New Tax Law burdens indirectly over some offshore activities of Panamanian Corporation: Accurate considerations
September 24th, 2009With the approval of Law 49 in the evening of September 17, 2009, the lately elected Government of the Republic of Panama with the purpose of increasing their incomes, has taken legal measures that burden directly some of the abroad (Offshore) activities of the Panamanian Corporations, stepping away from the notion of territoriality which for so many years has been the governing rule of the Panamanian tax legislation.
By means of Article 6 of Law 49, the Article 733 of the Panamanian Fiscal Code was modified, as follow:
Article 733. All incorporated persons which requires the Notice of Operation stated by Law 5 of 2007, are constrained to retain a dividend tax” or share participation toll of ten percent (10%) from the income that are distributed to their shareholders or partners when these are from Panamanian sources and five percent (5%) when the rent comes from foreign sources or from export operations.
With this rule, we see for the first time within the Panamanian revenue legislation, how the income from international businesses are burdened indirectly with a domestic tax in Panama at the moment of the payment of profits to the shareholders.
However, there is an important condition to take into account within the mentioned rule, and it is that such tax over dividends paid for operations generated from offshore business, is only required to the Panamanian Corporations that require a Notice of Operation to do business.
The Notice of Operations is required only by Panamanian laws to the companies that have a commercial office opened in Panama and do business inside and from Panama, so the Panamanian Offshore Corporations that do not have physical offices in Panama and do not fulfill businesses within or from national territory, are not constrained to fulfill the mentioned tax retention.
This regulation, despite what is mentioned above, maintains the general rule of no payment of any type of tax or toll to the Panamanian Authorities for using the Panamanian Corporations when they fulfill business exclusively outside of Panama, so for the moment it does not affect the Offshore activity in itself, nor the distribution of dividend caused by this type of activity.
We comment this article only, since the rest of the tax modifications approved by means of Law 49, does not affect directly or indirectly, the international commercial operations that the Panamanian Offshore Corporation fulfills.
