Panama’s New Tax Law Reform |
By means of Law 8 of March 15th, 2010, the Panamanian parliament members approved a substantial modification of our tax legislation in accordance to the guidelines established by President Ricardo Martinelli and its Minister of Economy and Finance, Mr. Alberto Vallarino.
The existence of some sort of enthusiasm to modify thetax legislation was known since the beginning of the new government, which based their initiative in the interest of raising funds for developing and fulfilling social projects promised in the political campaign, such as the construction of the subway, scholarship for all students, extending pension programs, among others. The modifications were developed by the Ministry of Economy and Financewith the assistance of international consultants that together modified the following aspects of our legislation tax.- Reduce the income tax applied to middle class population
- Reduce the income tax applied to small/medium enterprises
- Increase large enterprises contributions
- Increase tax rate to other business sectors
- Increase VAT from 5% to 7%
- Extend VAT to other products andservices
- Create new rules for income tax declarations (Deductions and others)
- Below you can find the most outstanding topics of the new law:Transportation1. 1. From now on the income from freight charge, passenger transportation and cargo performed by an international transportation companies will be taxable if the origin or destination of business is the Republic ofPanama.*Note:* Except for companies from countries that have a special transportation treaty with Panama.The government is also amending the article due to the fact that in later articles the freight charge, air cargo, land cargo and maritime cargo is considered as tax exempted.2. 2. Companies* described in paragraph 1 may apply as a credit the income tax paid abroad in regards to the part that correspond tofreight charge, passenger transportation, cargo and other services performed out of Panama territory. Nevertheless, this credit must not be used in other fiscal periods nor requested for return.3. Air tickets will no longer pay the tourism authority tax. (US$ 4.00 for each US$ 100.00),4. As of July 1st, 2010 air tickets will be charged with 7% VAT5. Automobile vehicles (tractors, cars,electric vehicle, motorcycles, jet-skies, yachts) will pay 7% VAT and depending upon their category and CIF value, it will also pay a selective tax that starts from 5% up to 25%6. The income resulting from international maritime trading with vessels registered in Panama will not pay taxes, even though the transportation agreement is executed in Panama.7. Boats, yachts and motor vessels forprivate use will require having a navigation license. The cost of the license is US$ 5.00 per year.8. Boat, yachts and motor vessels for private use navigating in national waters will pay a navigation tax depending upon their length:Up to 6 meters length US$ 24.00
From 6 meters up to 10 meters length US$ 120.00
From 10 meters and above US$240.009. Boat, yachts and motor vessels for private use and from a foreign registry navigating in national waters will pay a navigation tax depending upon their length as well. This rate is valid for the renewable temporary visit of 1 year:Up to 6 meters length US$ 45.00
From 6 meters up to 10 meters length US$ 90.00
From 10 meters and above US$180.00Telecommunications1. 1. The total income generated by international telecommunications service will now be considered as taxable. Before, telecommunication companies deducted from their income a portion of the income generated by the service due to the fact that part of the service was from abroad and therefore considered as non taxable.
2. Satellite, microwave and cable and cell phone...