As a part of a plan to boost and promote the foreign direct investment, create new job opportunities and the improvement of domestic workforce, throughout the transfer of technological knowledge to our nationals, Panamanian Government approved a Special Regime for the establishment and operation of multinational companies for the provision of services related to manufacturing (EMMA for it’s Spanish in acronym) under Law 159 of August 3rd, 2020
To the effects of this present law, a multinational enterprise is a “legal person that, having its headquarters in Panama or in a certain country, develops important productive, commercial, financial or service activity in various countries. In addition, companies, that, although they operate only in a certain country, have important operations in different regions of the same country and decide to establish a branch, affiliate, subsidiary or associate company in Panama to carry out commercial transactions in the region.”
The multinational enterprises for the provision of services related to manufacturing could belong to multinational companies with international operations or important regionals in their country of origin. These companies should offer the services listed in the present law and exclusively to their Business Group.
These companies could be settled as a Panamanian Company owned by a multinational Enterprise or as a foreign Company dully registered in Panama.
Permitted activities to be a candidate for an “EMMA” License:
- Services related to the manufacturing, assembly, maintenance, repair, remanufacture, and conditioning of products, machinery and equipment provided to companies of the Business Group.
- Product development services, research or innovation of existing products or processes provided to companies of the Business Group.
- Analysis, laboratory, testing or other services related to the provision of services related to manufacturing, provided to Group company Business
- Logistic services such as storage, deployment and distribution center of components or parts, required for the provision of services related to manufacturing.
- Any other analogous service previously approved by the Cabinet Council trough reasoned resolution.
Entities could only provide these services to the multinational group to which they belong. Thus, these services may not be provided to clients directly or to entities that do not belong to the same multinational group.
The Technical Secretary of the Commission of Multinational Enterprises, located in the Ministry of Industry and Commerce, is the governmental authority in charge of granting the necessary permissions for the establishment and operation of multinational companies that render manufacturing services.
In order to obtain an “EMMA” License, the commission will establish the following applicable requirements, that all entities must comply:
- The multinational enterprise’s assets
- Places of operation or related entities, subsidiaries or the parent entity of the multinational enterprise
- Commercial or industrial activities or operations carried out by the multinational enterprise
- Listing of shares on the local or international stock exchange markets
- The multinational enterprise’s number of full-time employees and annual operational expenses in Panama (number of employees and amount of expenses should be adequate for the business carried out by the multinational enterprises)
- Any other requirement or information that the Commission requests.
The license for “EMMA” regime would be granted for an indefinite period. For administrative procedures, the General Directorate of Revenues will give a special number of identification.
Entities under the “EMMA” regime could provide services under the multinational headquarters regime (SEM) established by Law 41 of 2007, as long as they have the corresponding SEM license as well; however, the accounting of this company should be handle in different ways and must be different companies.
Tax benefits
- “EMMA” corporations will be exempted from paying the Income Tax for the first five (5) years from their registration.
- They will pay 5% of Income Tax after the period of five (5) years from their registration. (Other companies pays up to 25% of their income taxes.
- “EMMA” corporations will be exempted from paying dividend tax, complementary tax and branch tax
- The Services performed by “EMMA” companies will not cause Tax on the Transfer of Personal Property as long as they are providing to people who don’t not generate income taxable within the Republic of Panama.
- “EMMA” corporations will not be subject to the use of fiscal equipment (obligatory to the majority of companies in Panama); however, they are obliged to document their activities.
- “EMMA” corporations are exempted from the use of the Notice of Operation (document that is obligatory to all companies)
- “EMMA” corporations will be exempted from all taxes, fees, charges or import duties on all types or classes of merchandise, products, supplies, spare parts that they are used to require for the execution of their services.
- “EMMA” corporations could be could be establish in special economic areas in the national territory, such as Panama Pacific, free zone, City of knowledge, among others.
Migratory Benefits and Incentives
- Visa for Temporary Personnel of entities under “EMMA” regime:
- These visas will be granted to foreign personnel hired to render operative services or training services to the entity for 2 years, renewable.
- Work Permit for the same period of time
- Salaries are exempt from income tax, social security contributions and educational tax
- Visa for dependents of temporary personnel of entities under “EMMA” regime:
- Apply to dependents of the temporary personnel with a visa, such as partner or spouse, children younger than 18 years old, or 25 years old (as long as they are still in school) and parents
- Visas for dependents would be granted for the same amount of time as the visas for temporary personnel.
- Applicable for work permit, benefit that none of the other immigration categories have.
- Visa of permanent personnel of multinational enterprises
- These visas would be granted for 5 years, but not extendable. Operates as those contemplated under the SEM regime.
- Salaries or other remuneration are exempt from income tax, social security contributions
- Subject to request a permanent residence in Panama.
- Visa for dependents of permanent personnel of entities under “EMMA” regime:
- Apply to dependents of the temporary personnel with a visa, such as partner or spouse, children younger than 18 years old, or 25 years old (as long as they are still in school) and parents
- Visas for dependents would be granted for the same amount of time as the visas for temporary personnel.
- Applicable for work permit, benefit that none of the other immigration categories have.
Tax Exemption from Permanent or Temporary Personnel under “EMMA” regime.
- Personnel who have any of these visas will be exempted, at the time of moving to the Republic of Panama for the first time, from payment of the taxes that are due to their importation of household goods.
- Personnel who possess any of these visas, may request from the National Customs Authority, a total duty exemption and only once, every 2 years, for the importation of a motor vehicle for their personal or family use.
You may contact us for any other information about “EMMA” regime to info@acclawyers.com
