Manufacturing: New Tax Regime in Panama

The Cabinet authorized the Minister of Commerce and Industry to submit to the Assembly a bill to create the Special Regime for the Establishment and Operation of Multinational Companies for the Provision of Services Related to Manufacturing.

Friday, April 24, 2020

The decision of the Executive, which seeks to reactivate the economy in the context of the health and economic crisis generated by the outbreak of covid-19, was made official through the publication in the Digital Official Journal, in Cabinet Resolution No. 26 of April 21, 2020.

Ramón Martinez, Minister of Trade and Industry, told that "... this project seeks to emulate the successful scheme of the Multinational Company Headquarters (SEM) regime, but focused on an economic sector that could have a high impact on job creation and the transfer of technological knowledge."

Martinez added that "... Under this new tax regime would be the activities related to manufacturing, assembly, remanufacturing, conditioning, maintenance and repair of products, in addition to logistics services, among others. These companies may be established in a special economic area, in the Colon Free Zone, in free zones or in a customs control and surveillance area."

The official said that companies under the license of the Special Regime for the Establishment and Operation of Multinational Companies for the Provision of Services Related to Manufacturing (Emma), will automatically enjoy the guarantees established by Law 54 of 1998 on the legal stability of investments, regulated by Executive Decree 9 of 1999.

Companies in Panama and covid-19: How to face the new commercial reality?

We prepared for our clients the report "Information System: Covid-19 and Business Outlook" which helps companies to measure the impact that the crisis will have on their activity in the coming months and which are the opportunities that will arise in the context of the new commercial reality.

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Because of the economic crisis, Foreign Direct Investment flows have practically vanished, and in order to attract the few investments that are projected for next year, countries are expected to compete by offering incentives and aid programs for businesses.

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After the deputies of the Panamanian Assembly approved in the third debate last month the bill that aims to promote investments in this context of economic crisis that derives from the outbreak of covid-19, the President of the Executive sanctioned the regulation on August 31, 2020.

Panama: Incentives for Multinationals to be Broadened

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The government plans to extend the incentives of the law 41 other multinational companies not included in the original text, such as the manufacturing sector.

Nestor Gonzalez, vice minister of Foreign Trade, told that "... the law currently only provides incentives to companies that set up back office operations, and now they want to expand this and allow industries to set up under this scheme. "

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The special tax regime for multinationals which have an established site in Panama remains the main factor, while the low supply of trained personnel has been identified as a serious problem.

In addition to tax incentives offered to companies that set up offices, there are also special areas such as Panama Pacific and the Colon Free Zone, whose special schemes offer other incentives for companies to set up there.

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