PANAMA Law and Practice Contributed by: Roy C Durling, Arias, Fábrega & Fábrega
• there is tax relief from some taxes (withhold - ing and stamp taxes and registration duties for mortgages and other security arrange - ments); and • there is specific recognition of lenders’ rights to step in, greater certainty regarding the enforcement of security arrangements, etc. However, past government administrations have not been sympathetic to the concept of con - tract-laws and recent Supreme Court decisions have cast doubts on the power of the govern - ment to enter into these agreements. 4.3 Transfer Tax and Capital Gains on the Sale of Mining Projects Mining concessions may be transferred, but the assignment or transfer requires government approval, to ensure that the assignee or transfer - ee has the same technical and financial capacity as the holder or transferor. In order to process the transfer approval, the parties will have to pay a USD100 duty to the NDMR. Once approved, the transfer will have to be entered into the mining registry, which is also kept by the NDMR. Any income generated from the transfer of a mining concession is subject to income tax - es, which will be calculated at the income tax rates of general application (which, in the case of companies, are currently set at a flat rate of 25% of net taxable income). There is no special capital gains tax regime for mining concessions. At present, there are no transfer taxes on the transfer of mining concessions. The transfer or sales agreement relating to the transfer may be subject to the payment of stamp taxes (which are calculated at the rate of USD1 per each
USD1,000 or fraction thereof of the face value expressed in the agreement – ie, the sales price). Transfers by Shares Another way of transferring mining concessions is by transferring the shares of the company that holds the concession. Even though the law does not seem to formally require such transfers to be notified to, or approved by, the NDMR, in practice such transfers have been notified to the NDMR. The capital gains generated from a transfer or sale of shares in Panama are subject to income tax at a rate of 10%. The law obligates the pur - chaser to withhold 5% of the total consideration payable to the seller, and to tender such amount to the tax authorities within ten business days of the transfer, as an advance on the seller’s capital gains tax. The seller has the option to consider the amount so withheld by the purchaser as its definitive capital gains tax. Alternatively, if the amount exceeds 10% of the capital gain actu - ally realised on the sale, the seller has the option to file, within the same fiscal year in which the transaction occurred, a sworn declaration with the tax authorities claiming either a non-assign - able tax credit for the amounts paid in excess, or the return of the amounts. If the transfer takes place through transfers or sales of shares of corporate structures located outside of Panama, capital gains taxes will also apply. In such cases, the capital gains tax will apply to the portion of the total sales price that corresponds to the value of the Panama opera - tion in the foreign corporate structure. In other words, if the shares of a mining company with operations in several countries (including Pana - ma) are transferred, capital gains taxes will apply to the portion of the price that corresponds to the Panama operation. The percentage of the
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