What is 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.
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Current Rate (Monthly reporting periods)
7% standard, 10% and 15% on specific items, 0% on exports
Example
A Panamanian retailer sells software services for US$1,000 in a month. At 7%, the ITBMS charged is US$70, reported on the monthly Formulario 430.
How ITBMS (Panama VAT-equivalent) works in Panama
A business must register as an ITBMS taxpayer once monthly turnover exceeds US$3,000 or annual turnover exceeds US$36,000. Returns are monthly, due on the 15th of the month after the reporting period.
Basic foodstuffs, medicines, school supplies and education, and agricultural products are exempt. Exports are zero-rated, and ITBMS paid on inputs used to generate exports can be refunded.
Always check the exact rate for a specific product or service rather than assuming 7% applies to everything. Finn applies 7% by default and flags items that may fall under a different rate for you to confirm.
Related terms
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.
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.
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.
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