On August 31st, the President of Panama, Laurentino Cortizo Cohen, visited the Colon Free Zone to ratify the EMMA Law (Law 159/2020). This regulation establishes a special regime for the settlement and operation of multinational companies that provide services related to manufacturing.
Panama expects that the new Law will encourage foreign investment and job creation through multinational companies installing factories, production plants, and assembly plants in its territory in exchange for customs, tax, labor, and immigration benefits. In addition to benefiting from the special regimes already in place in the free zones of Colon and Panama Pacifico, the unbeatable logistics situation and location are advantageous for companies to take their products from Panama to other countries in the region.
The success of the regime of Headquarters of Multinational Companies (SEM Law/2007), which has allowed the establishment of 158 companies and the creation of more than 7 thousand jobs, with amounts of about 1200 billion dollars, is the previous precedent that Panamanians had to establish the EMMA Licence. In fact, companies that are under the SEM regime may require the EMMA license without the need to submit a new application.
The processing to access this new regime is done through the Technical Secretariat of the Commission (Law 41/2007), which ensures compliance with the EMMA Law; manages the visas for the personnel working for the assigned companies; establishes the administrative or pecuniary sanctions in case of non-compliance; resolves the claims or appeals, and is in charge of all the administrative procedures for the management of the benefits granted by the Law.
The regulations describe the services multinational companies must provide to obtain an EMMA license:
- Manufacture of products, machinery, and equipment rendered to companies of the business group.
- Assembly of products, machinery and equipment rendered to companies of the business group.
- Maintenance and repair of products, machinery and equipment rendered to companies of the business group.
- Remanufacturing of products, machinery, and equipment rendered to companies of the business group.
- Refurbishment of products rendered to companies of the business group.
- Product development, research or innovation of existing products or processes rendered to companies of the business group.
- Analysis, laboratory, testing, or other services associated with manufacturing, rendered to companies of the business group.
- Logistics such as storage, deployment, and distribution center of components or parts, required for the rendering of services associated with manufacturing.
- Any other similar service previously approved by the Cabinet Council by means of a reasoned decision provided that it complies with the principles set forth in this Law.
Benefits of the EMMA Law
The employment generation will be supported by stimuli established by the new regulations for the training of Panamanian workers by creating technical education centers that train qualified personnel for the new jobs.
Companies under the EMMA Law will have a reduced rate of 5% of the Income Tax (ISR) in the fiscal aspect. Also, transfers of corporate shares will be subject to a reduced income tax rate of 2%. Services rendered to persons who do not generate taxable income in the territory will not cause ITBMS (Tax on Transfer of Goods and Services or VAT in other countries). Other benefits relate to the exemption from dividend tax, supplementary tax, and branch tax.
The new immigration regulations provide for temporary and permanent visas for foreign personnel working in Panama. After five years from obtaining the first visa, foreign workers can opt for permanent residence in the country. In addition, foreign personnel can bring household goods at a 0% rate and enjoy total duty-free to import a car.
The legal stability of the investment is guaranteed for a period of 10 years. This means that the legal conditions with which the company started the project are respected, even if new provisions are issued that may modify the acquired rights and tax obligations at the time of entering under the EMMA regime.
In the environmental field, the new regulation establishes that the companies that generate risk for the environment must be previously submitted to an Environmental Impact Study to be able to operate. Also, it allows them to sell their waste locally for recycling by third parties, exempt from income tax.
Publicado el 01-2021 por Englobally Latinoamérica