The Digital Bill: Taxes on Netflix, Uber, and Social Media Sellers

Introduction

In many countries, global platforms already pay special taxes for operating digitally, which impacts both users and businesses.

In Panama, there is still no digital tax in force. However, there is a draft bill that seeks to tax foreign digital services under ITBMS and Income Tax. And this debate raises a key question: how should digital services and social media commerce be taxed?

How governments tax digital services

• Digital VAT/ITBMS: some countries apply it directly to subscriptions (example: Netflix in Mexico or Spain).
• Withholding at source: banks or payment gateways automatically retain the tax.
• Mandatory registration: foreign platforms must register as taxpayers in order to declare.

The case of Panama

• There is still no digital tax in effect.
• Bill 229 (2019) proposes that foreign platforms generating income in Panama should pay ITBMS and also be subject to income tax.
• The goal is to level the playing field with local businesses, but the measure is still under debate and not yet enforced.

How could these taxes apply in the future?

1. Foreign digital services (example: Netflix):

• The ITBMS (7%) would be charged directly to the user’s credit card.
• The bank would act as the collector or withholding agent and transfer the tax to the DGI.
• The result would be a monthly bill already including the tax.

2. Transport or delivery platforms (example: Uber, PedidosYa):

• The app charges the customer for the service.
• The tax is calculated on the service provided in Panama.
• The company declares in its monthly ITBMS form the respective revenues and pays the tax.
• In some cases, acting as withholding agents, they also remit to the DGI the tax corresponding to restaurants or merchants with whom they operate.

3. Social media sellers (Instagram, Facebook, WhatsApp):

• Selling products through social media follows the same scheme as a physical store, meaning:

Simple example to illustrate

• Netflix: They charge $10 + 7% ITBMS → you pay $10.70.
• Entrepreneur on Instagram selling jewelry for $50:
• Freelancer in Panama charging $1,000 for graphic design to a local client:

Impact on freelancers and small businesses

• Freelancers: Many think that working online means no ITBMS, but if the client is local, it does apply. Only when the client is abroad is the service considered an export and exempt.
• Small businesses on social media: Thinking “since I sell on Instagram, I don’t pay taxes” is false. If the activity is recurrent, they must register in the RUC and comply.

International comparison

• Mexico: 16% digital VAT since 2020.
• European Union: minimum 15% digital VAT, charged in the consumer’s country.
• Argentina: 21% digital VAT + additional withholdings.
• United States: no federal tax, but some states already tax digital services.

Conclusion

In Panama, digital ITBMS still does not exist, but the debate is already on the table. In the meantime, local businesses operating through social media do have clear obligations: to issue invoices and declare taxes just like any physical store.

The global trend is clear: where there is digital consumption, governments will seek to collect taxes.

In the digital economy, every transaction leaves a trace… and every trace is taxed.

The Fine Print doesn’t tell you how much to sell on Instagram… but it does tell you why you need to know how to invoice what you sell.