Panama’s Headquarters of Multinational Companies (SEMs) have reported revenues exceeding $14 million in the first six months of 2023, following the establishment of six new companies. This marks a significant increase in investment compared to 2022 when another six SEM companies were established, with nearly $7 million more invested in 2023 according to Jeannette Díaz-Granados, the Director General of SEMs at the Ministry of Commerce and Industries.
The six newly established companies have concentrated their investments in sectors such as engineering, construction, insurance, reinsurance, and telecommunications, which have seen the most substantial investments. These companies primarily originate from the United States, China, Switzerland, the Netherlands, South Korea, Denmark, Japan, Spain, Germany, and France.
Díaz-Granados revealed that as part of their strategies, some of these companies have actively participated as speakers in various organizations and events, webinars, and in-person training sessions. They have shared insights about the different regimes, including the SEM regime and the Special Regime for Multinational Companies Providing Manufacturing-Related Services (EMMA), with law firms and consultants.
As of 2022, Panama had 188 multinational companies operating under the SEM regime, with a cumulative investment of $1.2 billion and the creation of over 6,000 jobs, 46% of which are filled by Panamanian citizens.
The special regimes of SEM and EMMA aim to attract and promote investments, create jobs, transfer technologies and knowledge, and enhance Panama’s competitiveness in the global economy, leveraging its strategic geographic location, physical infrastructure, and international services.
Source: La Estrella de Panamá
As of May 2023 these are the multinational companies operating under the SEM regime
Above you can check the list of SEM companies registered up to this date according to the MICI’s website. Source: Ministry of Commerce and Industries of Panama.
These are the key features and benefits regarding the tax advantages of holding a Multinational Company Headquarters (MCH) License in Panama:
- Reduced Income Tax Rate:
- Companies holding a Multinational Company Headquarters (SEM) License are subject to a reduced income tax rate of 5% on taxable net income derived from services provided.
- Tax Payment through Annual Income Declaration:
- SEM companies are required to settle and pay income tax through an annual income declaration. They can include labor remuneration expenses for all their employees as deductible expenses, following the provisions of the Fiscal Code.
- Tax Exemption for ITBMS (VAT):
- Services provided as exports do not incur Transfer Tax, provided they are rendered to entities within the business group located abroad, which do not generate taxable income within Panama.
- Exemption from Dividend Tax, Complementary Tax, and Branch Tax:
- Companies holding an SEM License are exempt from dividend tax, complementary tax, and branch tax, regardless of whether the income source is local, foreign, or exempt.
- Capital Gains Tax:
- Capital gains or losses from the transfer of shares issued by the SEM company are subject to a fixed tax rate of 2%. The buyer is responsible for withholding 1% of the total sale value and remitting it to the seller.
- No Business License (Aviso de Operaciones) Required:
- SEM companies are not obligated to obtain a Business License for the provision of services under this law, and therefore, they are exempt from paying Operation Notice Tax.
These fiscal benefits make Panama an attractive destination for multinational companies looking to establish their headquarters or operations.
Disclaimer: This blog post is meant for informational purposes only and should not be considered legal or tax advice. For personalized advice tailored to your situation, it’s recommended to consult with us.
