The CSS is Panama's social security institution. Employees contribute 9.75% of gross salary with no cap, and employers also contribute under a rate that is being raised in stages by Law 462 of March 2025.
Décimo Tercer Mes (13th-Month Bonus)
The décimo tercer mes is a mandatory 13th-month payment equal to one month's salary, paid in three equal instalments on 15 April, 15 August and 15 December.