Panama uses a sales tax system called ITBMS, which works similarly to VAT (Value Added Tax) systems used in many countries. The standard ITBMS rate is 7% and applies to most products and services sold in the country.
There are also special tax rates for certain categories:
- 7% — General goods and services
- 10% — Hotel accommodations and alcoholic beverages
- 15% — Tobacco and tobacco-related products
Many essential products and services are exempt from ITBMS, including:
- Basic food items
- Medicines
- Medical services
- Educational services
- Public transportation
- Some school supplies and textbooks
In Panama, prices displayed in stores may or may not include ITBMS. In supermarkets, malls, restaurants, and many shops, the tax is often added at checkout, similar to the United States.
For businesses, companies generally must register to collect ITBMS if annual revenue exceeds approximately B/.36,000. Registered businesses collect the tax from customers and remit it to the Panamanian tax authority, the Dirección General de Ingresos (DGI).
Tourists should know that Panama does not generally offer a nationwide tourist VAT refund program for regular purchases outside duty-free airport zones.