Special Regime for the Establishment and Operation of Multinational Companies for the Provision of Services Related to Manufacturing – EMMA
Through Law 159 of August 31, 2020, the Special Regime for the Establishment and Operation of Multinational Companies for the Provision of Services Related to Manufacturing, better known as EMMA, is created with the purpose of attracting foreign direct investment by emulating the successful scheme that the Headquarters of Multinational Companies (SEM) have had. “EMMA” seeks to create a new regime aimed at companies from the same economic group to settle in Panama to perform their services related to manufacturing. The Law may only be applied to operations of Multinational Companies for the provision of services related to Manufacturing.
Law 159 of August 31, 2020 defines an “EMMA” company as a foreign or national company that from Panama carries out operations aimed at offering services defined in this Law, to its parent company or its subsidiaries or its affiliates or companies associated with said entities of the same Business Group. The law defines a Multinational Company as a legal person that, having its headquarters in Panama or in a certain country, develops important productive, commercial, financial or service activities in various countries. In addition, companies that, although they operate only in a certain country, have important operations in different regions of the same country and decide to establish a branch, affiliate, subsidiary or associated company in Panama to carry out commercial transactions in the region will be considered as such.
Permitted Activities to be a candidate for an “EMMA” License:
1. Services related to the manufacturing of products, machinery and equipment, provided to companies of the Business Group.
2. Assembly services of products, machinery and equipment, provided to companies of the Business Group.
3. Maintenance and repair services of products, Machinery and equipment provided to companies of the Business Group.
4. Services related to the remanufacturing of products, machinery and equipment provided to companies of the Business Group.
5. Services related to the Conditioning of products provided to companies of the Business Group.
6. Product development services, research or innovation of existing products or processes provided to companies of the Business Group.
7. Analysis, laboratory, testing or other services related to the provision of services related to manufacturing, provided to Group companies Business.
8. Logistics services such as storage, deployment and distribution center of components or parts, required for the provision of services related to manufacturing.
9. Any other analogous service previously approved by the Cabinet Council through reasoned resolution.
Benefits of “EMMA” Corporations
Here are some of the benefits of obtaining an “EMMA” license:
Incentives related to tax exemption for the Company:
- Exemption from Income Tax: With regard to tax matters, it is established that EMMA corporations will be exempt from paying the Income Tax of the Republic of Panama for the first five (5) years from their registration.
They will pay 5% of Income Tax after the period of five (5) years from their registration.
- Application of credit for Income Tax Paid abroad: “EMMA” companies may apply as Income Tax credit the amount that they have actually paid for this concept or similar abroad, with respect to the taxable income generated in the Republic of Panama derived from the provision of services to non-residents, as well as the amounts withheld by taxpayers of the Republic of Panama as income tax.
When the application of this tax credit is applicable, the company “EMMA” must pay, at least, 2% of the net taxable income generated in the Republic of Panama, as income tax.
- Exemption from the payment of dividend tax: “EMMA” companies will be exempt from paying dividend tax, complementary tax and branch tax, regardless of whether they are from local, foreign or exempt sources.
- Exemption from the use of Fiscal Equipment: “EMMA” companies will not be subject to the use of fiscal equipment; However, they will be obliged to document their activities through invoices or equivalent documents that allow the General Directorate of Revenues to control, register, record and audit the transactions carried out, such as electronic invoices or any other means established.
- Exemption from the use of the Notice of Operation: “EMMA” companies will not have the obligation to obtain a Notice of Operation.
- Exemption from the Tax on the Transfer of Personal Property and the Provision of Services: The services performed by the “EMMA” companies will not cause Tax on the Transfer of Personal Property and the Provision of Services, as long as they are provided to people who do not generate income taxable within the republic of Panama.
- Exemption from Import Tax: “EMMA” companies will be exempt from all taxes, fees, charges or import duties on all types or classes of merchandise, products, containers, raw materials, supplies, supplies and spare parts that are used or required. For the execution of the Provision of Services Related to Manufacturing. These products may not be sold, leased, given as collateral or judicially auctioned, without the corresponding taxes, duties or fees being paid on them.
- Introduction of manufactured, processed, assembled or remanufactured products to a special economic area of the Republic of Panama: Products manufactured, processed, assembled or remanufactured by an “EMMA” company established in a special economic area in the national territory , free zone, free zone or in a customs control and surveillance area may be introduced to the National Fiscal Territory by a company of the business group paying the respective customs duties or taxes, only on the value of the raw materials and foreign components incorporated in the product, based on the tariff that corresponds to each raw material or component incorporated in the final product. For the computation of said tariffs or customs duties, the amount corresponding to the value of the raw materials, supplies, components or foreign goods that have been incorporated into the finished product, subject to the treatment free of duties or tariff discounts, by virtue of International Trade Treaties or Agreements.
- “EMMA” Temporary Personnel Visa: “EMMA” companies will be able to manage a Temporary Personnel Visa from the “EMMA” company. The Temporary Personal Visa will be granted to the foreigner who provides services at an operational or training level for a term of two (2) years, renewable. Salaries and other labor remunerations are considered exempt from income tax, social security contributions and educational insurance, whether they are paid, assumed and recognized as personnel expenses in the accounting of the company “EMMA”.
- “EMMA” Temporary Personnel Dependent Visa: “EMMA” companies may apply for a Temporary Personnel Dependent Visa for people who meet the following requirements:
- Spouse or couple united for a minimum of five years in unique conditions and stability.
- To children under eighteen (18) years of age and up to twenty-five years of age, provided that they study regularly and are economically dependent on the temporary staff of the company “EMMA” and children with disabilities who live with them.
- To the parents of the staff, who remain in the national territory under the responsibility of the main interested party.
Temporary Personnel Dependents may work in the Republic of Panama, as long as they meet the necessary conditions to process a work permit in any of the existing or recognized categories in the country.
- “EMMA” Permanent Personnel Visa: The “EMMA” companies may apply for a Permanent Personnel Visa. The personnel who hold this visa may work in the Republic of Panama while working within the multinational company “EMMA”. Salaries and other labor remunerations are considered exempt from income tax, social security contributions and educational insurance, whether they are paid, assumed and recognized as personnel expenses in the accounting of the company “EMMA”. The Permanent Personnel Dependent Visa may be granted to persons who meet the same requirements mentioned in the Temporary Personnel Dependent Visa. The Dependents of Permanent Personnel may work in the Republic of Panama, as long as they meet the necessary conditions to process a work permit in any of the existing or recognized categories in the country.
- Permanent Residence of Personnel of “EMMA” Companies: Foreign personnel who work or have worked for any “EMMA” company may, once the term of five years has elapsed, counted from the approval of the first Permanent Personnel Visa or of the Temporary Personal Visa, opt for a permanent residence.
- Tax Exemption for Permanent Personnel and Temporary Personnel of the “EMMA” Companies: People who have a Permanent Personnel Visa or Temporary Personnel Visa will be exempt, at the time of moving to the Republic of Panama for the first time, from payment of the taxes that due to their importation could apply to your household goods. Additionally, the persons who possess the Personnel Visas may request from the National Customs Authority a total duty exemption and only once, every two years, for the importation of a motor vehicle for their personal or family use.