PANAMA Law and Practice Contributed by: Rafael Rivera, Javier José Vallarino, Juan Vallarino, Karen Y. Tejeira and Carolina Lino, BDO Legal Panama
attract foreign investment, promote economic devel - opment and support specific industries. Some of these regimes are outlined below. Free Trade Zones Free Trade Zones are designated areas within Panama where domestic and foreign companies can estab - lish operations in different sectors, including higher education centres, scientific research centres, spe - cialised centres for the provision of health services, high-tech enterprises, assembly enterprises, finished or semi-finished product processing enterprises, ser - vice enterprises, environmental service companies, general service companies, logistics service compa - nies, and manufacturing companies. Currently, there are 16 Free Trade Zones in Panama and six in development, focusing on various indus - tries. Companies established in the Free Trade Zones can benefit from tax, immigration and labour incen - tives. Colón Free Zone The Colón Free Zone is a free trade zone located at the Atlantic entrance of the Panama Canal. Compa - nies established in the Colón Free Zone are primarily dedicated to the international purchase and sale of merchandise, forming a distribution centre from Asia to countries in South America, the Caribbean and Central America. The most common activities of companies established in the Colón Free Zone are the import, export and re-export of merchandise received in large, duty-free volumes, which is subsequently repackaged, labelled, assembled, manufactured and reshipped in smaller quantities to customers. The Colón Free Zone offers tax, immigration, labour and corporate advantages to companies establishing themselves in this zone. Some of the tax benefits are tax exemption on imports, re-exports, and manufac - turing goods, tax exemption on re-export income, etc. Panama Pacifico Regime The Panama Pacifico Regime supports the develop - ment of an international business centre, attracting large multinational companies, logistics services com -
panies, various commerce and general industries. The main objective of this regime is to attract foreign direct investment and create jobs in Panama. The Panama Pacifico Regime offers customs, immigration, labour and tax benefits to companies involved in logistics, maritime and airport services, high technology, call centres and shared services, among others. The development of economic activities under the Panama Pacifico Regime will be open to nationals and foreigners. The requirements, criteria and review procedures for registration applications will be applied in a fair, transparent and equitable manner to all appli - cants, through non-discriminatory commercial treat - ment, respecting the principles of free competition and free market access. Multinational Companies Headquarters (SEM) Regime The SEM regime aims to encourage multinational business groups to establish their reginal and glob - al operations centres in Panama. The Multinational Companies Headquarters is an office with manage - ment control in the region, providing services from Panama to related companies (parent, subsidiaries or affiliates) in other countries. To apply to this regime, the company’s business group must have assets equal to or greater than USD200 million; or must provide services to at least seven subsidiaries of the group. The SEM regime offers tax, immigration and labour benefits. In terms of immigra - tion and labour benefits, there is no limit on the hiring of foreigner workers under the SEM regime. Expatri - ates will be exempt from income tax, mandatory social security affiliation and are eligible for a special SEM visa. Moreover, the SEM regime grants a fixed income tax rate of 5%, services provided to business groups are exempt from VAT, and there is an exemption from paying withholding dividend tax and complementary tax. Multinational Companies for the Provision of Services Related to Manufacturing (EMMA) Companies, whether foreign or domestic, can apply to the EMMA regime, provided they operate from Pana - ma to provide services to their parent company or to
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