Multinational Headquarters (SEM) in Panama
Overview
Panama is an attractive place for investments. The country has established laws and regulations allowing local and foreign investors to establish companies in segregated special areas with a variety of unique fiscal, migratory and labor incentives with the main objectives of developing different kinds of activities and to promote international trade, manufacturing and complimentary services.
Such special regimes encourage productive activities in different geographical areas, the generation of new jobs and promote the country’s economic growth. The areas known as Special Economic Zones or Free Zones.
Created by Law 41 of 2007, SEMs are companies that operate as a foreign company registered in Panama or as a Panamanian company owned by a transnational company. Its objective is to provide defined services to its headquarters, affiliate or subsidiary from Panama.
The special system of the multinational Corporation headquarters, popularly known as SEM, provides benefits in tax, labor, customs and immigration. It grants business greater flexibility and ease of access to the Latin American market of over 400 million people.
Permitted activities
- Direction and/or management for geographical operations (in a specific area or globally) of a company within the group of companies: strategic planning, business development, management of personnel training, management of operations and/or logistics;
- Logistics and/or storage of components or parts of manufacturing products;
- Technical assistance not only for the companies of the EG but also for the clients for products and services of the EG;
- Financial management, including treasury to EG;
- Accounting of the EG;
- Preparing blueprints that form part of the design and/or construction that constitute the ordinary course typical of the business activity of the head office company or any of its subsidiaries;
- Processing electronic data of any activity including consolidations for the EG operations and network operations;
- Advice, coordination and follow-up for EG goods and services, marketing and advertising;
- Support for operations and research, as well as EG goods and services development;
- Other analogous services previously approved by the Cabinet Counsel according to Law 41.
Benefits
Some benefits of Multinational Headquarters established in Panama include:
- Complementary and dividend tax exemption
- Exemption from sales tax for services rendered to the corporate group abroad
- Exemption of license tax
- Exemption from income tax and VAT for services provided to the business group outside the country.
- For services provided to entities located in Panama, income tax rates are reduced by 50%
- Foreign personnel of the company with a Multinational Headquarters license that is covered by a Permanent Employment Visa for Multinational Company will not be subject to income taxes if payment is received from abroad, with exemptions extended to social security contribution and education taxes
- 5% income tax (reduced rate).
- 2.5% remittance tax (reduced rate).
- Exemption of ITBMS, except for those services provided to related entities located in Panama.
- Exemption from the Operation Notice tax.
Companies can also take advantage of immigration and labor benefits including:
- Flexibility to exceed the 10% limit of foreign workers as a percentage of a company’s total workforce
- Permanent residency for permanent staff (after 5 years)
- Visas for full time employees are available for 5 years and are renewable; also extendable to family members
- Short term visas for technicians (3 months, renewable)
Requirements
Requirements to establish Multinational Headquarters in Panama include:
- The capital of the group that owns the SEM must be equal to or greater than US$200 million
- Maintain a minimum of full-time employees and annual operating expenses appropriate to the nature of the business
- All applications must be submitted to the SEM Licensing Commission
All applications to avail of the MHQ Law are made to the MHQ license commission. If all the requirements are met, the application process is usually complete within 10 to 15-day period.
As well as providing expert advice on the application process, the Ministry of Commerce and industries, via law No.41, operates a one stop window service to speed up the process in order to obtain the MHQ license of Multinational Companies Headquarters and visas for the foreign personnel and their dependents.
Contact us
The Kraemer and Kraemer team can assist you during the process and provide you with the right legal advice. Contact us at info@kraemerlaw.com
