Last updated : 11.05.2026
Expense rules in Panama.
Panama applies ITBMS (VAT) at 7%, one of the lowest rates in Latin America, with a dollarized economy (USD) and a major logistics hub around the canal.
Get started →Disclaimer: This country guide is provided for informational purposes only and does not constitute legal advice. Although we update it regularly, it may not reflect ongoing regulatory changes. Illizeo SA declines all responsibility for actions taken or not taken based on this content.
1Expense rules & reclaimable VAT
ITBMS 7% standard, 10% for alcohol/lodging, 15% on tobacco. Dollarized economy.
| Category | VAT | Reclaim | Cap / Note |
|---|---|---|---|
| Meals | 7% | Deductible | Tax receipt required |
| Lodging | 10% | Deductible | Higher rate for lodging |
| Alcohol | 10% | Limited | Excluded from business meals |
| Fuel | 7% | Deductible | Tax invoice required |
| Transport | 7% | Deductible | Taxi/Uber/airfare |
| Client gifts | 7% | Non-deductible | Strict limit |
Receipt
Tax invoice
RUC + VAT detail
Meal cap
<= $80/pers
Above: justify
SourcesPanama Tax Authority
2Mileage allowance
No official mileage scale. Actual reimbursement on receipts (fuel + tolls).
| Mode | Allowance | Cap | Note |
|---|---|---|---|
| Personal car | – | Fuel + tolls | On receipt |
| Company car | – | No reimbursement | Company card |
| Taxi/Uber | – | 100% on receipt | Receipt required |
Tracking
Logbook
Date, distance, purpose
SourcesPanama Tax Authority
3Per diem and travel allowances
No official tax per diem. Company policy based on city (Panama City being the most expensive).
| Destination | Meal | Lodging / night | Daily rate |
|---|---|---|---|
| Panama City | $45 | $120 | $180 |
| Colon | $35 | $80 | $130 |
| David | $30 | $70 | $110 |
| Other cities | $25 | $60 | $95 |
Currency
USD (= PAB)
Balboa pegged 1:1
SourcesPanama Tax Authority
4Foreign VAT recovery
No ITBMS recovery for non-resident companies. Residents: standard credit via monthly return.
| Zone | Mechanism | Deadline | Method |
|---|---|---|---|
| Resident companies | Monthly credit | Monthly (15th) | ITBMS return |
| Non-resident companies | None | – | Final cost |
| Free Zone (Colon) | Exemption | On entry | Special regime |
Statute of limitations
3 years
Keep invoices
SourcesPanama Tax Authority
Centralize your Panama expenses
Illizeo automates factura fiscal collection, USD tracking and ITBMS compliance for your teams in Panama.
Book a demo