Countries › Panama › Guide › 6. Taxes › Digital services and Panamanian tax: withholding on cross border services today and the ITBMS proposal for foreign platforms announced in August 2026

Digital services and Panamanian tax: withholding on cross border services today and the ITBMS proposal for foreign platforms announced in August 2026

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Last verified: 2026-10-29 · Status: Changing

Panama has no specific digital services tax in force. A Panamanian business paying a foreign provider for services that benefit it in Panama and are deducted there withholds 12.5 percent effective income tax, and the ITBMS applies to taxable events carried out in Panama. In August 2026 the Cabinet approved bill 30-26 to make foreign digital platforms register with the DGI and charge the 7 percent ITBMS, but it is not law.

Panama's currency, the balboa (B/.), is at par with the US dollar, which circulates freely as legal tender; the Superintendencia de Bancos states that the balboa's value is on a par with the US dollar (checked 29 October 2026). USD figures therefore equal the balboa figures.

Key facts

Specific digital services tax in force	No textMEF announcement of bill 30-26, as of 2026-10-29 · in force
ITBMS collected by foreign digital service platforms	Not in force; bill 30-26 announced August 2026 textBill 30-26, as of 2026-10-29 · pending
ITBMS rate proposed for foreign digital services	7 %Bill 30-26 (MEF note of 21 August 2026), as of 2026-10-29 · pending
Effective withholding on services paid to foreign companies	12.5 %Código Fiscal art. 694 literal e, as of 2026-10-29 · in force
Exchange rate used for USD conversions	1 PAB per USDBalboa at par with the US dollar (Superintendencia de Bancos), as of 2026-10-29 · in force

The rule

1. Income of non residents from any service or act, documented or not, that benefits persons in Panama, including royalties, copyrights and know how, is Panamanian source to the extent it bears on Panamanian income and is deducted by the payer; the payer withholds the general rate on 50 percent of the payment unless the provider registered with the DGI. This covers business to business payments for software, cloud, advertising and other digital services that meet those conditions.
Example: A Panamanian company deducts B/.40,000 of fees paid to a foreign online advertising provider: withholding is 25 percent of B/.20,000, B/.5,000. / US$40,000 of fees, US$5,000 withheld.Código Fiscal art. 694 parágrafo 1 literal e as worded by Ley 27 de 2015 art. 1, art. 694 parágrafo 1 literal e, 2015-05-04 official text · verified 2026-10-29

2. The ITBMS applies to the transfer of movable goods and the provision of services carried out in Panama, regardless of where the contract was signed and of the domicile, residence or nationality of the parties, at 7 percent.Código Fiscal art. 1057-V parágrafos 3 and 6; parágrafo 6 as worded by Ley 8 de 2010 art. 76, art. 1057-V, 2010-03-15 official text · verified 2026-10-29

3. On 19 August 2026 the MEF announced that the Cabinet approved sending bill 30-26 to the National Assembly to update the ITBMS for digital transactions, including territorial rules based on the user's payment instrument, billing address, IP address and SIM card country code, with safeguards for financial activities; the MEF stated it creates no new tax category.Bill 30-26 (Proyecto de ley 30-26), MEF announcement, Not enacted, 2026-08-19 official text · verified 2026-10-29 · changed: Proposal only: announced 19 August 2026; no law in the Gaceta Oficial as of 29 October 2026.

4. On 21 August 2026 the MEF explained that under the proposal foreign providers of digital services would register with the DGI, apply the 7 percent ITBMS and remit it, with no additional procedure for consumers, and that the rate would not change.MEF explanatory note on bill 30-26, Not enacted, 2026-08-21 official text · verified 2026-10-29

Payer	Income tax withholding	ITBMS	Basis
Panamanian business that deducts the cost against Panamanian income	12.5 percent effective, B/.1,250, unless provider registered with DGI	No platform collection rule in force	Art. 694 literal e
Individual consumer	No withholding duty	No platform collection rule in force	Bill 30-26 not enacted

Tax treatment of a B/.10,000 (US$10,000) payment to a foreign digital service provider (checked 29 October 2026).

Worked example

A Panamanian retailer pays US$10,000 (B/.10,000) to a foreign cloud provider in 2026 and deducts it.
It withholds 25 percent on half the payment, US$1,250, and remits it within ten days, unless the provider is registered with the DGI as an income taxpayer.
If bill 30-26 were enacted as announced, the provider would also register with the DGI and charge 7 percent ITBMS; that is not yet law.

Step by step

List recurring payments to foreign digital providers and check whether they are deducted against Panamanian income.
Ask providers whether they are registered with the DGI as income taxpayers; if not, withhold.
Monitor the Gaceta Oficial for any law arising from bill 30-26 before changing ITBMS treatment.

Common traps

Remote delivery does not make a service foreign source if it benefits a Panamanian business and is deducted.
Press reports of a new digital tax describe a bill, not a law.
Withholding applies even if the Panamanian payer is in a loss position.

Sources

Related: Panama country profile · live dashboard · central bank and release calendar · our posts on X · where Argentina is involved, see The Argentine Thread guide

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