Withholding in the Transfer Tax on Personal Property and Rendering of Services

February 15, 2021

The Tax Code of Panama, regulated by Executive Decree N°82/2005, states in its Article 1057-V the establishment of an ITBMS (Impuesto sobre las Transferencias de Bienes corporales Muebles y la prestación de Servicios – Tax on the Transfer on Personal Property and the Rendering of Services) in Panama.

This article describes the main aspects of this tax and its withholding mechanism.

ITBMS Taxpayers

The following are considered taxpayers of this tax:

  • Individuals, companies performing the taxable event, as transferors of real estate tangible property, and/or as service providers. However, those whose average monthly gross income for the previous tax period has not exceeded B/3,000.00, and the annual one B/36,000.00, are not included.
  • The importer, whether on his own behalf or for others.

Transactions subject to ITBMS

The following transactions are subject to the tax:

  • The transfer made by merchants, producers, or industrialists in the development of their activity of real estate tangible property.
  • The performance or rendering of any type of service by producers, traders, lessors of goods, except for those rendered in a relationship of dependence.
  • The importation of movable goods or merchandise, whether intended for the use of the introducer, for charitable or educational purposes or use in the improvement of other goods.

Birth of the obligation to pay ITBMS

The obligation to pay the tax arises:

  • In case of transfer of tangible goods, at the time of invoicing or delivery, regardless of the order.
  • In case of rendering of services, upon completion of the service or upon receipt of payment when the corresponding invoice is issued, whichever occurs first.
  • In case of importation of goods, at the moment of declaring in customs.


The tax rate is 7%, with some exceptions.

Withholding Agents

Article 19 of Executive Decree No. 84 of August 2005 stipulates that the following must withhold the tax:

  • State agencies, decentralized entities, public companies, municipalities, or other public sector entities. This withholding will be made without the amount of the consideration as long as the supplier is an ITBMS taxpayer, being the amount of the withholding 50% of the tax, except for the rendering of professional services to the State in which it will be made at 100%.
  • Those paying or crediting remuneration for taxable transactions carried out by individuals domiciled abroad. The withholding will be performed on the total amount of the tax.
  • Those being or not ITBMS taxpayers, having had annual purchases of goods and services for an amount greater than five million Balboas in the previous tax period. The amount to be withheld will be 50%.
  • The entities that manage debit or credit cards, in charge of paying merchants and service providers at the moment of payment or credit. The withholding will be 50% of the tax and may be used as a tax credit and must be included as a payment on account in the ITBMS return.

Withholding Certificate

The aforementioned withholding agents must issue a Withholding Certificate during the month the obligation arises to the withheld suppliers to document the tax credit.