Activities of the Panamanian Corporations

With the purpose of incrementing the income from taxes, has taken legal measures that directly tax some of the extraterritorial activities of the Panamanian Corporations, pulling away from the territorial principle that has been the ruling base of the Panamanian tax law.

Any legal person that may require the Notice of Operation which is referred to in Law 5 of 2007 is obligated to retain the dividend tax or participation fee of ten percent (10%) of the amounts distributed to its shareholders or partners when they are from a Panamanian source and five percent (5%) when it is income from a foreign source or export operations….”

This is the first time in Panamanian tax legislation that we see how the income of international businesses is taxed with an internal tax which is internal to Panama.

However there is an important condition that is pointed out within the law and it is that said tax on dividends paid for operations are generated from foreign income, is only demanded from the corporations that require a Notice of Operations to operate.

The Notice of Operations is demanded from companies that have a commercial office in Panama so that Panamanian corporations that don’t have offices within Panama and that don’t carry out businesses within the national territory are not obliged to make the retention mentioned earlier.

In spite of what was mentioned a prior, this law maintains the validity of the principle of non-payment of any type of taxes to Panamanian authorities for the use of Panamanian Corporations when carrying out business outside of Panama exclusively, so the activity in itself is not affected yet, nor is the distribution of the dividends that are a product from this activity