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Tax Incentives
There are many tax incentives available to businesses and individuals who choose to invest in Panama
Tax Incentives on Principle Home (Law 66 October, 2017)
Families living in Panama in real estate described as “family patrimony” for every national or foreign person, with or without a spouse or children, who has a home in order to live in it permanently, can register it as “main residence” and request their exemption from payment of real estate taxes, an exception or a lower tax rate.
The taxation reform establishes exemption from real estate tax for owners of real estate property with a taxable worth of one hundred and twenty thousand U.S. dollars (U.S.$120,000).
Tax Incentives on the Principle of Territoriality (Article 694 of the Tax Code and Article 9 of Executive Decree 170)
Panamanian tax legislation is governed by the principle of territoriality, that is, only income that is obtained in operations perfected or consumed within the Panamanian territory will be taxed
Therefore, the taxpayer can be a Panamanian or foreign natural or legal person without legal residence to exempt them from this payment. This principle of territoriality applied in Panama makes this country one of the few in the world that allows the commercial activity of national or foreign people or companies, freeing them from paying taxes in case of international operations.
Tax Incentives for Investment in Casco Antiguo (Law 136 of 2013 and its amendment Law 53 of 2017)
The Family Interest Preferential Interest Law offers a subsidy so that you do not pay the full rate, but a fraction of it. In this case, 1.5% of the total percentage. The rest of the fee is covered by the government.
The restrictions to the law are:
- The law only applies to the purchase of the beneficiary’s first home
- The value of the property cannot exceed $120,000.
- After15 years, the owner of the real estate must pay the full rate in force at that time
Law 136 exempts all property owners in Casco Antiguo from paying property tax for 30 years, regardless of its value and whether or not it is the owner’s first home.
What are the differences between the Special Interest Law of the Old Town and the general law described above?
- The law applies to properties at any price
- The agreement remains in place for 25 years
- Interest represents three percentage points below the regular rate, or a minimum of 3%.
Tax Incentives for Tourism Investment (Law No. 80 of 2012 and Law No. 122 of 2019)
Through this law both natural and legal persons are granted 100% income tax credit for the sums invested in the acquisition of bonds, stocks or other financial instruments issued by tourism companies registered in the National Tourism Registry of the Panama Tourism Authority (ATP).
The investment in these tourism companies may be for new projects, or extensions to existing tourism projects, being in both cases projects located outside the District of Panama.
Said tax credit will only be granted to the investor who is the first acquirer of the aforementioned shares or financial instruments. Likewise, this incentive will be granted until December 31, 2025 to investors who are not directly or indirectly linked to the tourist company that issues the financial instrument.
Tax Incentives in the Panama-Pacific Special Economic Area (Law 41 of 2004)
Exemption from all taxes, contributions, fees, charges or import duties on all types of merchandise, products, equipment, services and other goods in general introduced in the Panama-Pacific area, including, but not limited to, raw materials, fuels and lubricants. , artifacts, supplies and spare parts introduced in the Panama-Pacific area.
Exemption from the Tax on the Transfer of Movable Personal Property and the Provision of Services on all types or types of merchandise, products, equipment, goods, services and other goods in general introduced.
in the Panama-Pacific area, as well as any tax, rate or right to the provision of services.
- Payment of operations notice
- Stamp tax
- Commercial and industrial improvements, property tax on the land and improvements.
Tax Incentives at Multinational Company Headquarters - SEM (Law No. 41 of 2007)
This tax incentive focuses on multinational companies offering services to their Head Office or its subsidiaries or its subsidiaries or associated companies, or to set their Head Office in Panama (Business Group).
The Headquarters must be part of multinational companies with international or regional or important operations in their country of origin.
Exemption from the payment of Income Tax, for services provided outside the national territory to the member companies of the Business Group or for services that do not generate taxable income within the Republic of Panama
Tax Incentives in the Colon Free Zone (Decree Law No. 18 of June 17, 1948)
Free from the payment of any tax, contribution, lien, national, provincial, with the exception of the dividend tax and notice of operation (non-nationalized goods).
All merchandise and other articles or commercial effects that enter the free trade areas owned or operated by the Colon free zone will be taxed.
Tax Incentives for Call Centers (Law No. 54 of 2001, Law No. 32 of 2011)
Upon obtaining the License or Concession for the provision of commercial call center services, the Call Center Operator may apply for all the benefits granted by the Export Processing Zones regulations which main exemptions are:
- All taxes, contributions, duties or import fees on all machinery, equipment, furniture, vehicles, appliances, or materials necessary for the development of the project
- National direct tax on capital
- Income taxes
- National direct tax on dividends and interests originated from securities issued by the company and traded in local or international markets.
Tax Incentives for Reforestation (Law 24 of 1992, Decree 89 of 1993).
The following Tax Incentives for Reforestation are in place:
Exemption from Income Tax.
Income derived from profits derived exclusively from the commercialization of products extracted from forest plantations, at the time of the final cut of the plantation and whose establishment is made within 13 years counted from the entry into force of Law No. 24 of 1992 , provided that the farms are registered in the Forest Registry of the National Environmental Authority.
Exemption from Import Tax.
For the introduction into the national territory of agricultural, forestry, industrial, rolling machinery and equipment, materials, tools, agrochemicals, forestry research equipment, seeds, stakes, forest plants and other elements necessary for the exclusive use of reforestation, management activities and / or use of forest plantations.
Exemption from Real Estate Tax and Real Estate Transfer Tax
To farms dedicated exclusively to reforestation in more than 75% of its surface, provided that the farm is registered in the Forest Registry of the National Environmental Authority.
Tax Incentives for the City of Knowledge (Law No. 6 of 1998)
The City of Knowledge in Panama City is an area made up of groups and societies dedicated to technological and international research.
The City of Knowledge has the following Tax Exemptions:
- Transfer of Goods and Provision of Services (ITBMS), on supplies necessary for the execution of scientific and technological activities
- Import tax, on machines, machinery, equipment and others, that is required for the development of its activities
- Income tax
- Property taxes
- Transfers abroad
- Goods and services