Bufete Illueca | Lawyers in Panama is one of the leading law firms promoting the Law of Regional or Multinational Company Headquarters (SEM). This is done in the interest of encouraging the establishment in Panama, in whole or in part, of multinational companies. Under this special legal regime such companies enjoy several labor, tax and immigration benefits.
The companies that can take advantage of the Regional or Multinational Headquarters Law are those that carry out operations for a head office or as a head office providing services to subsidiary or branches in other countries. These companies may operate as a foreign company registered in Panama or as a Panamanian company owned by the multinational company.
Law No. 41 establishes important incentives, for both the companies and for the foreign personnel working for them.
Tax incentives
The tax incentives available to a multinational company duly registered as established by Law No. 41 of August 24, 2007, are the following:
1. Income Tax exemption, for the services provided to another company member of the business group. These services must be provided outside Panamanian territory. If the SEM provides services to its local subsidiaries, it must retain the corresponding income tax.
2. Exemption from withholding and/or paying the Transfer Tax of Movable Personal Property and the Provision of Services (ITBMS). As long as the services provided are conceived as export services (as they will be lent to entities of the business group abroad), they will not entail a Transfer Tax (as they do not generate a taxable income within Panamanian jurisdiction).
3. Posibility of negotiating and reaching a tax agreement with the National Treasury.
Dependiendo de un análisis y estudio de la actividad, organización y administración de la empresa, se puede celebrar un acuerdo fiscal con el Ministerio de Economía y Finanzas, para la consolidación de sus ganancias y el pago de impuestos por las rentas que obtienen en diversos países.
When is an income is considered produced in Panama?
The income of a Multinational Company will be considered produced within Panama insofar as the services provided by that company affect the production of income of other Panamanian companies or to the conservation such income. The fact that the Panamanian company considers the service rendered by the Multinational Company as a deductible expense would add to the characterization of such income as produced in Panama.
When is a SEM Company exempted from the payment of Income Tax?
Companies that hold a Regional or Multinational Company Headquarters License will be exempted from the payment of Income Tax in Panama, for any services rendered to entities domiciled abroad, which do not generate taxable income within Panama. Panama. This exemption will only apply to the company and not to its employees (except special temporary ones).
4. Incentives for Executives
Exemption from Income Tax, social security and education tax, when their salaries come from a parent company based abroad, in accordance with applicable tax and social security legislation.
Exemption from the Import Tariff for household goods when the worker moves to Panama for the first time.
Immigration Incentives
Types of Visas
Foreign Personnel of the Companies operating in Panama under Law 41, have two types of visas at their disposal:
- Permanent resident visa
- Temporary resident visa
Permanent resident visa
Only administrative or executive level workers/personnel are eligible within this category. These visas will have the same validity as the one established in the work contract. This visa is renewable every 5 years for an indefinite period.
Visa for Dependents of Permanent Personnel: The spouses, students under the age of twenty, and the parents of permanent resident visa holders, who remain in Panama under their responsibility are eligible. Such visas will have the same term as the ones given to the SEM personnel (5 years, renewable every 5 years for an indefinite period).
Temporary resident visa
These visas will be granted for a period of no more than 3 months and will be extended to workers who come to Panama for any activity related to the SEM, i.e. to provide technical or training services. Similarly, to the permanent staff of the SEM, this type of visa does not require a work permit.
Labor Incentives
The most important labor benefits as established by Law 41 are:
- The Company may have the necessary number of trusted employees and foreign senior executives to carry out their operations in Panama.
- The Company may sign labor contracts in Panama with national and foreign personnel.
- The Company does not need to process work permits, in favor of its foreign personnel.
- Dependents of foreign workers who wish to work, may change their immigration status through a special process in the Ministry of Commerce and Industry.
The Panamanian workers of the SEM Company enjoy all the benefits provided by law
The principle of tax territoriality applies regardless of the nationality of the person. Therefore, if the employee in question, whether national or foreign, is paid with funds coming from abroad and the effects of his work are produced abroad, the salary would be tax exempt.
Requisites
LICENSE OF REGIONAL OR MULTINATIONAL COMPANY HEADQUARTERS REQUIREMENTS
The requirements for obtaining a Regional or Multinational Company Headquarters License are established by Resolution No. 010-09 of June 29, 2009.
The requirements may be downloaded here: https://sem.mici.gob.pa/requisitos.php
Authorized activities of the SEM
- Management of the operations of a business with several locations.
- The logistics and/or storage of components or parts required for the manufacture or assembly of products.
- Technical assistance to companies of the business group or to clients who acquired a product or service from the company.
- The accounting of the business group.
- The preparation of architectural plans that are part of designs and/or constructions, which are part of the typical business activity of the parent company or any of its subsidiaries.
- Advice, coordination and monitoring of marketing and advertising guidelines for goods or services produced by the business group.
- Electronic processing of any activity, including consolidations of business group operations.
- Financial management of the business group.
- The general support of operations and R&D (research and development) of products and services of the business group.
- Any other service previously approved by the SEM Licensing Commission.
Commission of Headquarters of Multinational Companies
For those interested in further information on the registration and benefits under the Law of Multinational Company Headquarters, please visit the following links:
- https://sem.mici.gob.pa/index.php
- https://sem.mici.gob.pa/en/index.php (English)
