According to Executive decree No. 241, Companies with a multinational company headquarters (SEM) license may be eligible for a tax incentive of a reduced 5% income tax rate. To be eligible for the reduced tax rate the company must:
- Have executed its main business activity in Panama;
- Have maintained in Panama an adequate number of qualified full-time employees for operating business;
- Have incurred an adequate amount of operational expenses in Panama directly related to business activities; and
- Timely comply in filing certain information reports.
The substance requirements apply as of 1 July 2021 for companies that obtained their SEM license prior to 17 October 2020. Regarding fiscal year 2019, the substance requirements apply for companies that obtained their SEM license after 17 October 2017.
Companies registered before 17 October 2017 and that, after obtaining their SEM license, added activities subject to a substance requirement to their registry, will be subject to complying with these requirements as of the 2019 fiscal period.
