Panama has published Law No. 159 of 31 August 2020, which provides for the introduction of a new special regime for manufacturing services to attract investment by manufacturing multinationals, the Special Regime for the Establishment and Operation of Multinational Enterprises that Render Manufacturing Services (Régimen Especial para el Establecimiento y la Operación de Empresas Multinacionales para la Prestación de Servicios Relacionados con la Manufactura - EMMA).
The regime is available for Panama companies and branches in Panama of foreign companies and requires an application to obtain an EMMA license. Companies licensed under the Multinational Enterprises Headquarters regime (Sedes de Empresas Multinacionales - SEM) are also able to benefit from the EMMA regime. Regulations setting out the exact eligibility requirements are to be issued in the near future.
The qualifying activities of EMMA companies are limited to the provision of services to companies in their MNE group and not to end customers. Qualifying activities include:
Benefits for EMMA companies include:
EMMA companies are also allowed a credit for income tax effectively paid abroad on taxable income generated in Panama for the provision of services to non-residents and for tax withheld by local taxpayers. However, the income tax paid in Panama must amount to at least 2% of the net taxable income generated in Panama, and any excess credits remaining may not be carried forward or refunded.
Law No. 159 was published in the Official Gazette on 1 September and enters into force three months after the publication date, i.e., 1 December 2020.
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