Law No. 41 of August 24, 2007, establishes a special framework for the operation of Multinational Company Headquarters in Panama. This law has the objective of attracting foreign investment, creating jobs, and promoting the transfer of technology, positioning Panama as a competitive center for the regional operations of multinational companies.
Conditions
Permitted Activities: Management, administration, logistics, technical assistance, financial management, and other specific services for the corporate group.
Requirements: SEMs must operate as registered foreign companies or Panamanian companies owned by the multinational, its subsidiaries or its affiliates.
Benefits
Tax Exemptions: The 2007 law exempts income earned from providing services to companies outside Panama from taxes. However, this and other tax benefits were reformed by Law 57 on October 24, 2018, which contemplates the payment of this tax on the net taxable income derived from the services rendered at a rate of 5% through an annual income affidavit.
For more information, see the reform here.
Immigration Facilities
- Permanent SEM Staff Visa: Foreign staff of SEM companies and their dependents* may be granted a visa with simplified work and residence permits for up to 5 years.
- Temporary SEM Staff Visa: For technical or training staff for up to 3 months.
*Dependents include spouses (this visa allows civil union as long as the same is confirmed with an affidavit), children under 25 years old (if they are students), and parents.
Implications
Legal Compliance: SEMs must submit annual reports to the Technical Secretariat of the Multinational Company Headquarters Licensing Commission (Secretaría Técnica de la Comisión de Licencias de Sedes de Empresas Multinacionales) and comply with the regulations established to maintain a license.
Penalties: Licenses may be revoked, and fines may be imposed if legal provisions are violated. Fines range from B/.5,000.00 for workers staying in the country without working for the SEM, to B/.100,000 for non-compliance with obligations or unauthorized activities.
License Revocation: This may occur if the company does not begin operations within 6 months, violates the law, or ceases authorized activities.
See modifications regarding SEM license revocation in Law 57 of 2018.
Administrative Efficiency: State entities are required to maintain high efficiency in processing matters related to SEMs.
For more details on Law 41, which creates a special regime for the operation of Multinational Company Headquarters (SEM), click here.
