WORLD TRADE
ORGANIZATIONG/SCM/Q3/PAN/7
11 March 2002
(02-1223)
Committee on Subsidies
and Countervailing MeasuresOriginal:  Spanish
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement on
Subsidies and Countervailing Measures
Replies to the Questions Posed by Australia,1 Switzerland,2
the European Communities,3 Japan4 and Canada5
PANAMA
The following communication, dated 7 March 2002, has been received from the Permanent
Mission of Panama.
_______________
I. QUESTIONS POSED BY AUSTRALIA (G/SCM/Q3/PAN/1)
1. How can it be assessed what the intensity or "favourability" of the programme is?
2. Which industry sectors have benefited?  3.  What are the total budget expenditures (Panama
has provided the budget expenditures in the programme listed in document 74/PAN/2)?
Export Processing Zones (EPZ)
Reply No. 1
The intensity or "favourability" of the programme can be assessed on the basis of export
values and the tax relief benefits granted at the various export levels.  The EPZs enjoyed income taxexemptions of the order of US$1.5 million over the period 1998-2000, according to the Department of
Fiscal Studies of the General Directorate of Revenue of the Ministry of the Economy and Finance.
These exemptions concerned export levels of US$25.7, 20.5 and 26 million for the years 1998, 1999
and 2000, respectively.
                                                     
1 G/SCM/Q3/PAN/1.
2 G/SCM/Q3/PAN/2.
3 G/SCM/Q3/PAN/3.
4 G/SCM/Q3/PAN/4.
5 G/SCM/Q3/PAN/5.G/SCM/Q3/PAN/7
Page 2
Reply No. 2
The main sectors that profited under the EPZ programme included machinery assembly,
rebuilding of auto parts, construction services, processing of pharmaceutical products, clothing
manufacture, aluminium and glass processing, and ship supply services.
Reply No. 3
See Reply No. 1.
Official Industry Register (OIR)
Reply No. 1
The intensity or "favourability" of the programme can be assessed on the basis of export
values and the tax relief benefits granted at the various export levels.
TOTAL VALUE OF EXPORTS AND TAX EXEMPTIONS FOR ENTERPRISES
INCLUDED IN THE OFFICIAL INDUSTRY REGISTER
TYPE OF ENTERPRISE 1999
AMOUNT OF THE
EXPORT
(Millions of US$)AMOUNT OF THE
EXEMPTION
(Millions of US$)1
TOTAL 238.4 14.39
Total export 73.8 2.67
Partial export 164.5 11.72
1Includes, inter alia , the full exempted income tax, the import tax, and the tax on the transfer of
tangible personal property.
Reply No. 2
The main sectors of the domestic industry that received subsidies under the OIR are the
manufacturing industry and various services.  The following table shows the number of enterprises
that profited under the programme, by activity.G/SCM/Q3/PAN/7
Page 3
NUMBER OF ENTERPRISES REGISTERED IN
THE OFFICIAL INDUSTRY REGISTER
MARKET
SECTORPARTIAL
EXPORTTOTAL
EXPORTDOMESTIC
MARKETGENERAL
TOTAL
Foodstuffs, drinks and tobacco 138 45 183 366
Textiles, garments and leather industries 126 11 26 163
Wood industry and wood products, includingfurniture43 2 37 82
Manufacture of paper and paper products,
printing and publishing54 3 59 116
Manufacture of chemicals and petroleum,
coal, rubber and plastic products93 4 73 170
Manufacture of non-metallic mineral
products, except petroleum and coal products20 31 51
Basic metal industries 9 3 4 16
Manufacture of metal products, machinery
and equipment69 6 90 165
Other manufacturing industries 8 1 5 14
Personal and household services 2 25 27
General total 562 75 533 1170
Reply No. 3
Panama provided an estimate of budget expenditure for tax exemptions for enterprises
included in the OIR in Section C of document G/ SCM/N/71/PAN.  The table below is reproduced for
greater clarity.
TOTAL VALUE OF EXPORTS AND TAX EXEMPTIONS FOR ENTERPRISES
INCLUDED IN THE OFFICIAL INDUSTRY REGISTER
TYPE OF ENTERPRISE 1999
AMOUNT OF THE
EXPORT
Millions of US$)(AMOUNT OF THE
EXEMPTION
(Millions of US$)1
TOTAL 238.4 14.39
Total export 73.8 2.67
Partial export 164.5 11.72
1Includes, inter alia , the full exempted income tax, the import tax, and the tax on the transfer of
tangible personal property.
Granting of Tax Credit Certificates (CAT)
Reply No. 3
The total budget expenditure under the CAT is given in Section A.9. of document
G/SCM/N/71/PAN.
4. What is the coverage of the programme?  Is this contingent on export?G/SCM/Q3/PAN/7
Page 4
Reply No. 4
The programme covers non-traditional exports of goods wholly or partly produced or
processed in Panama, provided that they fulfil the following programme requirements:  A minimumshare of 20 per cent in national content in terms of manufacturing or production costs and in national
value added for enterprises established in the metropolitan region, and a minimum share of 10 per
cent in national content for enterprises located outside the metropolitan region.  Although programme
coverage does not depend on the volume of exports, the products covered must be classified as non-
traditional goods.  For the purposes of the CAT programme, and pursuant to Articles 1 and 2,
Chapter 1, of Law No. 108 of 30 December 1974 on export incentives, regulated by Executive Decree
No. 5 of 8 February 1991, and Law No. 4 of 19 February 1993, non-traditional goods are considered
to be those wholly or partly produced or processed in Panama, as defined by the 1996 Harmonized
System, with the following exceptions:
(a) Cane sugar;
(b) bananas and banana purée:
1. bananas;
2. banana purée;
(c) honey and cane molasses:
1. sugarcane honey;
2. cane molasses;
(d) cocoa beans;
(e) raw coffee (beans);
(f) shrimps, fresh, chilled or frozen;
(g) bovine meat, fresh, chilled or frozen;
6
(h) bovine cattle leather, not tanned;
(i) wooden logs;
(j) bovine cattle, swine and horses:
1. bovine cattle, other than pure-bred;
2. swine, other than pure-bred;
3. horses, other than pure-bred;
(k) fish flour;
(l) other oils of fish and marine mammals;(m) scrap metal;
(n) hawk-bill turtles, unworked;
(o) extracts of (citrus) fruit;
(p) petroleum and petroleum products;
(q) sales under bilateral, free or preferential trade agreements;(r) minerals, metals and metal products.
II. QUESTIONS POSED BY SWITZERLAND (G/SCM/Q3/PAN/2)
1. Could Panama provide statistical data of th e value of total export of the enterprises
included in the Official Industry Register?
Reply No. 1
Statistical data of the value of total export of the enterprises included in the OIR are as
follows:
                                                     
6 Under Law No. 4 of 19 January 1993, bovine meat, fresh, chilled or frozen, is considered to be a non-
traditional product.G/SCM/Q3/PAN/7
Page 5
TOTAL VALUE OF EXPORTS AND TAX EXEMPTIONS FOR ENTERPRISES
INCLUDED IN THE OFFICIAL INDUSTRY REGISTER
TYPE OF ENTERPRISE 1999
AMOUNT OF THE
EXPORT
(Millions of US$)AMOUNT OF THE
EXEMPTION
(Millions of US$)1
TOTAL 238.4 14.39
Total export 73.8 2.67
Partial export 164.5 11.72
1Includes, inter alia , the full exempted income tax, the import tax, and the tax on the transfer of
tangible personal property.
2. Could Panama also specify if the exemptio ns granted to enterprises included in the
Official Industry Register are also open to fore ign legal entities, and that the same application
procedures apply to both national and foreign companies?
Reply No. 2
Article 2 of Law No. 3 of 20 March 1986 adopting a regime of incentives for the promotion
and development of the national industry and exports stipulates that all enterprises on the territory ofthe Republic of Panama engaged in industrial activities involving manufacture or assembly, including
small- and medium-sized industrial enterprises, may avail themselves of the benefits and incentives
provided for in the Law.  This means that in or der to benefit from the incentives offered by the
programme, the enterprise in question must be located and operating in the territory of the Republic of
Panama, in addition to meeting other production-related requirements.
Panamanian laws governing trade and industry provide that an operating licence, known as an
industrial licence, is required to run an industrial  enterprise in Panama.  Such licences are granted by
the Ministry of Trade and Industries, authorizing i ndustrial enterprises to operate and to apply for
registration in the Official Industry Register.
Industrial enterprises, whether Panamanian- or foreign-owned or in the form of joint ventures,
must comply with the production requirements in Law No. 3 of 20 March 1986 in order to apply for
registration in the Official Industry Register and to avail themselves of benefits under the programme,
under conditions that are identical regardless of the origin of their equity.
Since 21 June 1995, new industrial enterprises have no longer been able to apply for entry in
the Official Industry Register, and programme benefits are restricted to enterprises registered up to
that date.
3. Regarding the request for an extension of the transition period for the CAT programme,
Switzerland notes that the amount of the subsidy granted has increased considerably under theperiod notified by Panama (G/SCM/N/71/PAN).  Article 27.4 SCM allows for a yearly extension
but also refers to a progressive phase-out of existing export subsidies.  Could Panama explain in
greater detail which timeframe it feels for the co ntinuation of this programme to be necessary?
Reply No. 3
In the present economic circumstances, as explained under heading 5 of document
G/SCM/N/74/PAN/2, Panama considers it necessa ry to extend application of the CAT for an
additional period of five (5) years, pending the results of the current policy geared towards greater
diversification of our production base and export markets, as well as the restructuring of our system toG/SCM/Q3/PAN/7
Page 6
stimulate and promote foreign trade, so as that we can make the adjustments needed to fulfil our WTO
commitments in this sphere.
III. QUESTIONS POSED BY THE EUROPEAN COMMUNITIES (G/SCM/Q3/PAN/3)
OIR and EPZ
Please indicate when the pr ogrammes came into operation.
OIR
Reply No. 1
Law No. 3 of 20 March 1986 adopting a regime of incentives for the promotion and
development of the national industry and e xports, published in Official Gazette No. 20518 of
24 March 1986, entered into force at the time of its promulgation.  Although the programme came
into operation on that date, the first registration in the Official Industry Register was not made until
August 1986, which marked the initial granting of benefits under the programme.
EPZ
Reply No. 1
Law No. 25 of 30 November 1992 establishing a special, integrated and simplified regime for
the establishment and operation of export processing zones, published in Official Gazette No. 22175
of 2 December 1992, entered into force at the time of its promulgation.  Although the programme
came into operation on that date, the establishment of the first two enterprises in an export processing
zone did not take place until 1993, which marked the initial granting of benefits under the programme.
2. Please indicate whether the programmes provide for other forms of subsidies than
exemption of import duties and internal taxes (e.g. grants, provision of goods or services).
OIR
Reply No. 2
The legal basis of the programme provides for other benefits.  It stipulates that enterprises
partially engaged in export production shall enjoy, in addition to tax exemptions, deduction from the
taxable income of fixed costs such as interests, depreciation and maintenance, provided that total
export sales do not exceed 20 per cent of the total value of sales.
As for enterprises wholly engaged and partially engaged in export production, the Law also
provides for the creation of special funding programmes on a preferential basis compared to what is
normally available on the market.  Such programmes have never been implemented, however, and so
far none of the enterprises in the Official Industry Register has availed itself of this benefit.
Apart from the aforementioned benefits, the programme provides for no other form of
subsidy.
EPZ
Reply No. 2G/SCM/Q3/PAN/7
Page 7
This programme does not provide for any form of subsidy other than the exemptions detailed
under B.5. in document G/SCM/N/71/PAN.
3. Please explain what is meant by "creati on of special funding programmes on a
preferential basis compared to what is normally available on the market" (page 3 ofG/SCM/N/74/PAN/1).
OIR
Reply No. 3
"Creation of special funding programmes on a preferential basis compared to what is
normally available on the market" means programmes designed to ease access to credit by means of
preferential interest loans.  Panama confirms that there is no programme of this kind that benefits or
could benefit enterprises registered in the OIR.
4. Do the programmes provide for a condition to use domestic goods? If so, please describe
the relevant provision.
OIR
Reply No. 4
Article 25 of Law No. 3 of 20 March 1986 establishes a number of conditions for the use of
domestic products.  The Law basically stipulates that enterprises wholly engaged in export production
may import all their inputs tax free, but that where such inputs are available locally in sufficient
quantity, at an acceptable standard of quality and at the same price or prices equivalent to the c.i.f.prices of foreign inputs, preference shall be given to domestic production.  The same applies, in
respect of exports, to enterprises partially engaged in export production.  An exception is provided for
enterprises involved in assembly activities and covere d by this legal regime, stipulating that all their
inputs may be imported tax free, regardless of whether such inputs are being produced domestically in
sufficient quantity, at an acceptable standard of quality and at a competitive price.
EPZ
Reply No. 4
This programme does not lay down any conditions for the use of domestic products.
5. Please indicate the rate of import duty or internal tax exemption as of
1 September 2001.
Reply No. 5
The average import duty rate applicable in Panama at 1 September 2001was 9.05 per cent
ad valorem .  The MFN duty applied to the third of imported products corresponding to raw materials
or intermediate goods for industry was brought down to 0 per cent as from 1 January 2002.  This
means that exemption from this duty has now been  extended to Panama's entire industrial park.  As
regards internal taxes, the exemption is 100 per cent of the applied rate, which in the case of incometax on exports ranges from 15 to 30 per cent at most and amounts to 5 per cent in the case of the tax
on the transfer of tangible personal property (ITBM).G/SCM/Q3/PAN/7
Page 8
6. Please describe any changes to the programmes since 1 September 2001, if any.  In
particular, indicate any changes to the rate of exemption or the coverage of the programmes
e.g. in terms of products, location, etc.
OIR and EPZ
Reply No. 6
Except for the above comments, Panama confirms that there have been no changes to the rate
of exemption or the coverage of the programmes referred to in the request submitted in document
G/SCM/74/PAN/1.
7. Please indicate for each programme how many companies have benefited from the
respective programme as of 1 September 2001.
OIR
Reply No. 7
The OIR programme has benefited 637 enterprises.
EPZ
Reply No. 7
The EPZ programme has benefited 56 enterprises.
8. The notification states that the duration of the programme concerning export processing
zones is "indefinite".  Please elaborate on when Panama intends to phase out this programme.
Reply No. 8
The EPZ programme is a tool for the promotion of trade and production.  Panama proposes to
adjust this programme, in accordance with the pr ovisions governing export subsidies, during the
extension period requested.
9. Document G/SCM/N/74/PAN/2 states that it is requested to extend the programme for
an additional period of five years.  However, document G/SCM/N/48/PAN states under
"duration of the subsidy" that the programme is scheduled to last until 31 December 2002.Please elaborate on how and until what date Panama intends to phase out this programme.
Reply No. 9
Panama proposes to adjust the CAT programme, in accordance with the provisions governing
export subsidies, during the extension period requested.
IV. QUESTIONS POSED BY JAPAN (G/SCM/Q3/PAN/4)
1. Could Panama please explain in detail how the certificate should be prepared?
Reply No. 1
The Technical Commission on Export Incentives approves the issuing of tax credit
certificates, as recommended by the Executive Secretariat.  The Executive Secretariat comes under theG/SCM/Q3/PAN/7
Page 9
National Directorate of Foreign Trade Services, which is attached to the Ministry of Trade and
Industry, and is responsible for receiving, analysing, assessing and investigating applications by
exporting enterprises.
To be eligible under the programme, an exporting enterprise must file an application with the
Executive Secretariat, using a form printed by the Secretariat and accompanied by the following
documents:  (1) Audited financial statements and/or income tax return for the latest fiscal period;
(2) sworn declaration of national content and national value added of the product to be exported, duly
certified by an economist, an industrial engineer or an authorized public accountant (CPA);  (3) copy
of Social Security Fund records for the previous fiscal period and the corresponding year, should the
exporting enterprise wish to avail itself of the employment incentive;  (4) national certificate of tax
payment;  (5) revenue stamps;  (6) documents attesting the national value added components of theproduct to be exported;  (6) power of attorney, where the application is filed through a lawyer.
The documents supplied by the exporting enterprise are checked by the Executive Secretariat,
which may conduct any investigation or inspection it deems necessary at any time and may request
the presentation of book-entries and other documents justifying the items or accounts relevant to theapplication.  Once the investigation has been completed and the data provided by the exporting
enterprise has been duly checked, the Executive Secretariat goes on to determine the national content
and national value added of the product to be exported.  The Secretariat uses the following parameters
to determine the aforementioned values and factors:
1. National content is equivalent to 100 per cen t of the value of the following components,
insofar as these affect the value of the products to be exported:
(a) Domestic raw materials (agricultural, marine and non-metallic mineral) used directly
in producing the product to be exported;
(b) domestic labour (direct, piece-work) used in producing the product to be exported;
(c) national and municipal taxes, minus those paid by means of tax credit certificates;(d) utilities, with the exception of the fuel clause;
(e) domestic packing and containers.
2. National value added is calculated on the basis of either of the following two criteria,
depending on the choice of the exporting enterprise:
I. National value added consists of the weighted value of the following components,
insofar as these affect the value of products to be exported:
(a) Domestic labour used in producing the product to be exported, weighted at
100 per cent;
(b) national indirect and municipal taxes, minus those paid by means of tax credit
certificates, weighted at 100 per cent;
(c) leasing of land, weighted at 100 per cent;(d) interest paid on loans from banks or financial institutions operating in
Panama, for the financing of export production, weighted at 100 per cent;G/SCM/Q3/PAN/7
Page 10
(e) depreciation of Panamanian movable and immovable property relating to the
manufacture of the product to be exported, weighted at 100 per cent;
(f) profits derived from exports, provided that they do not exceed 12 per cent of
the capital invested, weighted at 100 per cent;
(g) value added of raw materials used in the production process, provided that it
is not included in the aforementioned components and that the national
component equals or exceeds 50 per cent;  this is determined on the basis of
the following classification:
(g.1) domestic raw materials (agricultural, marine or non-metallic mineral)
are weighted at 85 per cent, except for shrimps, fresh, chilled or
frozen, and meat, fresh, chilled or frozen, which have a zero-
weighting;
(g.2) domestic industrial raw materials, with a national component equal to
or exceeding 50 per cent of their value, are weighted at 35 per cent;
(h) leasing of Panamanian production-re lated movable and immovable property,
weighted at 80 per cent;
(i) payments for services to natural or legal persons established on the national
territory and involved in domestic production and management of the product
to be exported, weighted at 85 per cent;
(j) utility costs (water, telephone and electric power), weighted at 80 per cent;
the fuel clause is not computed in the case of electric power;
(k) locally produced packing and containers used for products to be exported,
weighted at 35 per cent.
II. National value added consists of the weighted value of the following components,
insofar as these affect the value of products to be exported:
(a) Domestic labour used in producing the product to be exported, weighted at
100 per cent;
(b) national indirect and municipal taxes, minus those paid by means of tax credit
certificates, weighted at 100 per cent;
(c) value added of raw materials used in the production process, provided that it
is not included in the aforementioned components;  this is determined on the
basis of the following classification:
(g.1) domestic raw materials (agricultural, marine) are weighted at 100 per
cent, except for shrimps, fresh, chilled or frozen, and meat, fresh,
chilled or frozen, which have a zero weighting;
(g.2) domestic industrial raw materials, with an imported component equal
to or lower than 50 per cent of their value, are weighted at 35 per
cent;G/SCM/Q3/PAN/7
Page 11
(d) payments for special services (piece-work and technical) directly related to
the production of the product to be exported, weighted at 100 per cent;
(e) utility costs (water, telephone and electric power), weighted at 100 per cent;
the fuel clause is not computed in the case of electric power;
(f) locally produced packing and containers used for products to be exported,
weighted at 35 per cent.
The exporting enterprise may opt once only for either of the above criteria.When the Executive Secretariat has determined the national content and national value added
of the product to be exported, it makes a recommendation, based on its findings, to the Technical
Commission on Export Incentives, for approval or denial of the tax credit certificate, as stipulated in
the Law.
Once the Technical Commission has received all the supporting documents, it has a period of
15 working days in which to assess the application and either approve or withhold the issuing of the
tax credit certificate.  If the national value added is approved by the Commission, the Executive
Secretariat draws up a decision whereby the certificate is to be granted, subject to presentation of the
following documents by the exporting enterprise:
(a) Sales invoice.
(b) Export declaration or clearance.(c) Bill of lading.(d) Certificate issued by the Ministry of the Economy and Finance confirming that the
merchandise has been exported.
The Decision must be endorsed by the Office of the Comptroller-General of the Republic and
published in the Industrial Property Bulletin of the Ministry of Trade and Industry.  The original copy
of the Decision is forwarded to the Ministry of the Economy and Finance for the issuing of the taxcredit certificate.
The national value added approved by the Commission for a period of one fiscal year may be
used for exports in the course of that year and fo r exports over the following two (2) years.  Once the
merchandise has been exported, the exporter has a maximum period of six (6) months in which to
apply for the incentive.
The tax credit certificate must clearly specify the name and the single taxpayer registration
number (RUC), the date of dispatch, the amount and the number and date of the Decision.  It equals
15 per cent of the national value added of the product exported and is divided into blank coupons (likea cheque) enabling the holder to use them for payment of tax amounts due.  It is exempt from any kind
of tax, is non-interest bearing, and has a maturity period of (9) months following the date of issue,
provided that the latter does not coincide with the fiscal period during which the certificate was
granted.
2. Could Panama please provide respective examples of exported commodities by
corporations receiving benefit from the programme?
Reply No. 2G/SCM/Q3/PAN/7
Page 12
The following are examples of merchandise exported by enterprises benefiting under the
incentive:  Sea products, beef, hygiene and cleaning products, semi-processed leather, latex gloves,
cigars, medicines, rum and spirits, beer, egg separators, and so forth.
3. According to Panama's notification, "the CAT lapses four years after its date of issue".
If this programme, as Panama stated, ends at the end of 2008, could the corporations continue
to receive benefit until the end of 2012?
Reply No. 3
The exporting enterprise may avail itself of benefits under the programme for up to six (6)
months after the merchandise has been exported, pursuant to Article 32 of Executive Decree No. 274of 29 December 1995 on the universalization of tax incentives.  Beyond that date, the enterprise
forfeits every right to apply for benefits, as the right granted under the Law then lapses.
Once the tax credit certificate has been issued, the exporting enterprise is entitled to the
benefits under the programme and may avail itself of the certificate.  At that point the State musthonour its commitment by giving effect to the document, as and when provided by the Law.  The
stipulated period of four years after which the CAT lapses refers to the time during which the holder
may use the certificate.  As the CAT is transferable by endorsement, the Law has established a specific
period of validity for the certificate, i.e. a period during which the holder may make use of the
document.
In submitting its application, the exporting enterprise exercises its right to benefit from the
incentives offered by the programme.  When the CAT is issued, the enterprise receives those benefits.
The four-year period after which the certificate lapses only spells out the consequences of failing to
use the document over a specific period of time.  In a certain way, the stipulated four-year period forgiving effect to the document can be understood to mean the period during which the enterprise can
actually benefit under the programme –  the more so since the Law sets a six-month deadline for
applying for such benefits.
V. QUESTIONS POSED BY CANADA (G/SCM/Q3/PAN/5)
1. For how long can a company enjoy these benefits?  If there is an expiry can a company
re-apply for the tax exemptions?
OIR
Reply No. 1
Article 30 of Law No. 3 of 20 March 1986 provides that registration of enterprises in the
Official Industry Register shall be valid for a period of 10 years, except for enterprises that are being
set up or are already established in less developed areas (as detailed in Article 13 of the Law), in
which case registration shall be valid for a period of 15 years.  After such time, and in the absence of
any other relevant legislation, established enterprises that are operating normally may annually invokethe stipulations of the Law in force, the respective register being updated once a year.
However, Article 23 of Law No. 28 of 20  June 1995, as amended by Law No. 26 of
4 June 2001, establishes legal provisions on the subject, stipulating that the Ministry of Trade and
Industries may extend registrations of enterprises engaged in identical or similar activities up to thedate of expiry of the last registration of an enterprise in the same line of production, so as to avoid
placing at a disadvantage enterprises whose registrations expired before the date in question.  The
duration of the validity of these registrations will thus depend on the validity of other registrations of
enterprises engaged in similar activities.G/SCM/Q3/PAN/7
Page 13
As long as enterprises remain entered in the Official Industry Registry, make the required
payments and fulfil the necessary requirements, they will be entitled to enjoy the benefits provided.
Should they fail to use those benefits, they shall not forfeit their right to them as long as they satisfy
the above conditions.  Enterprises may request extensions when they deem appropriate or choose notto do so, in which case they will in some way forfeit their rights.
EPZ
Reply No. 1
The programme does not specify a termination date, for the Law stipulates that the
programme shall be of indefinite duration.  Any enterprise operating in an export processing zone is
eligible for the benefits under the Law and may freely stop availing itself of them or resume doing so
after a period of interruption.  As long as the enterprise operates within the zone and fulfils the legal
requirements, it will be entitled to enjoy the benefits offered by the programme.
2. Who can take advantage of these programmes, e.g. industry sectors, agriculture, certain
regions?
OIR
Reply No. 2
As regards benefits for enterprises either wholly or partly engaged in export production, only
those involved in industrial manufacturing or assembly activities on Panamanian territory, including
small- and medium-sized industrial enterprises, are eligible under this programme.
EPZ
Reply No. 2
All natural and legal persons, whether nationals or foreigners, engaged in the production of
goods and services either as manufacturing, assembly and processing enterprises for finished or semi-finished goods or as services export and general service enterprises, are eligible under this
programme.
Sales of raw materials, semi-finished goods and packaging supplied by domestic enterprises
to the industries located in the export processing zones are also eligible for the programme incentives,since they are considered to be exports.  They are not eligible for the tax credit certificate, however.
3. Which products fall under the spectrum of "non-traditional goods"?
CAT
Reply No. 3
Pursuant to Articles 1 and 2, Chapter 1, of Law No. 108 of 30 December 1974 on export
incentives, regulated by Decree No. 5 of 8 February 1991, and Law No. 4 of 19 February 1993, non-traditional goods are considered to be those wholly or partly produced or processed in Panama, as
defined by the 1996 Harmonized System, with the following exceptions:
(a) Cane sugar;
(b) bananas and banana purée:G/SCM/Q3/PAN/7
Page 14
1. bananas;
2. banana purée;
(c) honey and cane molasses:
1. sugarcane honey;
2. cane molasses;
(d) cocoa beans;
(e) raw coffee (beans);
(f) shrimps, fresh, chilled or frozen;
(g) bovine meat, fresh, chilled or frozen;7
(h) bovine cattle leather, not tanned;(i) wooden logs;
(j) bovine cattle, swine and horses:
1. bovine cattle, other than pure-bred;
2. swine, other than pure-bred;
3. horses, other than pure-bred;
(k) fish flour;
(l) other oils of fish and marine mammals;(m) scrap metal;
(n) hawk-bill turtles, unworked;
(o) extracts of (citrus) fruit;
(p) petroleum and petroleum products;
(q) sales under bilateral, free or preferential trade agreements;(r) minerals, metals and metal products.
4. The tax credit is described as 15 per cent of the national value-added of the exported
goods.  Is this a refundable tax credit if  taxes owing are less than the tax credit?
Reply No. 4
The value of the CAT must be used in its entirety to pay income tax, dividend tax,
supplementary tax, property tax and the tax on the transfer of tangible personal property enjoying tax
credit (ITBM).  Holders may use the certificate to settle tax amounts due.
__________
                                                     
7 Under Law No. 4 of 19 January 1993, bovine meat, fresh, chilled or frozen, is considered to be a non-
traditional product.