Arosemena Noriega & Contreras

Tag: Taxation

  • Tax Residency in Panama: Benefits and Opportunities

    Tax Residency in Panama: Benefits and Opportunities

    Tax Residency in Panama: Benefits and Opportunities

    Tax residency refers to the status that an individual acquires in a country, by which said country has the right to consider said individual as a taxpayer and, consequently, apply its tax regime.

    Panama considers as tax residents those individuals who remain in the country for more than 183 days within a fiscal year or the previous one, or those who establish their permanent residence in the territory.  This also includes those juridical entities incorporated in Panama or abroad that have their management and administration in the country, provided they are recorded in the Public Registry.

    Benefits of Tax Residency in Panama:

    1. Exemption from Taxes on Foreign Income: Panama applies the principle of territorial taxation, exempting income earned outside the country from income tax payments.
    2. Legal and Fiscal Stability: Panama maintains a predictable regulatory framework and international agreements that ensure tax security and protection against double taxation.
    3. Access to Double Taxation Agreements: The agreements signed by Panama with multiple countries prevent double taxation on the income of Panamanian tax residents.
    4. Benefits for Businesses and Entrepreneurs: Panama offers a modern infrastructure, a solid  banking system, and tax advantages for business with income from foreign sources.

    It is advisable to seek specialized legal advice to ensure compliance with the requirements necessary to obtain tax residency, and in this manner obtain full benefit from the advantages offered by Panama’s tax system.

  • Understanding ITBMS Rates in Panama: 7%, 10%, and 15%

    Understanding ITBMS Rates in Panama: 7%, 10%, and 15%

    SME and their ITBMS TAX  obligations

     

    For small and medium-sized companies in Panama, the Transfer Tax on Personal Property and Services (known by the Spanish acronym of ITBMS) is similar to the value-added tax that exists in other countries.

     

    The following are some important aspects that small and medium-sized companies should take into consideration:

     

    1. REGISTRATION: When the annual income of the companies exceeds USD$36,000.00, they must register as a taxpayer of the ITBMS with the Directorate General of Income (DGI);
    2. BILLING AND DECLARATIONS: Companies must issue invoices that include the ITBMS in their sales of goods and services;
    3. ITBMS RATES: In Panama, there are different ITBMS rates: 7%, 10%, and 15%. It is important that small and medium-sized companies know what rates apply to their products or services;
    4. EXEMPTIONS AND REDUCED RATES: Some goods and services are exempt from the ITBMS, while others may have reduced rates. The companies should be informed on the exemptions and reduced rates applicable to their business in order to properly comply with the tax regulations;
    5. TAX ADVICE: Due to the complexity of the tax legislation and possible updates, it is advisable to seek tax advice to ensure correct compliance with the obligations related to the ITBMS and other taxes.
  • Electronic Billing in Panama: Taxpayer Obligations and Exemptions

    Electronic Billing in Panama: Taxpayer Obligations and Exemptions

    Electronic Billing in Panama

     

    Pursuant to Decree No. 147 of May 26, 2021, obligations are established, requiring that all taxpayers, be they persons or juridical entities, must issue invoices or equivalent documents to legitimize their operations, otherwise, sanctions may be imposed.

     

    In this regard, the liberal, artisan, and artistic professions, carried out independently or through civil companies, are exempt from the use of a fiscal printer.  Consequently, lawyers are exempt from the obligation to of invoicing using fiscal equipment, however, they can adopt the Electronic Billing model.

  • Promoter of Free Zones in Panama

    Promoter of Free Zones in Panama

    Promoter of Free Zones in Panama

     

    Free Zones are part of a special simplified global regime for the establishment and operation of companies that contribute to the development of the country and the creation of jobs, framed in the global goods and services economy.

     

    The Free Zones in Panama are governed by Law 32 of 2011 and regulated by Executive Decree No. 62 of 2017, which establish a wide range of tax, royalty and tariff benefits; as well as special flexible immigration and labor regimes that encourage business activity.

     

    The licenses granted by the Ministry of Commerce and Industries (MICI) to operate in the to Free  Zones are:

     

        1. License as Promoter and/or Free Zone Operator

        2. Operation License as a company established in the Free Zone

  • Law 337 of 2022

    Law 337 of 2022

    Law 337 of 2022

    The Government of Panama enacted Law 337 of 2022 (the “law”;), for the purpose of increasing the collection of taxes and duties.

     

    The most salient points of the Law are:

     

    • All corporations that, until December 31, 2023 are in arrears in the payment of franchise tax and that intend to dissolve the same before the Public Registry, are exempted from the payment of the franchise tax, except for the last period, as well as the waiver of the surcharges caused. The only payment that the corporation has to make is the last franchise tax and the marginal fine for reactivation. 
    • The amnesty period regarding the payment of the franchise tax is extended until December 31, 2022.
    • 100% of the total interest and surcharges of the franchise tax will be forgiven until December 31, 2022.
    • Up to 60% of the value of the marginal fines applicable to corporations will be exonerated until December 31, 2022.
  • New Laws on International Tax Fiscal Transparency

    New Laws on International Tax Fiscal Transparency

    New Laws on International Tax Fiscal Transparency

     

    In order to comply with the Foreign Account Tax Compliance Act (FATCA) and facilitate the exchange of tax information, Panama enacted the following laws:

     

    1. Law 47 of October 24, 2016, which ratifies the Agreement between the Government of the Republic of Panama and the Government of the United States of America, to comply with international tax standards and to execute FATCA. The Ministry of Economy and Finance is empowered to carry out the exchange of information corresponding to the year 2014 and all subsequent years.
    2. Law 51 of October 27, 2016, which establishes the legal framework for the Exchange of tax information and other rules are enacted. The Ministry of Economy and Finance is empowered to request and carry out in situ inspections in private entities and financial institutions with the purpose of gathering all necessary information to comply with the exchange of tax information with foreign authorities, FATCA, and tax treaties.

     

    By: Ana Cristina Alzamora