Panama Commercial Permit Tax
All persons and entities engaging in business activities within the Republic of Panama must obtain a Panama Commercial Operation Permit (“Aviso de Operacion”) which is issued by the Ministry of Commerce and Industry. Once you obtain this business operations permit, your company will be required to file an annual tax declaration in Panama, declaring all local and foreign earned income. In addition, your company will be required to register with the local Municipal tax office and pay the respective municipal tax due on your business operation, which may vary depending on what municipality you are doing business in.
Panama Sales Tax
The Panama Sales Tax is known as the “ITBMS”. This tax applies to imported goods, products sold or services rendered in Panama. The importer, seller, or service provider pays this tax whereby most simply add this tax to be paid by the consumer. Since July 1, 2010 the ITBMS increased from 5% to 7%. Higher rates exist for the sale of alcoholic drinks (10%), tobacco products (15%), and specific services such as housing services (10%). Exceptions to paying this tax include free trade zone transactions, power generation & distribution services, cargo and passenger transportation by sea, air, or land. Most businesses pay the sales tax monthly. You can offset the sales tax that you collect and have to pay to the government of Panama, with the any sales taxes you pay on invoices for goods or services that your business consumes.
Importing Products into Panama
Products imported into Panama which are not exempt by law or by international trade agreements are subject to import tariffs and the ITBMS tax. The import tariffs differ by products and are set forth in a tariff line system.