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Panama VAT on foreign digital services

Panama has again proposed imposing a Withhold VAT on payment providers processing payments to non-resident providers of digital services to consumers. This was due to come into effect on January 2020, but was delayed due to the COVID-19 crisis.

The current VAT rate in Panama is 10%.

Withholding VAT agents

Rather than VAT register in Panama, most receipts paid to non-resident providers of digital services suffer a Withholding VAT. This means the payment provider must identify the recipient as a digital services provider as split the VAT element of the consumer’s payment. The provider then remits this directly to

Withholding VAT is not recommended under the OECD’s guidelines on model VAT regimes for digital services. Other countries to use this split payment mechanism include: Paraguay and Colombia.  Follow VAT Calc’s global VAT and GST on digital services blog keeps a live update on how countries are imposing indirect taxes on non-resident providers and electronic marketplaces.

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