In recent years, Panama has undergone a massive boom in tourism, coupled with the development of economic policies that promote investment across the country.
Today there are regulations in place that provide incentives for foreign investment focused on tourism. These are mainly regulated by Law No. 80 of November 8, 2012, which defines all the incentives that foreign investments receive, in addition to other laws that complement these incentives, with the primary objective of increasing tourism development in our country.
Article 8 on incentives for tourism products specifically addresses the purpose of promoting tourism with conventions or exhibitions organized by incentive travel, establishing the following tax incentives:
- Companies that build convention or exhibition centers will be granted, from the date of their registration in the National Tourism Registry, total exemption from import taxes.
- Businesses, associations or unions that hold congresses, conventions, meetings, seminars, artistic or sporting events within the Republic of Panama in which 50% of the attendees are foreigners (minimum of 100 people) will be granted exemption from income tax on the profits generated by the event.
- International subsidiaries of companies that offer incentive trips within Panama which are located in the country will be given a tax credit corresponding to 2% of the tax income. The credited amount will be 3% if the activity takes place outside the district of Panama and fulfills the indicated requirements.
- The costs of holiday tours outside the district of Panama and San Miguelito offered by companies to employees and their families may be considered deductible expenses for purposes of income tax, provided that they meet the conditions outlined in Law 80, Article 8, paragraph 2.
In order for an individual or company to enjoy these tax benefits, the project that will be developed must be presented to the National Tourism Registry, specifying the project data on the downloadable registration application form. Once the form is complete, its content will be deemed a sworn statement. The following documents must be attached to the form:
- For construction projects, all building plans that have been duly approved by the respective municipality and are in compliance with the regulations for tourist facilities (attach copy of the modality note issued by the department of Business and Tourism Activities).
- Certificate that indicates the sources of financing for the project, duly certified by an authorized public accountant.
- Certificate issued by the Public Registry that proves the existence of the society, its legal representative and dignitaries.
- Certified copy of the government-issued identification card of the legal representative or natural person who is registering the project.
- Certificate from the Public Registry that indicates ownership of the land where the project will be built. In the case of possessory rights, the corresponding certificate by the appropriate government entity must be attached. If the project will be built on another person's property, the contract, agreement or statement, duly authenticated by a notary public, must be attached.
- Certified copy of the resolution or certification by the National Environmental Authority that approves the environmental impact study, if so required.
- Feasibility study, prepared by a qualified economist from the Technical Council of Economics, which must include, at a minimum, the following information:
Overview of the Project
- Product Features
Financial Economic Study:
- Detailed list of goods, equipment and supplies that must be imported and/or purchased in the local market, including quantities and unit costs.
- Total investment
- Income from operations
- Operating costs and expenses
- Source and conditions of payment
- Debt service
- State of project gains and losses
- Projected net cash flows
- Internal rate of return (IRR)
- Net present value (NPV)
- Benefit-Cost Ratio (B/C)
- Sensitivity analysis
- Breakeven point
8. Power of attorney