./.WORLD TRADE
ORGANIZATIONG/SCM/N/38/PAN
16 November 1998
(98-4551)
Committee on Subsidies
and Countervailing MeasuresOriginal:  Spanish
SUBSIDIES
New and Full Notifications Pursuant to Article XVI:1 of
the GATT 1994 and Article 25 of the SCM Agreement
PANAMA
The following communication, dated 29 October 1998, has been received from the Permanent
Mission of Panama.
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A. GRANTING OF TAX CREDIT CERTIFICATES (CAT)
1. Description of subsidy
The Tax Credit Certificate (CAT) is a subsidy to which all enterprises exporting
non-traditional goods are entitled.
The CAT is a negotiable, non-interest-bearing document (bond) payable to the Ministry of
Finance and the Treasury, with a maturity period of nine months.  It is issued in the national currency
and used to pay income tax, dividend tax, supplementary tax, property tax, import tax and the Tax on
the Transfer of Tangible Personal Property (ITBM).  The CAT lapses four years after its date of issue.
In order to be eligible for the CAT, the enterprise exporting non-traditional goods must show
a minimum share of 20 per cent in national content and national value added.  As a rule, the higher the
national content, the higher the amount of the CAT.
2. Period of notification
The notification covers the period from September 1997 to 31 December 1997.
3. Policy objective
Basically to promote non-traditional exports of goods wholly or partly produced or processed
in Panama.
4. Background and authority
The CAT was introduced and is granted under Law 108 of 30 December 1994 and its
successive amendments of which the most recent dates back to 1 September 1997 through Executive
Decree No. 101.  This legislation provides fo r an incentive mechanism for non-traditional exports
wholly or partly produced or processed in Panama, in the form of a certificate or document of a value
equivalent to 20 per cent of the national value added of the exported goods.G/SCM/N/38/PAN
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5. Form of the subsidy
Working capital contribution amounting to 20 per cent of the national value added of the
exported goods.
6. Beneficiaries and mechanism
All natural and legal persons exporting non-traditional products.  The mechanism operates on
the basis of non-traditional exports of goods wholly or partly produced or processed in Panama.  The
value of the CAT is equivalent to 20 per cent of the national value added of the goods exported based
on production costs.
7. Estimated amount of the subsidy
According to the information provided by the Panamanian Foreign Trade Institute (IPCE) on
the basis of resolutions issued during the period from September to December 1997, the total amount
of CATs granted amounted to B 8,234,118, corresponding to an f.o.b. export value of B 52,169,118.
Of this total amount, 34 per cent was granted for agricultural goods, 34 per cent for manufactured
goods, 20 per cent for marine products and 12 per cent for agro-industrial products.
8. Duration of the subsidy
With the promulgation of Law 28 of 20 June 1995 "adopting measures for the
universalization of tax incentives to production and providing for other measures" it was established
that the CAT would amount to 20 per cent of the national value added until 31 December 2000.  From
2001 to December 2002, the CAT would be reduced to 15 per cent of the national value added.  Theincentive would be eliminated as of 2003.  It was further established that enterprises benefiting from
any other system of tax exemption would not be eligible for this incentive.
9. Trade effects of the subsidy
There is no information available on the trade effects of the subsidy.
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