In order to attract investment in production processes, create jobs and transfer technology, the Government of the Republic of Panama promulgated Law 159 of August 31, 2020, which creates the special regime for the establishment of multinational companies for the provision of services related to manufacturing (EMMA), through the granting of various labor, immigration, tax and customs benefits, as well as streamlining the registration and registration processes necessary for the operation of this type of companies in Panama.
The EMMA Law will grant a license (EMMA license) that allows multinationals to provide their business group the following services:
- The manufacture of products, machinery and equipment.
- Assembly of products, machinery and equipment.
- Maintenance and repair of products, machinery and equipment.
- Remanufacturing of products, machinery and equipment.
- Product conditioning.
- Product development, research or innovation of existing products or processes.
- Analysis, laboratory, test or other related to manufacturing.
- Logistics such as warehousing, deployment and distribution center for components or parts.
- Any other similar service.
It is important to note that for legal purposes, the above manufacturing services must be directed to the same business group.
In general terms, Panamanian companies or branches of foreign companies registered in Panama that belong to a multinational organization with international or regional operations in their country of origin are eligible to benefit from the benefits of Law 159.
The companies that take advantage of this regime will have a series of tax benefits, among which the following stand out:
- Payment of income tax at a reduced rate of 5%;
- Payment of capital gains tax on the sale of EMMA shares at a reduced rate of 2%;
- Exemption from ITBMS for services rendered to subsidiaries that do not generate taxable income in Panama;
- Exemption from ITBMS to the EMMA in the purchase and importation by the latter of goods and services;
- Exemption from dividend and complementary tax;
- Exemption from the operation notice tax;
- Exemption from all types of taxes, fees or charges or import duties, among others, of the products, goods and equipment required for the execution of the services.
Under this law, immigration flexibility is granted for foreign workers, granting two types of residence permits:
- Residence permit for 5 years for executives and
- 2-year residence permit for technicians.
Both permits are renewable. Likewise, dependents of employees with visas under the EMMA Law have the possibility of obtaining a work permit in Panama.
Likewise, those who hold these visas will not count for the purposes of the Labor Code provisions that require Panamanian companies to maintain a ratio of local to foreign employees.
It is important to highlight that this is a recently created law and although there are already general requirements, its regulations must be awaited, which will define the requirements. However, this new provision is under the same legal framework as Law No. 41 of 2007 that creates the special regime for the establishment of Multinational Companies Headquarters (SEM), declared more than ten years ago.
