Panama Cuts Corporate Tax

by Ulrika Lomas, Tax-News.com, Brussels

18 March 2010

Panama’s President, Ricardo Martinelli signed on March 15 a bill to reform Panama's Tax Code, adopting several tax measures to lower the company tax burden, ensure fiscal sustainability, and simplify the tax system.

In order to improve Panama’s international competitiveness, the bill lowers the corporate tax rate from the current 30% to 25%, though the timescale for this reduction is as yet uncertain.

The bill however will introduce higher license fees on banks resident in Panama. Fees will range from USD75,000 for institutions with assets of up to USD100m, and a fee of USD1m for institutions with assets of more than USD2bn.

The bill will alter the country’s sales tax rate to 7% from 5%, and introduce sales taxation on fixed telephones and prepaid mobile phones. Public houses and restaurants that do not serve alcohol will be granted an exemption from paying sales tax under the bill. Childcare items have also been made exempt under the bill. In addition companies operating in the agricultural sector will see their exemption threshold increased from USD150,000 to USD250,000, and will not be required to file an income tax return.

Finally, the bill modernizes the tax code and abolishes more than 30 taxes. The code also contains provisions for the creation of an administrative court which will host tax appeals.

Provisions in the bill will enter into force on July 1, 2010.

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