OFFICE OF THE DIRECTOR FOR ASSISTANCE TO INVESTORS

AREA FOR PROMOTING INVESTMENTS AND MARKETING

FREQUENT QUESTIONS ASKED ON

THE SPECIAL PANAMA-PACIFIC ECONOMIC AREA

 

 

  1. ¿WHAT IS THE SPECIAL PANAMA-PACIFIC ECONOMIC AREA AGENCY?

 

The Special Panama-Pacific Economic Area Agency is a Government entity created by Law No. 41 of 2004, same which is in charge of managing, directing, operating, and developing the Panama-Pacific Area. This is an area made up of 2,005 hectares (approximately 4,952.35 acres) of land located on the west bank of the Panama Canal, near the Pacific Ocean, where the U.S. Howard Air Force Base operated. This Base was under the command of the United States of America, until it was reverted back to Panama in 1999, by virtue of the Panama Canal Treaties. The Panama-Pacific Agency also makes it easier for the paperwork procedures which the companies operating therein need to carry out, as well as to assist them in any need they may have.

 

  1. ¿WHAT IS THE INTEGRATED PROCESSING SYSTEM?

 

The Panama-Pacific Agency operates as a system known as the Integrated Processing System (in Spanish, SIT). It makes it easier for all companies which operate therein, to carry out all the processing of their paperwork procedures which must be processed before Government entities, thus avoiding the need to go to different places or locations for services to be rendered. Therefore, the institutions stationed at SIT take care of and resolve at the site, all processing of paperwork procedures required for by the companies operating within the Panama-Pacific Area, pursuant the new and swift, accelerated procedures. At present, Government entities which have established an office at SIT are as follows: The National Immigration Service (in Spanish, SNM), Ministry of Labour and Labour Development (in Spanish, Mitradel), the National Environmental Authority (in Spanish, ANAM), Municipal Government, Social Security Office (in Spanish, CSS), National Customs Authority (in Spanish, ANA), just to name a few.

 

  1. ¿WHO IS LONDON & REGIONAL PANAMA, AND WHAT DUTIES AND RESPONSIBILITIES DOES IT HAVE AT THE SPECIAL PANAMÁ-PACIFIC ECONOMIC AREA?

 

It is a company of  selected through an international bid process, in order to carry out the Master Developer’s duties and responsibilities of a large part of land in the former U.S. Howard Air Force Base, now known as the Special Panama-Pacific Economic Area. London & Regional Panama is a subsidiary of the British corporation London & Regional Properties, in charge of constructing the installations and of entering into the commercial terms and conditions, whether by selling or renting or leasing to any company or individual wishing to establish itself or himself/herself in the Panama-Pacific Area.

 

 

  1. WHAT IS THE DURATION OF THE MASTER DEVELOPER’S CONTRACT WITH THE COMPANY LONDON & REGIONAL PANAMÁ?

 

The term of the existing contract agreement entered into between the State (represented by the Special Panama-Pacific Economic Area Agency) and the corporation London & Regional Panama, to develop the Panama-Pacific Area assigned to it, that is, one thousand four hundred (1,400) hectares (3,458 acres), is of forty (40) years.

 

  1. ¿WHAT ACTIVITIES ARE ALLOWED WITHIN THE AREA?

 

Individuals and corporation established in the Panama-Pacific Area may engage in all kinds and types of activities not expressly prohibited the laws and rules and regulations currently in force in the Republic of Panama, on health, security, and public order issues. Regarding activities which in the opinion of the Agency may affect equilibrium of contract agreements entered into with the State, individuals and corporations who engage in said activities can register at the Registry of the Panama-Pacific Area, but shall not benefit from the tax and labour incentives provided by the law currently in force.

 

There shall be no showrooms within the Panama-Pacific Area, of products which are internationally marketed in other free zones or which receive special tax treatment.

 

  1. ¿WHAT TAX TREATMENT IS PROVIDED AND WHO ARE SUBJECT THERETO?

 

·         Unless certain types of activities are totally tax exempt, companies which establish themselves in the Panama-Pacific Area (in Spanish, APP) are subject to gains taxes: income, dividends, complementary, and money transfers sent overseas (even for local or foreign operations).

 

·         They shall be free of direct or indirect taxes, except municipal taxes.

 

·         All activities listed in Section 60 of Law No. 41 of 2004, are exempt from paying the following taxes:

 

1)     Income tax for net taxable income received from the activities, business, and operations carried out within the APP.

2)     Taxes on Dividends retained from profits or dividends paid to its shareholders or partners, and the Complementary Tax.

3)     Taxes on Monies Transfers sent Overseas, retained as payments for commissions, bonuses, and payments for technical assistance services or for any other item.

4)     Import taxes and Personal Property Sales and Rendering of Services Tax, specifically for companies which render professional services regulated under special current legislation and rules and regulations.

 

 

  1. ¿WHAT ACTIVITIES RECEIVE INCENTIVES AND WHICH ONES ARE EXEMPTED FROM PAYMENT OF PROFITS OR GAINS TAXES?

 

Activities which are tax exempted and referenced to in the previous question, are income, profits or gains which result from the following:

a)        Off-Shore Services (rendering of services without the national territory)

b)        Selling of shares of stock between Area companies.

c)        Transfer of goods and rendering of services between Area companies, or to companies located in Oil Free Zones or Port Areas or Premises.

d)        Sale of merchandise, products, equipment, and goods, as well as rendering of services to visitors, passengers, or crew members while in transit abroad, or to vessels which cross through the Panama Canal, except when the sale is made by the manufacturer itself or by an Area company which is part of its own economic group.

e)        Sale of merchandise, products, equipment, and goods, as well as rendering of services to aircraft which use airports authorized to operate within the Republic of Panama, except when the sale is made by the manufacturer itself or by an Area company which is part of its own economic group.

f)          Manufacture of high technology products, components and parts.

g)        Multimodal and logistics services.

h)       Call Center Services for Commercial Use: Capture, Processing,  Storage, Switching, Transmission and re-transmission of digital data and information, Linkage of radio, television, audio, video and/or other signals, Office management for users within the Area or without the territory of Panama, or established without the Republic of Panama.

i)          Resource and digital application investigation and development,  for their use in Intranet and Internet networks.

 

 

  1. ¿WHO PAY EXPORT, IMPORT, AND TRANSFER TAXES?

·         Companies which render professional services must pay taxes, such as Sales and Services Rendered, Taxes (in Spanish, ITBMS) and Import Taxes, among others.

·         Retail sales pay Import Duties and Taxes (ITBMS), and a Selective Consumer Tax.

 

 

 

 

  1. ¿WHAT MUNICIPAL TAXES ARE INCLUDED?

 

·         Among others, the following: lucrative, for profit activities, garbage collection services, building and re-building, commercial advertisement, automobile title transfers of ownership, selling of license plates, annual vehicle taxes.

·         Municipalities where there are International Commercial Areas, cannot tax (1) merchandise which enter, are stored, are transformed, or leave the area, and (2) companies engaged in receiving, storing, transforming, or issuing merchandise.  (Except Automobile Taxes), Law No. 9 of 1958.

·         Municipalities cannot tax companies which render telecommunication public services (except advertisement, plaques, and buildings), Law No. 3 of 1996.

 

 

  1. ¿WHAT IS THE MERCHANDISE AND INVENTORY CONTROL SYSTEM?

 

·         Automated merchandise movement control system, based on inventory audits and not on actual, physical controls.

 

  1. ¿WHAT LABOUR LAWS RULE IN THE AREA?

 

Law 41 of 2004 contains special labour provisions for the Special Panama Pacific Economic Area, nevertheless, matters not regulated by said Law shall be regulated by the Labour Code in a supplementary manner; that is, it applies to those issues not regulated by Law 41 of 2004. We can mention among the Labour regulations, the following:

·         25% fixed overtime pay for overtime hours.

·         Mixed and night work shifts, paid per tour actually worked.

·         Possibility to agree on rotating shifts.

·         Possibility to agree on weekly off-day different than Sunday.

·         Fixed overtime pay of 50% for working on a weekly off-day.

·         Possibility to negotiate the manner of making use of vacation time.

·         The following are considered to be grounds for dismissal: reduction in sales, and/or request of services because of market fluctuations.

 

In the event of economic grounds for dismissal, Labour authorities shall have 15 days to render a decision thereupon. In the event that no decision has been made, the dismissal shall be considered to be justified.

 

  1. ¿ WHAT LABOUR LAW PROVISIONS ARE APPLICABLE IN THE AREA?

 

  • Day, night, and mixed shifts shall be paid on an hourly basis having been worked.

  • Maximum duration, without exceeding that established by Law.

  • Right to compulsory day off, is governed by the Labour Code.

 

  1. ¿WHAT DOES AN OVERTIME SCHEDULE MEAN?

 

  • Overtime hours can be agreed upon, with the limitations set forth under the Labour Code, with an only overtime pay of 25%.

  • Unless otherwise agreed upon, overtime work shall be compulsory if relief has not arrived.

 

  1. ¿WHAT DOES DAY OFF MEAN?

 

  • Freedom to negotiate the compulsory weekly day off, same which can be any day of the week.

  • This includes all companies located within the Special Economic Area, which are part of the list of companies which pursuant the Labour Code, can open on Sundays and on national or mourning holidays.

 

  1. ¿HOW IS THE RIGHT TO VACATION EXECUTED?

 

  • By way of negotiation of a Collective Work Agreement, on vacation issues.

  • The Labour Code applies temporarily, until a Collective Work Agreement is approved.

 

  1. ¿WHAT ARE JUSTIFIED GROUNDS FOR DISMISSAL?

 

Justified grounds for dismissal are listed in the Labour Code of the Republic of Panama, as well as economic grounds or reasons for dismissal as regulated under Law 41 of 2004.

 

  • Dismissal or layoff on economic grounds

Market fluctuations which cause the loss or considerable reduction on the demand for services or sales, are grounds for dismissal or layoff.

MITRADEL must render a decision for request for dismissal or layoff within a period of 15 days; otherwise the company will understand that it is authorized to proceed with a reduction of personnel.

 

  1. ¿ARE THERE LABOUR CONCILIATION BOARDS FOR RESOLVING LABOUR DISPUTES?

 

  • In lieu of Labour Conciliation Boards, the Office of Conciliation has been created at the Agency, which shall handle all out of court, unofficial Labour claims.

 

  1. ¿IS A LABOUR CONTRACT AGREEMENT REQUIRED?

 

  • There is an obligation to enter into Labour contract agreements in writing, subject to the formalities and provisions as set forth in the Labour Code.

 

  1. ¿WHAT IMMIGRATION TREATMENT GIVEN TO FOREIGN INVESTORS AND TECHNICAL EMPLOYEES?

 

·         Special Visas for Area employees and investors who invest no less than B/. 250,000.00 in risk capital companies.

 

·         Visas for technical employees and investors: provide the right to import items for personal, domestic use and consumption, in an amount of not greater than B/.100.000.00.

 


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