Share with your friends

Panama: Tax incentive amendments for Panama-Pacific special economic zone

Panama: Tax incentive amendments, special economic zone

The rules for tax incentives for companies established in the Panama-Pacific special economic zone have been amended.


Related content

Ley No. 66 of 13 December 2018 includes changes to the Panama-Pacific special economic zone (Área Económica y Especial Panamá-Pacífico), such as:

  • A modification of the incentives by replacing the concept of the “provision of services” with “office administration services” (including such items as management and support of operations, strategic planning services, business development, personnel training, control of operations, technical assistance and technical support, market logistics among others). Companies that have been registered in the Panama Pacific special economic zone for more than 10 years and that have been dedicated to the provision of such administrative services to persons outside of the territory of Panama, may request to be qualified as companies dedicated to the provision of "office administration services.” There are options for companies with less than 10 years of being registered in the “Panama Pacifico” but registered as companies that provide services to natural or legal persons abroad and / or office administration services. 
  • A change to the tax incentive regime so that office administration services will be taxed at a reduced rate of 5% of their net taxable income, both for services rendered abroad and those provided within the territory of the Republic of Panama. Also, a foreign tax credit may be available for income tax paid abroad. Individuals or legal entities that benefit from the services offered by companies in Panama Pacifico must withhold tax at a rate of 5% or remittances, provided that the services affect the production of income and are treated as deductible expenses by the person who received them. The effective tax rate cannot be reduced to less than 2% of the taxable income generated in the Republic of Panama.
  • A modification concerning an exemption from tax on the transfer of movable personal property and the provision of services (ITBMS) for services provided by companies in the Panama-Pacific special economic zone to all persons, whether established inside or outside Panama. The effective date of this measure is 1 January 2019. 
  • New substance requirements for companies to be eligible for tax incentives for certain activities such as multimodal and logistic services, office management services, call center services and capture services, processing, and data storage. The requirements include items such as having an adequate number of qualified full-time workers and incurring an adequate amount of operational expenses in Panama. 
  • Reporting requirement are updated, and companies that have registered before 17 October 2017, will have until 1 July 2021 to comply with the new requirements, whereas companies registered as of 17 October 2017 or later must comply with these reports as of 1 January 2019.


Read a January 2019 report (Spanish) prepared by the KPMG member firm in Panama

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Want to do business with KPMG?


loading image Request for proposal