Panama’s tax system is based on territoriality: income produced in Panama must be assessed to determine its tax treatment. The location of a customer or bank account does not by itself determine the income source. International transactions and special cases require a review of the facts and applicable rules.

The general corporate income tax rate is 25% of net taxable income. Alternative calculation rules, special rates or specific treatments may apply depending on the taxpayer and its activity. Taxable income and expense deductibility should be assessed together with the supporting documentation.

The standard ITBMS rate is 7%. Exempt transactions and special rates exist, including 10% for accommodation and alcoholic beverages and 15% for tobacco products. Registration, invoicing, filing, tax credits and withholding obligations depend on the circumstances of the transaction and taxpayer.

Profit distributions and payments to non-residents may give rise to withholding obligations. In Panama, dividends paid from Panamanian-source profits are generally subject to a 10% dividend tax. A 5% rate generally applies to dividends paid from foreign-source income, export income, or certain tax-exempt income. The 5% rate also generally applies to profits distributed by companies operating in free zones, subject to the applicable rules. The treatment depends on the source and nature of the income, the recipient’s status, the applicable regime and any available tax treaty relief. These obligations should be reviewed before payments are made.

Transactions subject to transfer pricing rules require an assessment of the arm’s length principle and documentation obligations. Where Form 930 is required, the DGI states a filing period of six months after the fiscal year-end. The scope may include foreign counterparties and certain domestic related-party transactions involving special economic zones or areas.

A tax compliance calendar should bring together returns, withholdings, information reports, supporting documentation and internal responsibilities. Accounting records should be reconciled to tax filings and transactions supported by adequate evidence. ECOVIS Camero Camero & Asociados can help organise this process and identify areas requiring review.