Recently, the President of Panama, Ricardo Martinelli has signed a bill to reform the Tax Code of Panama, under which will be taken several measures to reduce the tax burden on companies to ensure the sustainability fiscal and simplified system of taxes and fees. To improve the competitiveness of Panama to the world market, the bill provides for the reduction in corporate tax rate from 30% to 25%, although the time frame in that this reduction will occur, yet to be determined. However, the bill sets higher licensing fees for banks that are residents of Panama. The size of this collection will vary from 75.000 U.S. dollars for banks, total assets exceeding $ 1 million, and will make $ 1 million for banks with assets, the value of which exceeds 2 billion U.S.
dollars. The bill also changes the rate of sales tax from 5% to 7% and establishes a sales tax on landlines and mobile phones with prepaid. Under the bill, snack bars and restaurants do not sell alcoholic beverages shall be exempt from the obligation to pay sales tax. Products for children are also exempt from tax. In addition, for companies operating in the agricultural sector, the limit of tax exemption will be increased from $ 150,000 to $ 250,000, and they will not have to file an income tax return. In general, the bill modernizes the tax code and abolish 30 taxes.
Tax Code will also contain provisions to establish an administrative court, which will deal with complaints on tax matters. Provisions of the bill take effect July 1, 2010. It is worth noting that the legislation in Panama taxation – one of the most liberal. Corporate tax (income tax) depends on the source of revenue. This means that if the income is received from a commercial activity carried out for outside the territory of Panama, this income is not subject to taxation in Panama. This company pays only the annual single tax (Annual Corporate Franchise Tax). The presence of an office in Panama is not sufficient for taxation. Dividends paid out of such income are also exempt from taxation. Thus, these changes will affect the bill is the local companies working with residents of Panama and receiving income in Panama.