Panama will Charge ITBMS to Netflix and other platforms. Felipe Chapman Explains How.
Chapman pictured below, also clarified that applying the ITBMS to digital transactions does not constitute a tariff.
Digital platforms that market products or services in Panama will have to apply the Transfer Tax on Movable Goods and Services (ITBMS), currently at 7%, and issue digital invoices, explained the Minister of Economy and Finance, Felipe Chapman. The measure seeks to equalize the tax treatment between transactions carried out physically and those carried out through digital platforms, including streaming services such as Netflix and other businesses that operate online.
How will the ITBMS Tax be Collected from Digital Platforms?
Chapman explained that the application of the tax will rely on the electronic payment system used in this type of transaction. The minister indicated that the Government has already spoken with the main banks that issue credit cards and with companies such as Visa, Mastercard and American Express, with the aim of facilitating the application of the tax through digital tools.
“All of these transactions, or if not all, then the vast majority, are carried out electronically, through electronic payment methods such as credit cards,” Chapman explained.
According to the head of the MEF, this mechanism will allow for the effective fulfillment of a tax obligation that, although it already existed for certain services, did not have a specific regulation that facilitated its application in the digital environment.
Netflix will have to Issue a Digital Invoice.
One of the most visible changes for consumers will be the issuance of a digital invoice by platforms like Netflix when they provide services to customers in Panama. Chapman noted that the receipt will allow the consumer to have proof of the transaction and the subscription contracted. In addition, digital invoices may have another use: participating in the Tax Lottery, through future digital draws intended to reward consumers who keep their receipts.
“Save your digital receipt and it will eventually be used in digital raffles to reward Panamanians who use this platform,” the minister stated.
The Government Expects to Raise More than $100 Million a Year.
The Ministry of Economy and Finance estimates that the application of these provisions could generate revenue exceeding $100 million annually. Chapman defended the measure as a mechanism to close a gap that, in his view, existed between the traditional economy and the digital economy.
“Panama, I would venture to say, if not the only one, is one of the few countries in the world where there was that disparity between the real physical world and the digital world,” he said.
