In the News from Panama

New Tax Breaks for Multinationals in Panama

Panama continues to explore new ways to attract multinational corporations, which provide a strong foundation for the local economy.

Panama’s president Laurentino Cortizo recently signed a new law, Law No. 159, establishing a tax regime designed to encourage multinationals to establish operations in Panama. The new law will “attract and promote investment in productive processes, job creation, technology transfer, and improve Panama’s competitiveness in the global economy,” according to coverage in MNE Tax, a publication tracking multinational tax news.

Companies that meet certain specifications will be eligible for a wide range of incentives, including a corporate income tax rate of 5 percent. They will also be able to deduct labor expenses and reduce import taxes.

The program is only available to multinationals and only companies that provide services to related parties, not directly to clients. The company’s business must be related to manufacturing and a variety of services such as lab work and tests, as long as they are manufacturing-related.

Panama already has a well-established incentive system for multinationals, the program known as SEM, which was enacted by law in 2007. That law created a framework of tax breaks and incentives for multinationals to set up operations. To date, more than 150 companies have taken advantage of the scheme, creating a strong driver for the local economy.

At Punta Pacifica Realty, we have close ties to many of the multinationals, which provide a steady stream of renters and buyers for Panama real estate.

Coverage of the new tax law, EMMA, notes that the program has far greater benefits for Panama, being simply economic growth. “One of the biggest purposes of Panama’s EMMA regime is the knowledge exchange and training of the Panamanian labor force,” the MNE Tax article points out. The new law requires companies to establish technical teaching centers or adopt additional training programs in association with universities and educational centers, the writer adds.