WORLD TRADE  
ORGANIZATION  G/SCM/Q3/PAN/13 
8 July 2002 
 (02-3740) 
Committee on Subsidies and 
Countervailing Measures Original:   Spanish 
 
 
SUBSIDIES 
 
Request Pursuant to Article 27.4 of the Agreement on  
Subsidies and Countervailing Measures  
 
Replies by PANAMA to Questions Posed by the  
UNITED STATES1 
 
 
 The following communication, dated 17 June 2002, has been received from the Permanent 
Mission of Panama.  
_______________ 
  
 I have the honour to transmit herewith, on be half of the Government  of the Republic of 
Panama, documents containing the legislation reque sted and replies to the questions posed by the 
delegation of the United States on 28 May 2002 in connection with Panama's request for an extension of the period for application of subsidies under Article 27.4 of the Agreement on Subsidies and 
Countervailing Measures, circulated in documents G/SCM/N/74/PAN/1 and 2. 
 
 A detailed list of the legislation provided is at tached.  None of the legislation is restricted 
because these laws, decrees and regulations must meet the requirement of publication laid down in the 
laws of the Republic of Panama in order to ente r into force and they were duly published in the 
Official Journal ( Gaceta Oficial ). 
 
                                                     
 
1 G/SCM/Q3/PAN/12. G/SCM/Q3/PAN/13 
Page 2  
 
Export Processing Zones 
Official Industry Register 
Tax Credit Certificates (CAT)  
 
Question 1
 
 
 Please provide the implementing legislation, and any relevant amendments, for each of 
the programmes for which an extension, pursu ant to Article 27.4 of the ASCM, is being 
requested. 
 
Reply  
 
 Panama is attaching legislation and amendmen ts concerning the programmes for which it has 
requested an extension of the period of applicatio n (Tax Credit Certificates, export processing zones 
and Official Industry Register).  See Annex I. 
 
Tax Credit Certificates (CAT)  
 
Question 2  
 
 The United States would like to thank Panama for its very complete responses to our questions concerning this programme.  However,  we remain concerned with the national 
content and national value added requirements under this programme.  The prohibition of 
subsidies under Article 3.1(b) of the ASCM includes subsidies contingent upon the use of 
domestic over imported goods "whether solely or as one of several other conditions ".  In 
response to our questions (G/SCM/Q3/PAN/11), you state that "provisions relating to the use of 
domestic raw materials for the calculation of th e 20 per cent in national content and national 
value added only constitute one of the elements to be taken into account in determining those 
values".  Consequently, it would appear, for exam ple, that a company that imported all of its 
raw materials incorporated in a product for export would not be eligible to receive the tax 
credit under this programme.  Please comment.  
Reply
 
 
 In response to the comment by the United St ates on Tax Credit Certificates (CAT), the 
Republic of Panama wishes to state that any enterprise that uses only imported raw materials in manufacturing its exports would be eligible for the benefits under the CAT provided that the national 
value added or national content is not less than 20 per cent.  This is the case for the following 
activities:  manufacture of clothing, prevulcani zed rubber treads, aluminium profiles, cleaning 
products, metal articles, plastic articles, freight co ntainers, manufacture of tin containers, medicines, 
inter alia:  these benefit from the CAT and are manufac tured using 100 per cent of imported raw 
materials. 
 
Question 3
 
 
 In G/SCM/N/71/PAN, Panama provided statistical data concerning this programme.  
With regard to that data, could Panama plea se provide a breakdown of the major industry 
sectors included in the heading "Industrial", as well as the exports of each of those sectors in the years provided? 
 
Reply
 
 
 See Table 1.  G/SCM/Q3/PAN/13 
 Page 3 
 
 
 
Table 1  
 
AMOUNTS IN RESPECT OF DECISIONS GRANTING TAX CREDIT 
CERTIFICATES IN THE REPUBLIC OF PANAMA BY PRODUCT 
AND BY INDUSTRIAL SECTOR, 1998-2000 
(In Balboas)1 
 
1998 1999 3000 
PRODUCT 
CAT VALUE FOB VALUE CAT VALUE FOB VALUE CAT VALUE FOB VALUE 
GRAND TOTAL       
 25,294,199.75 175,177,275.19 34,892,115.51 197,399,699.98 37,527,168.98 203,508,046.31
Industrial Sector2   
   
FEEDS FOR AQUACULTURE  48,063 530,937 13,564 113,033 58,129 466,697
METAL FILING CABINETS  19,361 156,923 11,417 103,791 28,678 262,341
CLEANING PRODUCTS  3,195,984 16,094,397 3,027,155 15,135,775 2,893,617 14,753,151
RUBBER FOR RETREADING 
TYRES  67,994 693,722 54,335 452,792 44,136 380,223
PLASTIC BAGS  5,834 117,675 0 0 0 0
PAPERBOARD BOXES  5,933 354,436 0 0 21,388 60,316
SHIRTS  0 0 65,515 818,938 36,316 447,203
FISHMEAL  0 0 0 0 47,300 64,400
COACHWORK  0 0 0 0 4,683 64,256
BEER  61,528 833,599 70,818 643,800 64,065 584,648
CLOTHING  1,189,487 10,596,468 1,529,016 13,900,145 799,729 7,438,517
COSMETICS  390,123 1,448,643 2,820,830 10,447,519 1,093,022 4,328,130
MOLA ARTWORK , TRUNKS 
AND WOOD HANDICRAFTS  0 0 428,146 2,253,400 821,459 4,279,095
FLEXIBLE CONTAINERS  0 0 1,693 169,300 1,787 156,562
TIN PLATE CONTAINERS  8,883 54,438 0 0 0 0
SPICES , TREATMENTS AND 
ANTIOXIDANTS  3,877 553,110 65,076 1,084,600 4,161 69,739
CARBON DIOXIDE GAS , LEAD , 
ANTIMONY , HYDROGEN  173,440 2,369,050 226,854 3,240,771 126,161 1,775,172
CHEWING GUM  27,841 268,212 0 0 200 60,763
LATEX GLOVES  326,677 2,301,386 179,926 1,058,388 182,929 1,071,616
GOLD JEWELLERY  0 0 0 0 0 0
SOFT TOYS  0 0 0 0 8,880 65,578
DOOR FRAMES  23,183 182,248 18,379 122,527 33,136 227,370
MEDICINES  176,566 5,004,661 226,805 1,512,033 437,531 9,534,662
ALUMINIUM PAPER  0 0 0 0 0 0
TOILET PAPER , SERVIETTES  0 0 54,416 906,933 47,841 897,286
MEDIUM AND LINER PAPER  366,478 4,921,642 261,513 4,358,550 208,1362 3,246,615
ALUMINIUM PROFILES  64,635 941,860 888,055 14,800,917 319,143 4,999,003
PLYWOOD  0 0 6,970 58,083 5,641 47,777
FOOD PRODUCTS  795,517 29,551,869 264,145 1,886,750 277,502 1,923,951
SOFT DRINKS AND MIXERS  90,456 880,427 264,554 1,889,671 57,163 408,893
ROLLS FOR CASH REGISTERS  0 0 3,517 14,068 34 540
RUM 665,239 2,914,577 223,807 1,598,621 203,149 1,454,458
SEPARATORS FOR EGGS  147,155 733,871 246,853 1,073,274 205,463 903,945
DEHYDRATED SOUPS  2,305 25,488 1,247 13,856 0 0
CLAY TILES  0 0 5,976 54,327 5,096 45,360
PAPER CUPS  0 0 0 0 56,766 889,018
SUBTOTAL 7,856,560 81,528,641 10,960,582 77,711,863 8,093,266 60,907,286
 
 1 One Balboa is equivalent to US$1. 
 2 The industrial sector does not correspond to "industrial goods" according to the WTO Agreements. 
 
Source : Export Incentive Section, Vice-Ministry of Fore ign Trade, Panamanian Ministry of Trade and 
Industry. G/SCM/Q3/PAN/13 
Page 4  
 
 
Export processing zones 
 
Question 4
 
 
 In G/SCM/N/71/PAN, Panama provided statistical data concerning this programme.  
With regard to those data, could Panama please  also provide information concerning the major 
industry sectors benefiting from this programme, including the exports of each of those sectors 
in the years provided? 
 
Reply  
 
 The major activities benefiting from the export processing zone programme are listed in the 
following table: 
 
Table 2  
 
MAJOR ACTIVITIES BENEFITING FROM THE EXPORT PROCESSING ZONE 
PROGRAMME ACCORDING TO THE VALUE EXPORTED , 1997-2000 
(In Balboas)1 
 
  Year 
Product/activity 1997 1998 1999 2000 
Medicines  4,250,995  10,880.741  7,781,787  11,672,285 
Toothpaste  0  1,820,207  4,121,411  1,917,900 
Vaccines  2,660,581  3,674,694  2,166,390  1,750,917 
Other plastic articles  91,598  1,080,972  799,478  777,012 
Machinery, equipment and 
spare parts  25,252  164,342  310,729  744,815 
Copper or aluminium scrap  0  0  12,003  227,401 
Ballpoint pens and parts thereof  1,946,035  3,495,269  748,933  180,498 
Other products2  1,294,013  2,715,387  1,130,311  2,809,405 
 TOTAL 10,268,474  23,831,612  17,371,041  20,080,232 
 
 1 One Balboa is equivalent to US$1. 
 2 Other products or activities include the following:  manufacture of clothing, hygiene products, glues, 
office supplies, accessories for motor cycles, synthetic fabrics, packaging and wrapping materials, radiators, 
inter alia . 
 
Source : Export Processing Zones Section, Vice-Ministry of Foreign Trade, Panamanian Ministry of 
Trade and Industry.  G/SCM/Q3/PAN/13 
 Page 5 
 
 
LIST OF LEGISLATION 
 
I. EXPORT PROCESSING ZONES 
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 Journal No. 22.175 
of 2 December 1992. 
 
2. Executive Decree No. 28 of 19 May 1993, establishing regulations under Law No. 25 of 
30 November 1992.  Published in Official Journal No. 22.289 of 20 May 1993. 
 3. Executive Decree No. 1-D of 28 January 1994, establishing regulations under Law No. 25 of 
30 November 1992 with regard to the movement of goods by enterprises subject to the Regime of 
export processing zones.  Published in Official Journal No. 22. 510 of 7 April 1994. 
 
4. Law No. 28 of 1 February 1996, cancelling the special passports issued on the basis of Law No. 25 of 1992 and introducing other measures.  Published in Official Journal No. 22.965 of 12 January 1996. 
 
5. Decree Law No. 3 of 7 January 1997, introducing an additional article into Law No. 25 of 
1992, establishing a special, integrated and simplif ied regime for the establishment and operation of 
export processing zones.  Published in Offi cial Journal No. 23.201 of 11 January 1997. 
 
II. OFFICIAL INDUSTRY REGISTER 
1. Law No. 3 of 20 March 1986, adopting a regime of incentives for the promotion and 
development of the national industry and exports.  Published in Official Journal No. 20.518 of 
24 March 1986.  2. Law No. 28 of 20 June 1995, adopting measures extending the scope of production tax 
incentives and establishing other provisions.  P ublished in Official Journal No. 22.810 of 22 June 
1995. 
 
3. Executive Decree No. 274 of 29 December 199 5, establishing regulations under Law No. 28 
of 20 June 1995, regarding the general application of tax incentives.  Published in Official Journal 
No. 22.956 of 22 January 1996. 
 
4. Law No. 26 of 4 June 2001, amending Articles 23 and 25 of Law No. 28 adopting measures 
extending the scope of production tax incentives.  Published in Official Journal No. 24.317 of 6 June 
2001. 
 III. TAX CREDIT CERTIFICATES (CAT) 
1. Law No. 108 of 20 December 1974, granting export incentives.  Published in Official Journal 
No. 17.776 of 6 February 1975. 
 2. Law No. 2 of 16 January 1991, repealing Cabinet Decree No. 64 of 23 February 1990 and bringing back into force Law No. 108 of 30 December 1974, as amended by Law No. 71 of 
22 December 1976 and Law No. 27 of 23 August 1977, and amending Article 8(d) thereof.  Published 
in Official Journal No. 21.712 of 25 January 1991. 
 
3. Executive Decree No. 5 of 8 February 1991, adopting a new regulation for the Application of 
Law 108 of 30 December 1974 on Export Incentives.  Published in Official Journal No. 21.753 of 27 
March 1991. G/SCM/Q3/PAN/13 
Page 6  
 
 
4. Law No. 4 of 19 January 1993, provisiona lly and temporarily suspending the effects of 
Article 2(g) of Law No. 108 of 30 December 1974, brought back into force by Law No. 2 of 
16 January 1991, and introducing other provisions .  Published in Official Journal No. 22.210 of 
22 January 1993. 
 
5. Law No. 12 of 23 April 1993, amending Article 3 of Law No. 4 of 19 January 1993.  
Published in Official Journal No. 22.271 of 26 April 1993. 
 
6. Executive Decree No. 80 of 29 July 1994, adopting certain measures for the application of Law No. 108 of 30 December 1974.  Published in  Official Journal No. 22.606 of 23 August 1994. 
 
7. Executive Decree No. 45 of 1 August 1996, amending Article 22 of Executive Decree No. 5 
of 8 February 1991 regulating Law No. 108 of 30 December 1974, which was brought back into force 
by Law No. 2 16 January 1991 and amended by Law No. 28 of 20 June 1995.  Published in Official 
Journal No. 23.097 of 8 August 1996.  
8. Executive Decree No. 101 of 1 September 1997, amending an article of Decree No. 5 of 
8 February 1991.  Published in Official Journal No. 23.372 of 8 September 1997. 
 
9. Law No. 28 of 20 June 1995, adopting measures extending the scope of production tax incentives and establishing other provisions.  Published in Official Journal No. 22.810 of 22 June 1995.
2 
 
10. Executive Decree No. 274 of 29 December 19 95 establishing regulations under Law No. 28 
of 20 June 1995, regarding the general application of tax incentives.  Published in Official Journal 
No. 22.956 of 22 January 1996.3 
 
                                                      
2 See Section 2 of Part II. 
3 See Section 3 of Part II.  G/SCM/Q3/PAN/13 
 Page 7 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
ANNEX I 
 
 
Legislation and Relevant Amendments Covering the Export Processing 
Zones Programme, the Official Industry Register, and 
Tax Credit Certificates (CAT)
1 
 
                                                      
1 Unofficial version of the Spanish text.  The official documents have been transmitted in hard copy 
and are available in the Secretariat for consultation. G/SCM/Q3/PAN/13 
Page 8  
 
LAW NO. 25
1 
30 November 1992 
 
Establishing a Special, Integrated and Simplified Regime for the Establishment 
and Operation of Export Processing Zones 
 
THE LEGISLATIVE ASSEMBLY 
 
HEREBY DECREES: 
 
CHAPTER I 
Purpose and Scope of Application 
  
 Article 1.   The purpose of this Law is to create a special, integrated and simplified regime for 
the establishment and operation of export processing  zones that contribute to Panama's development 
and the generation of jobs and foreign exchange by integrating Panama into the global economy 
through the export of goods and services, promoting investment and, at the same time, fostering the 
country's the scientific, technological, economic, cultural, educational and social development. 
 
 Article 2.   For the purposes of this Law, exports shall be understood to mean: 
 1. The shipment abroad of goods or services pr oduced, manufactured, asse mbled or processed in 
the export processing zones, even when they derive from agreements concluded in Panama. 
 
2. The sale of the goods and services referred to in the preceding paragraph to enterprises 
established in the same zone, in other processing zo nes, in the Colón free zone or in other free zones 
operating in the Republic of Panama, for the purposes of sale on foreign markets. 
 
3. The transfer of semi-finished products to ente rprises situated in the same zone or in other 
export processing zones in Panama in order to comp lete the manufacturing or assembly process or for 
the purposes of special trea tment, quality testing, repair or mo dification, packaging and subsequent 
shipment abroad. 
 
4. The sale of the goods and services referred to  in paragraph 1 of this Article for shipment 
abroad.  
 PARAGRAPH .  The import of final products for re-export without any processing that 
involves local value added shall not be a llowed within export processing zones. 
 
 Article 3.  This Law shall apply throughout the area of the export processing zone, to its 
promoters and operators and to any natural or legal persons established within the zone in any of the 
following categories:  manufacturing enterprises, assembly enterprises, enterprises that process 
finished or semi-finished products which involve lo cal value added, enterprises that export services, 
and general services enterprises. 
 
 Article 4.   The National Commission on Export Processing Zones, subject to approval by the 
Cabinet Council, shall authorize the establishment of  export processing zones in specific and clearly 
defined areas in the Republic of Panama in accord ance with the requiremen ts, conditions, benefits, 
incentives and provisions laid down in this Law. 
 
                                                     
 
1 Published in Official Journal No. 22.175 of 2 December 1992.  G/SCM/Q3/PAN/13 
 Page 9 
 
 
 The National Commission on Export Processing Zones shall have a period of two (2) months 
in which to authorize or reject requests for the es tablishment of a processing zone, calculated from the 
date of submission of all the documentation required for this purpose according to this Law.  The 
Cabinet Council shall have a period of thirty (30)  calendar days in which to take a decision. 
 
 
CHAPTER II 
National Commission on Export Processing Zones 
  Article 5.
2  The National Commission on Export Processing Zones is hereby created as an 
agency belonging to the Ministry of Trade and Industry and responsible for advising the Executive on all matters regarding the regulation, promotion and development of export processing zones.  It shall 
be composed as follows: 
 
 1. The Minister or Vice-Minister for Trade and Industry; 
  2. The Minister or Vice- Minist er for Finance and the Treasury; 
 
 3. The Minister or Vice-Minister for Planning and Economic Policy; 
 
 4. The Minister or Vice-Minister for Labour and Social Welfare;   5. A representative of the enterpri ses promoting export processing zones; 
 
 6. A representative of the Panamanian Manufacturers' Union (SIP); 
 
 7. A representative of the Panamanian Exporters Association (APEX). 
 
 The representatives of the private sector, and their alternates, shall be freely appointed and 
dismissed by the Executive and shall serve for a period of three (3) years.  They shall be appointed on 
the basis of lists submitted by the representatives of each of these groups. 
 
 Article 6.
3  The National Commission on Export Processing Zones shall have a Technical 
Secretariat under the responsibility of the Panamanian Foreign Trade Institute (IPCE) to assist it in 
the fulfilment of its duties.  The Commission's Tech nical Secretary shall attend all its meetings with 
the right to speak, but not to vote, in the proceedings.   
 Article 7.  The National Commission on Export Proc essing Zones shall have the following 
functions: 
 
1. To recommend to the Executive the measur es and action needed or appropriate for the 
establishment, promotion and development of export processing zones. 
 
2. To approve or cancel licences for the functioning and development of export processing zones 
and licences for the enterprises established in such zones. 
 
3. To ensure strict compliance with this Law and the relevant regulations and rules. 
 4. To keep the Official Register of Export Processing Zones and the Official Register of 
Enterprises established in Export Processing Zones. 
 
                                                     
 
2 Repealed by Article 10 of Law No. 53 of 21 July 1998 (Official Journal No. 23.593 of 24 July 1998). 
3 Repealed by Article 10 of Law No. 53 of 21 July 1998 (Official Journal No. 23.593 of 24 July 1998). G/SCM/Q3/PAN/13 
Page 10  
 
5. To approve the appointment of the Commission's Technical Secretary. 
 
6. To adopt its rules of procedure. 
 
 Article 8.  The Commission shall hold regular meetings once a month on the date it 
determines and special sessions whenever convened at  the initiative of its Chairman, or at the request 
of three (3) or more members. 
 
 Article 9.  Any request to be submitted or proced ure to be followed before Government 
authorities by enterprises promoting, operating or  using export processing zones must be channelled 
through the Technical Secretariat of the National Commission on Export Processing Zones.  The Technical Secretariat shall establish a single proced ure for these purposes in its offices and in each 
processing zone where the volume of operations so requires. 
 
 
CHAPTER III 
Export Processing Zones, its Promoters and Operators 
  Article 10.  Export processing zones are defined as specially delineated free zones and free 
enterprise zones that have all the infrastructure, installations, buildings, systems and support services 
required, together with the necessary operationa l organization and administrative management to 
allow them to operate with maximum efficiency and enable enterprises from all parts of the world producing goods and services for export to set up in such zones. 
 
 The immediate objective of the export processi ng zones shall be to provide optimal conditions 
of operational efficiency and comparative advantages so as to ensure that exporting enterprises 
achieve high levels of competitiv eness in international markets. 
 
 Article 11.  Export processing zones may be private, public or mixed: 
 
1. Private:  zones whose investors are natural and/or legal persons, whether Panamanian and/or 
foreign.  Their owners shall have the authority and responsibility for their establishment, operation 
and administration in accordance with the rules and pr inciples applicable to the free enterprise system 
and private property, as well as other provisions in the legislation of the Republic of Panama. 
 
2. Public:  zones in which the sole investor is the St ate.  Their establishment, development, 
operation and administration shall be  the responsibility of a State entity or a private enterprise that has 
been given a management contract accordi ng to the legal procedures prescribed. 
 
3. Mixed:  zones that are owned by both the State and Panamanian or foreign investors.  Their 
development, operation and management shall be the responsibility of the State or a private 
enterprise. 
 
 Article 12.   Responsibility for the establishment, development, and operation of an export 
processing zone shall involve two (2) basic function s:  promotion and operation.  These functions may 
be exercised simultaneously or separately by the pr omoters and operators of export processing zones.  
For the purposes of the Law, the following definitions shall apply: 
 1. Promoter of export processing zones :  a natural or legal person, whether private or public, 
Panamanian or foreign, who develops or acquires the concept and transforms it into a feasible project;  
invests and contacts investors for the purpose of ob taining capital;  purchases or leases the land;  
negotiates with credit agencies in order to obtain financing;  organizes, directs or employs specialized 
services for the international market and attracting clients;  defines and approves the administrative 
and operational organization and systems under which the processing zone will function;  and directs  G/SCM/Q3/PAN/13 
 Page 11 
 
 
or supervises the conduct of the work, inter alia .  A natural or legal person acting as a promoter may 
also act as an operator. 
 
2. Operator of export processing zones :  a natural or legal person, whether private or public, 
Panamanian or foreign, who assumes responsibility  for the management direction, operation and 
supervision of the overall functioning of the proc essing zone and for ensuring that it functions as 
efficiently as possible so that users enjoy the optima l conditions that allow them  to achieve high levels 
of competitiveness. 
 
 Article 13.   The setting up of export processing zones authorized under this Law shall include 
the following activities: 
 1. Development of land and construction of buildings for workshops, factories, warehouses, 
services, ancillary activities and any necessary and ap propriate infrastructure for the functioning of 
the processing zones, either for the person's own use or for sale or leasing to third parties established 
within such zones. 
 2. Sale or lease of plots of land to natural or legal persons, whether Panamanian or foreign, 
established within the processing zone s or in order to carry out any of the activities authorized by this 
Law. 
 3. Building, promoting and developing centres for technical training, medical centres, sports 
centres and recreation areas, as well as establishmen ts for public and personal services to users and 
workers in the processing zones, including the transport of passengers and freight. 
 
4. Installation and operation of systems for the production and supply of gas, water, drains, 
electric power, local and international telecommunica tions and data transmission, treatment of waste 
water, disposal of refuse and industrial waste, se curity and other systems needed for the operation of 
the processing zones, subject to coordination with the competent public authorities.  In designing and 
carrying out such works, the construction standards a nd specifications used by public systems shall be 
followed so as to facilitate interconnection whenev er necessary, except wher e the installations and 
systems require sophisticated technology that is not used in the public systems. 
 5. Development of projects for housing, hotels, hospitals, international education centres and 
housing facilities for the executive and technical staff and their families who are employed or 
involved in business in the processing zones. 
 
6. Building and/or directly operating or subcontracting the operation of airports, ports, docks, 
dry docks, sites for loading and unloading, roads, streets, railway stations and railway lines for 
loading and unloading freight on land in conformity with the regulations in force and in coordination 
with the competent government authorities. 
 
 It shall be understood that the conduct of such activities shall be subject to the relevant legal 
provisions. 
 
 Article 14.   A licence for export processing zones is  hereby created.  Any natural or legal 
person, whether Panamanian or foreign, wishing to  act as a promoter and/or operator of an export 
processing zone shall obtain such a licence.  The licence shall be granted by the National Commission 
on Export Processing Zones.  An Official Register of Export Processing Zones is also created and 
within the Panamanian Foreign Trade Institute. 
 G/SCM/Q3/PAN/13 
Page 12  
 
 Article 15.   In order to obtain a licence for an ex port processing zone, applicants shall meet 
the following requirements: 
 
1. Submit a formal request on stamped paper to the National Commission on Export Processing 
Zones, through its Tech nical Secretariat;  
 
2. Provide the relevant authorization allowing establishment in the processing zone granted by 
the National Commission on Export Processing Zones; 
 
3. Attach to the application details concerning the natural or legal person, accompanied by an authenticated copy of his or her personal identity car d or passport in the case of a natural person, the 
articles of incorporation and an atte station that the enterprise is duly in operation;  the names of its 
directors and legal representatives in the case of legal persons; 
 
4. Attach banking references and/or referenc es from local or foreign businesses that are 
recognized to be solvent;  and  
5. Attach a document containing the following information: 
 
 (a) Description of the objectives, activities, structure, organization and services which the 
processing zone intends to offer; 
  (b) surface area and location of the processing zone; 
 
 (c) ownership deed or lease for the land; 
 
 (ch) the initial investment and projected future investment;  
 
 (d) preliminary financial projections;  and 
 
 (e) proposed timetable for carrying out the project. 
 
 Article 16.  After the licence for the export processing zone licence has been granted, the 
enterprise shall: 
 
1. Invest in the development of the processing zone an amount that is no lower than that 
proposed in its application and indicated in the Resolution authorizing the establishment of the 
processing zone. 
 
2. Within a period not exceeding one (1) year, commence the investment referred to in the 
preceding paragraph, the period to be  calculated from the date of regi stration in the Official Register 
of Export Processing Zones. 
 
3. Recruit Panamanian workers, with the ex ception of foreign experts, technicians and 
managerial staff needed for the development of the activity concerned, in accordance with the 
provisions of the Labour Code. 
 
4. Provide technical training programmes for th e vocational training of Panamanian workers. 
 5. Comply with the provisions of this Law a nd the terms on which the licence was granted and 
submit an annual report on its activities to the National Commission on Ex port Processing Zones. 
 
6. Comply with the laws in force on the protection and conservation of the environment and 
with the urban planning and development standards and specifications, with the exception of those  G/SCM/Q3/PAN/13 
 Page 13 
 
 
which, due to their obsolescence or inconsistency with the sophisticated designs and technologies 
used in the export processing zone, would be c ounter-productive and affect the efficiency and 
operational dynamism of the zone. 
 
 Article 17 .  A licence granted to promoters and/or operators of export processing zones shall 
be for an indefinite period, but it may be withdrawn or cancelled in accordance with the provisions in 
Chapter VI of  this Law. 
 
 Article 18.  National or municipal land that has been leased or conceded for the establishment 
and development of export processing zones may not be  sold or transferred and shall be returned to 
the State or respective municipal authority if the project is cancelled or ceases to operate as a 
processing zone. 
 
 Where the cancellation or cessation of operation ar e due to causes attributable to the operator 
of the export processing zone, permanent infrastruc ture such as roads, drains, pavements, paths, 
lighting and such like shall also revert to the State.  
 Article 19.  Export processing zones may be establishe d in any part of Panamanian territory 
provided that their activities do not have any destructive or irreversible impact on the site's eco-
system and do not violate the legal provisions in force or the rights of third parties. 
  
CHAPTER IV 
Enterprises Established in Export Processing Zones 
 
 Article 20.  Natural or legal persons, whether Panamanian or foreign, may become 
established in export processing zones for the purpose  of producing goods or services in the following 
categories: 
 
1. Manufacturing enterprises:  Enterprises that  manufacture goods for export by processing raw 
materials and semi-finished products, including those of agricultural, livestock, forestry and marine 
origin. 
 
2. Assembly enterprises:  Enterprises that manu facture finished or semi-finished products for 
export by putting together inputs and semi-finished parts. 
 3. Enterprises processing finished or semi-finished products:  Enterprises that receive finished or 
semi-finished products, spare parts, components, accessories and/or parts in liquid or solid form for 
the purpose of tropicalization treatment or processe s, alteration, repair, cl eaning, quality testing, 
calibration, approval, analysis, purification, pain ting, application of anti-corrosives, wrapping, 
packaging, grinding, recycling and/or any type of manual or mechanical physical or chemical process 
needed to permit the export of a specific good. 
 
4. Enterprises exporting services:  enterprises th at provide services to outside users, in other 
processing zones or within the same zone provided that their direct or indirect purpose is to support or 
complement an export activity or the services themselves are an export activity. 
 
 Services provided to outside users include a ll international services  commonly known as 
"offshore" transactions such as trading and intern ational marketing, insurance, re-insurance, banking, 
finance, auditing, management, br okerage, consulting and similar activities.  It also includes all 
services related to telecommunications and computers for the entry, processing, storage and 
transmission of data, organization, management and operation of databases and basic and applied 
scientific and technological research. 
 G/SCM/Q3/PAN/13 
Page 14  
 
 Services to users in other processing zones or within the same zone include all technical 
support services, maintenance and repair of equipment, machinery, furnishings, buildings, 
installations, transport, handling and storage of freight, security, administrative, accounting, 
consulting and other internal services needed to st reamline and the export of goods and services and 
make it efficient. 
 
5. General services enterprises:  enterprises that provide personal services to workers and 
visitors such as restaurants, laundries, pharmacies, beauty salons, gymnasiums and other such 
services. 
  Article 21.  Natural or legal persons, whether Panamanian or foreign, established in export 
processing zones for the purpose of carrying out activities related to the production of goods and 
services intended for export may bring in, store, exhibit, pack, unpack, manufacture, process, produce, 
examine, mount, assemble, refine, distil, mill, grind,  liquefy, equip, cut, work, purify, mix, transform, 
repair, test, modify, clean, analyse, crush, recycle, pack, wrap, market, finance, insure, administer, 
purchase, sell, exchange, and handle any type of goods, products, raw materials, inputs, components, 
packaging and wrapping materials and any other commercial articles intended for export, with the 
exception of those that harm or cause negative changes to the local or global ecology or are 
specifically prohibited by the laws of the Republic of Panama. 
 
 They may also produce, create, develop, upgrade and provide any category of service of any type that may be exported and/or is required to  allow the exporting enterprises to carry on their 
activities in global markets at a high level of compet itiveness, as well as all their other activities that 
are not specifically prohibited by the Law. 
 
 Article 22.  A licence for enterprises established in expor t processing zones, to be granted by 
the National Commission on Export Processing Zones is hereby created.  An enterprise that has been 
granted such a licence shall be registered in the Offi cial Register of Enterpri ses established in Export 
Processing Zones, which shall operate under the Panamanian Foreign Trade Institute. 
 
 Article 23.  In order to obtain a licence and be regi stered in the Official Register of 
Enterprises established in Export Processing Zones referred to in the preceding Article, enterprises 
shall provide the following: 
 
1. In the case of natural persons, full name, nationality, personal identity card or passport 
number.  In the case of legal persons, the name of the business, the name of the country under whose laws the business was established, details of registra tion in the Public Register, and particulars of its 
legal representative and the registered agent; 
 
2. A document containing the following information: 
 
 (a) The activity or types of production to be undertaken; 
 
 (b) origin and details concerning the raw materials, materials, inputs, equipment, 
 machinery, accessories and other goods to be used; 
 
 (c) number of jobs it is intended to create; 
  (ch) initial investment and projected future investment;  
 (d) timetable for co mpleting the project. 
 
3. Copy of the articles of incorporation and amen dments thereto.  Recent certificate attesting to 
its legal status, directors and registered agents;  G/SCM/Q3/PAN/13 
 Page 15 
 
 
 
4. Certificates attesting to pa yment of national and municipal taxes issued to the applicant; 
 
5. Certificate attesting that no tax fraud has been committed, issued to the applicant by the 
Ministry of Finance; 
 
6. Two (2) identical passport-sized photographs of the legal representative; 
 
7. Power of attorney given to a practising lawyer; 
 8. Single tax payers registration number (RUC) issued by the Ministry of Finance;  
9. Certificate on stamped paper attesting to th e capital invested, issued by an authorized 
chartered accountant (CPA);  and 
 
10. Certificate issued by the promoter of the proc essing zone attesting that the applicant has been 
authorized to become established in the zone. 
 
 Article 24.  Enterprises or industries authorized to se t up in export processing zones shall be 
obliged to comply with the following: 
 1. Invest in its industrial activities an amount no less than the capital indicated in the relevant application; 
 
2. Initiate the investment within a period not exceedi ng one (1) year as of the date of registration 
in the Official Register of Enterprises Established in Export Processing Zones; 
 
3. Commence production within a period not exceeding two (2) years as of the date of 
registration in the relevant Register, except in cas es where the type of production requires a longer 
period; 
 
4. Recruit Panamanian workers, with the exception of foreign experts, technicians and 
managerial staff needed for the conduct of operations.  Provide Panamanian workers with 
technological training facilities appropriate to the pa rticular activities of their respective production 
lines and related activities; 
 5. Comply with the current regulations or future regulations on the recovery and protection of 
the environment, control and elimination of pollution, conservation of green and marine zones, labour, 
health and security measures and all other provisions prescribed for the protection of flora and fauna;  
and 
 
6. Provide the National Commission on Export Processing Zones with an annual statistical 
report containing the following information:  number of jobs, investment made, volume of exports, 
type of exports (goods or services), output, inputs used, (amount and type) and major markets. 
 
 Article 25.  An enterprise's registration in the Official Register of Enterprises Established in 
Export Processing Zones shall be ordered in a Resolution issued by the National Commission on 
Export Processing Zones and it shall give the holde r the right to enjoy the benefits and incentives 
provided under this Law as of the date of its issue.   A duly authenticated copy of the Resolution shall 
be transmitted to the enterprise concerned.  Resoluti ons issued in conformity with the provisions of 
this Article shall be published in the Official Industrial Property Bulletin. 
 
 Article 26.   Enterprises established in export proc essing zones may temporarily transfer raw 
materials and semi-finished products to enterprise s located outside these processing zones for the G/SCM/Q3/PAN/13 
Page 16  
 
purpose of manufacture, assembly, processing or treatment.  The dispatch of these inputs or products 
from the processing zone shall not lead to any im port taxes or levies during a maximum period of six 
(6) months.  If they do not re-enter the processing zone in their original state or in the form of finished 
products or products with the value added for which they were allowed to be dispatched, the 
enterprise concerned shall pay the corresponding import taxes or levies without prejudice to sanctions 
imposed by the National Commission on Export Proce ssing Zones in conformity with the provisions 
of Chapter VI of this Law. 
 
 PARAGRAPH .  The National Customs Directorate of the Ministry of Finance and the 
Treasury shall be responsible for supervising this mechanism using a simplified system of entry and exit.  
 
CHAPTER V 
Tax Regime for Export Processing Zones 
 
 Article 27.   Export processing zones are tax free zone s, consequently, the enterprises referred 
to in this Law, together with any activities, ope rations, transactions, procedures and transfer of 
movable or immovable property, purchase or im port of equipment and building materials, raw 
materials, equipment, machinery, tools, accessories , inputs and any goods or services required for 
their operations within the processing zones shall be  totally exempt from national direct and indirect 
taxes, contributions, fees, duties and levies.  
 The capital of processing zones and of the enterprises established therein shall be exempt 
from direct or indirect national taxe s, including patent or licence taxes. 
 
 Article 28.   Foreign natural or legal persons shall not be exempt from income tax if the 
legislation in their respective countries allows them to deduct or credit the income tax paid in Panama 
from the taxes to be paid in their countries of origin. 
 
 Article 29.   The following shall be considered exportation provided that it is not the subject 
of a Tax Credit Certificate (CAT):  the sale of raw materials, semi-finished products and packaging 
provided by domestic enterprises to industries established in the export processing zones. 
 
 Article 30.  Income received in the form of dividends  or interest on shares, bonds and other 
titles and securities issued by enterprises covered by this Law an d placed on local or international 
markets shall be free of national direct or in direct taxes, contributions, fees and levies. 
 
 Article 31.   Export processing zones are free trade and free enterprise zones, consequently, 
the rates for services and the prices of products shal l be fixed by each enterprise providing a service or 
producing a good in accordance with the rules of supply and demand, bearing in mind the 
competitiveness required in order to participate successfully in global markets, to which the 
processing zones belong. 
 
 Article 32.   Vessels and aircraft which enter and le ave the export processing zones shall be 
subject to the relevant national and international co ntrols in addition to the formalities laid down in 
the regulations on export processing zones. 
  Article 33.   Where goods produced in export processing zones or introduced into them are 
imported into Panamanian fiscal territory, the corr esponding customs duties and levies shall be paid.  
In such cases, the consular documents shall be re placed by similar documents to be issued by the 
Technical Secretariat of the National Commission on Export Processing Zones. 
  G/SCM/Q3/PAN/13 
 Page 17 
 
 
 Article 34.   Enterprises or industries established in  export processing zones shall not benefit 
from the Tax Credit Certificate (CAT). 
 
 
CHAPTER VI 
Cancellation of Licences and Registration 
  Article 35.   Failure by the promoter, operator or ex porting enterprises established in export 
processing zones to comply with the obligation s regarding the amounts and periods allowed for 
investment, and non-compliance with the other provisio ns of this Law, may give rise to cancellation 
of the respective licence and registration, except where non-compliance is found to be due to force 
majeure  or unforeseen circumstances. 
 
 Article 36.   Non-compliance with the provisions of  this Law shall entail the following 
penalties: 
 1. Issue of a written warning to the enterprise, which shall be given a period of ninety (90) 
calendar days to remedy the deficiency; 
 
2. where the enterprise fails to remedy the deficiency, a fine shall be imposed in accordance 
with the regulations issued for this purpose;  3. where non-compliance persists, a temporary au ditor shall be appointed for a period of one 
hundred and eighty (180) days;   
 
4. if no definitive settlement is reached, th e licence and registration shall be cancelled. 
 
 Article 37.   Cancellation of licences for promoters and operators in export processing zones 
that are private persons shall no t imply transfer of ownership to  the State.  When cancelling the 
licence, the National Commission on Export Processi ng Zones shall appoint an auditor who shall be 
responsible for the following: 
 
1. Ensuring the continued efficient and co mpetitive operation of the processing zone; 
 
2. selling the movable and immovable assets possessed by the promoter in the processing zone 
at a public auction and at market prices.  This pr ocess shall guarantee payment of debts, fulfilment of 
financial commitments and payment of labour that may be due, as well as the operational integrity of 
the processing zone; 
 
3. after the costs of the aforementioned sale have  been deducted, the funds generated by the sale 
shall be handed over to the promoter. 
 
 Article 38.   Any natural or legal person wishing to pu rchase an export processing zone that is 
being sold as a result of cancellation of the licence or because its owner or owners wish to sell it shall 
have previously complied with all the requirements and procedures necessary to acquire a licence for 
an export processing zone. 
 
 Article 39.   The provisions and procedures laid down  in the preceding articles in this Chapter 
shall also apply to enterprises that become  established in export processing zones. 
 
 Article 40.   Cancellation of the licences and registra tion referred to in this Chapter shall not 
exempt those who violate the law from the corresponding sanctions and penalties laid down in the 
legislation of the Republic of Panama. 
 G/SCM/Q3/PAN/13 
Page 18  
 
 
CHAPTER VII 
Special Migration Regime 
 
 Article 41.   Foreigners who can prove that they have invested an amount of not less than two 
hundred and fifty thousand Balboas (B.250,000) in enterprises duly authorized as promoters or 
operators of export processing zones or enterprises established within such zones shall have the right 
to request a permanent residence visa as an investor. 
 
 Article 42.   Foreigners recruited as managerial staff, executives, experts and/or technicians by 
enterprises authorized as promoters or operators of export processing zones or enterprises established in such zones shall have the right to apply for a te mporary residence visa valid for the duration of their 
contract.  The visa shall be subject to the laws laid down in the Labour Code. 
 
 Article 43.  Foreigners wishing to enter Panama for the purpose of carrying out transactions 
or conducting business in zones already established or in the process of being established may request 
a business residence visa valid for one (1) year, s ubject to submission of a financial attestation. 
 
 Article 44.  The granting of the visas referred to in Articles 41, 42 and 43 of this Law gives 
the right to multiple entry and exit permits valid for the same period as the visa. 
  Article 45.   The visas provided in the preceding Ar ticles shall extend to  spouses, minor and 
adult children dependent on the principal applicant under the same terms. 
 
 Article 46.  Foreigners granted a permanent residence visa as investors in export processing 
zones shall enjoy the following benefits: 
 
1. Permanent residence with the right to a personal identity card; 
 
2. 
4Special Resident's Passport; 
 
3. The right to Panamanian nationality by natu ralization in accordance with paragraph 1 of 
Article 10 of the Panamanian Constitution. 
 
 PARAGRAPH .  The privileges provided in this Law shall be automatically cancelled if the 
investor withdraws, transfers or in any other way loses his investment.  In order to ensure proper 
supervision,  the Technical Secr etariat of the National Commission on Export Processing Zones shall 
provide the Immigration Department of the Ministry of the Interior and Justice with an annual report 
showing the names of investors whose privileges are to be cancelled. 
 
 Article 47.  Applications for residence visas referred to in Articles 41 and 42 of this Law 
shall be submitted to a Panamanian Consulate or to the Immigration Department through the 
Technical Secretariat of the National Commission on Export Processing Zones.  Applications shall be 
accompanied by the following documents: 
 
1. Certificate attesting to the investment, issued  by the Technical Secretariat of the National 
Commission on Export Processing Zones in the case of investors;  or attesting to the enterprises 
established in the processing zone or the employment contracts in the case of managerial staff, technicians and/or experts;  
                                                     
 
4 Paragraph 2 was repealed by Article 3 of Law No. 28 of 1 February 1996 (Official Journal No. 22.965 
of 2 February 1996).  G/SCM/Q3/PAN/13 
 Page 19 
 
 
2. attestation issued by the promoter of the processing zone substantiating the need for the visa 
requested by the investors, technicians and/or expert s or managerial staff of the enterprise established 
or to be established in the zone, in conformity with the documentation subm itted by the enterprise; 
 
3. bankers' reference issued by an internationally recognized bank or proof of economic 
solvency amounting to annual revenue of not less than one thousand Balboas (B.1,000) and 
certificates of transfer to their country of origin, valid for one (1) year in the case of businessmen and 
investors who have come to review invest ment possibilities or carry out transactions; 
 
4. four (4) passport-sized photographs of th e applicant, full face and without headgear; 
 5. medical certificate; 
 
6. letter from the enterprise that is making the investment or issuing the employment contract 
undertaking to repatriate the applicant at the end of the contract or whenever necessary; 
 7. marriage certificate and birth certificates for minor and adult dependent children where 
applicable; 
 
8. letter accepting responsibility for the spouse and children where applicable. 
  After the Panamanian Consul ha s received and verified the aforementioned documentation, he 
shall inform the Director of Immigration who, afte r ascertaining that there are no impediments, shall 
authorize the visa without any further procedure other than payment of the legally-established fees.  
The Director of the Department of Immigration shall do likewise when applications are submitted to 
his Department through the Technical Secretariat of  the National Commission on Export Processing 
Zones. 
 
 Article 48.  Foreigners who obtain any of the aforementioned visas from a Panamanian 
Consulate shall present themselves to the Immigrat ion Department within fifteen (15) days following 
their entry into Panama in order to be duly recorded. 
 
 
CHAPTER VIII 
Special Labour Provisions Applicable in Export Processing Zones 
 
 Article 49.  In the case of employment contracts for a specified period, a particular work or 
corresponding phase in the promoting enterprises and industries and enterprises coming under the 
special regime on export processing zones, the provisions in Article 77 of the Labour Code shall not 
apply during the first three (3) years of the employment relations with the employee concerned. 
 
 Article 49-A.
5  The following provisions shall apply to the export processing zones already 
established in Panama or to be established in the fu ture, as well as to enterprises established therein or 
to be established in the future: 
 
 Section A.  In order to streamline the processing  and approval of all the documentation 
required by the Ministry of Labour and Social We lfare and other State agencies from enterprises 
interested in establishing themselves in export processing zones, including investors, a Single Window Office is hereby created and shall function as follows:  
 
                                                     
 
5 As added by Article 1 of Decree Law No. 3 of 7 January 1997 (Official Journal No. 23.201 of 
11 January 1997). G/SCM/Q3/PAN/13 
Page 20  
 
1. Its functions shall be of an institutional natu re and, consequently, the regulations laid down in 
this Decree-Law shall not affect nor limit the pr ovisions regulating procedures and approval with 
regard to enterprises subject to the export proc essing zones regime in the Republic of Panama. 
 
2. It may operate in any part of Panamanian te rritory, including the Inter-Oceanic Region, where 
its administrative headquarters shall be located in the offices of the Inter-O ceanic Region Authority, 
in the Atlantic Sector and in the Pacific Sector .  This office shall act as the coordinator and 
administrator of the Single Window Office, but the o fficials appointed by each institution shall remain 
independent as regards application of the regulat ions and technical aspects established by each 
institution.  In the rest of Panama, the administrativ e headquarters shall be in the Ministry of Trade 
and Industry through the Panamanian Foreign Trade Institute.  
3. It shall be composed of the following bodies:   
 
 (a) Ministry of Labour and Social Welfare; 
  (b) Ministry of Trade and Industry; 
 
 (c) Ministry of Finance and the Treas ury, Directorate-General of Customs; 
 
 (d) Ministry of the Interior and Justice,  Immigration and Naturalization Department; 
  (e) Inter-Oceanic Region Authority; 
 
 (f) Panamanian Foreign Trade Institute; 
 
 (g) Institute of National Wate r Supply and Sewage Systems; 
 
 (h) Institute of Water Re sources and Electrification; 
 
 (i) respective municipal authority. 
 
4. The Minister, Administrator or Director of th e relevant body shall appoint the personnel to act 
on behalf of his office in the Single Window Office.   The official appointed shall have the authority, 
capacity and competence necessary to carry out his functions;  he shall remain permanently available 
at his place of work to carry out the formalities required through the Single Window system, although where the volume of work so requires, he shall move physically to the offices of the agency that acts  
as coordinator and administrator of the Single Wi ndow Office where he shall make his services 
available on a full-time basis. 
 
5. The Ministry of Labour and Social Welfare shall have a permanent office in the respective 
processing zone in order to streamline and speed up issue of the work permits needed and the Ministry 
of Finance and the Treasury shall also have an of fice for the purpose of customs controls, which shall 
be carried out by the Directorate-General of Customs. 
 
6. The institutions and agencies belonging to the Single Window Office shall draw up the 
Office's procedure for pr ocessing and approving the documentation required by enterprises, including 
investors, interested in establis hing themselves or operating within export processing zones.  The 
Ministry of Trade and Industry or the Inter-Oceanic Region Authority, as is appropriate, shall periodically review this procedure with a view to st reamlining it, as shall the institutions that make up 
the Office. 
 
7. The Executive may grant concessions for the establishment of export processing zones in any 
part of Panamanian territory, including the In ter-Oceanic Region zones when the Inter-Oceanic  G/SCM/Q3/PAN/13 
 Page 21 
 
 
Region Authority so requests without the need to draw up a public deed, that is to say, by means of a 
direct agreement, and may also negotiate agreements for the establishment of such export processing 
zones. 
 
Section B. 
 
1. The promoting and operating enterprises located within export processing zones shall 
establish, in coordination with the Ministry of Labour and Social Welfare and INAFORD, vocational 
training and skills improvement programmes for employees. 
 2. The promoting and operating enterprises located in export processing zones shall pay the legal minimum wage to their employees for their se rvices.  The wages shall be paid at least once a 
fortnight.  In addition to the legal minimum wa ge, in order to improve output and productivity among 
employees, the promoting and operating enterprises located in export processing zones may provide 
systems for the payment of wages through prof it-sharing, production premiums, productivity 
incentives, bonuses, rewards, gifts and the like, provided that such incentives, or any other such payments, do not exceed fifty per cent (50%) of the basic wage and are exempt from contributions to 
educational insurance and social security. 
 
3. The parties shall freely determine the weekly rest day and how it should be utilized, either on 
fixed days or on a rotating basis.  Work on the weekly rest day shall be remunerated at an additional rate of fifty per cent (50%), without prejudice to the right to enjoy another day of rest.  
4. In order to create more jobs, the promotin g and operating enterprises located in export 
processing zones shall seek to establish, in coordination with the Ministry of Labour and Social 
Welfare, systems of work that avoid, as far as po ssible, overtime by the workforce, and shall instead 
seek to recruit new staff. 
 
 In any event, overtime shall not exceed three (3) hours per day and shall be paid at an 
additional rate of twenty  five per cent (25%). 
 
5. The employer may indicate in advance the time when the employee shall begin his holidays, 
taking into account as fully as possible the inte rests of the enterprise and of the employee, in 
accordance with the operating cycles of the establishment or industry.  Accordingly, the employer 
may decide that all or some of the staff take their holidays at fixed times of the year, even when they 
have not yet accrued sufficient leave.  In such cases , an equal period of time must be worked later on 
to make up for the holidays taken.  The employer may divide the annual holidays of the employees 
into, at the most, two (2) equal parts. 
 
6. The employer may place the employee by turn s on different production lines or transfer him 
from one production line to another from time to ti me in accordance with the needs of the enterprise, 
provided that there is no deterioration in the conditions enjoyed by the employee. 
 
7. The Ministry of Labour and Social Welfare shall process as expeditio usly as possible the 
specific systems and regulations for the evalua tion of output and productivity referred to in 
paragraph 16A of Article 213 of the Labour Code , properly backed up by specific studies of 
production. 
  If at the conclusion of the period of sixty (60) calendar days, the administrative labour authority has not dealt with the corresponding ap plication, the system or regulations shall be 
considered to be fully approved in law and the employer may apply them with immediate effect. 
 
 After the systems or regulations have been approved, the employer shall place them 
permanently on display in a prominent lo cation in each of its establishments. G/SCM/Q3/PAN/13 
Page 22  
 
 
8. Fluctuations in the international market leadin g to a decline or loss of exports shall entitle the 
employer to terminate the employment  contract, in addition to the grounds laid down in Article 213(c) 
of the Labour Code.  The employer shall inform th e administrative labour authorities and shall explain 
the grounds for his action. 
 
9. The promoting and operating enterprises locat ed in export processing zones may, at the 
request of their employees or of their respective social organizations or on their own initiative, 
conclude agreements relating to the conditio ns of work or other benefits at work. 
 10. The Ministry of Labour and Social Welfare shall establish a special department to monitor 
individual and collective disputes relating to the e xport processing zones, and which would also seek 
to ensure improvements for the work force in the zones, both at the professional level and with regard 
to safety at work. 
 
 In order to settle any labour dispute that might occur in the export processing zones located in the Inter-Oceanic Region, in conformity with the provisions of Article 2 of Law No. 5 of 
25 February 1993, the main offices of the specia l department mentioned in the previous paragraph 
shall be sited in the regional agencies establis hed by the Inter-Oceanic Region Authority for such 
zones, either as promoter, operator, concessionaire or in any other form, with regard to the assets that 
will revert in the Pacific Sector or Atlantic Sect or as a result of the implementation of the Panama 
Canal Treaties and their Annexe s (Torrijos-Carter Treaties). 
 
 Notwithstanding the above, should it prove necessary, offices or sub offices may be 
established within, or in the vicinity of, other export processing zones. 
 
11. Within the above-mentioned special depart ment, there shall be a Tripartite Conciliation 
Commission, consisting of a representative of the promoting and operating enterprises and a 
government representative appointed by the Ministry of Labour and Social Welfare. 
 
 The exclusive purpose of this Commission shall be to reconcile the interests of the employers 
and the employees, whenever disputes of a collective nature arise or may arise, with a view to 
preventing stoppages of work in the enterprise or ente rprises affected.  To this same end, it shall direct 
the proceedings to be initiated to conclude the agreem ents referred to in paragraph 9 of this section.  
In both cases, the interested party shall place before the Commission the issue or issues in dispute, or 
its proposed agreement.  
 In such case, the Commission shall request the other party to explain its position within 
ten (10) working days. 
 
12. At the end of this period, the Commission shall meet jointly with both parties so as to reach a 
common understanding on the dispute or the proposed agreement.  For such purposes, the 
Commission shall have a period of twenty (20) work ing days to achieve a settlement or the signing of 
the agreement. 
 
 During this period, the Commission shall meet jo intly or separately with both parties, as it 
deems advisable, and may hold as many hearings as  it considers useful, without being subject to any 
formal procedure.  It may also request technical,  scientific or professional advice on the matter 
submitted for its examination with a view to achieving a rapid solution.  
13. If no agreement can be reached, the Commission  shall submit to the parties, within five (5) 
days following the end of the above-mentioned period, a proposal for the settlement of the matters in 
dispute, which shall be accepted or rejected by the parties within a period of twenty-four (24) hours. 
  G/SCM/Q3/PAN/13 
 Page 23 
 
 
14. The above-mentioned procedure shall not prev ent the parties from settling their disputes 
themselves or negotiating agreements directly or, at any time, the employees or their respective social 
organization, or both of them, from submitting their di sputes to an Arbitration Tribunal, in which case 
the procedure laid down in Cabinet Decree No. 25 2 of 1971 (Labour Code) shall be followed, it being 
understood that the decision adopted by that Tribunal shall be binding on both parties. 
 
15. At the end of the period of twenty-four (24) hours referred to in paragraph 13 above, the 
employees or their respective social organization may exercise the right to strike, in which case the 
provisions of Cabinet Decree No. 252 of 1971 (Labour  Code) shall apply, regarding the status of the 
strike, which shall be covered by the ordinary labour  laws and be subject to the procedure established 
in that body of labour legislation.  
16. It is understood that any work stoppage that fails to observe the procedures stipulated here 
shall give the employer the right to request the em ployment tribunals to end the employment contracts 
with the employee(s) who had incited the illegal stop page, or to request the administrative authorities 
to impose a fine of between fifty Balboas (B.50.00) and five hundred Balboas (B.500.00) on the employee(s) who had incited the stoppage or third parties who had participated therein. 
 
 Article 50.   The Ministry of Labour and Social We lfare shall process as expeditiously as 
possible the specific systems and regulations for the evaluation of output and productivity referred to 
in paragraph 6A of Article 213 of the Labour Code, properly backed up by specific studies of 
production.  
 If at the conclusion of the period of one hundred and twenty (120) calendar days, the 
administrative labour authority has not dealt with the corresponding application, the system or 
regulations shall be considered to be fully approved in law and the employer may apply them with 
immediate effect. 
 
 After the systems or regulations have been approved, the employer shall place them 
permanently on display in a prominent lo cation in each of its establishments. 
 
 Article 51.   The employer may place the employee by turns on different production lines or 
transfer him from one production line to another fro m time to time in accordance with the needs of the 
enterprise, provided that there is no deterior ation in the conditions enjoyed by the employee. 
 
 Article 52.   Fluctuations in the international market leading to a substantial decrease in sales 
shall be grounds that entitle the employer to terminate the employment contract, in addition to the 
grounds laid down in Article 213(c) of the Labour Code.  The employer shall request prior 
authorization from the administrative labour author ities and shall explain the grounds for his action. 
 
 Article 53.  Production premiums, bonuses and rewards shall not be considered wages or 
salaries for the purposes of Article 62(b) of De cree-Law No. 14 of 27 August 1954, as amended by 
Article 46 of Law No. 30 of 26 December 1991. 
 
 Article 54.  The employer may indicate in advance th e time when the employee shall begin 
his holidays, taking into account as fully as possible the interests of the enterprise and of the 
employee, in accordance with the operating cycles of the establishment or industry.  Accordingly, the 
employer may decide that all or some of the staff take their holidays at fixed times of the year, even 
when they have not yet accrued sufficient leave.  In such cases, an equal period of time must be worked later on to make up for the holidays taken.  The employer may divide the annual holidays of 
the employees into, at the most, two (2) equal parts. 
 G/SCM/Q3/PAN/13 
Page 24  
 
 Article 55.  The common regulations contained in the Labour Code, in Law No. 1 of 
17 March 1986 and in the special legislation that ar e not contrary to the provisions of this Law shall 
apply to labour relations in industries or enterpri ses established in the export processing zones. 
 
 Article 56.  The Executive, through the Ministry of Finance and the Treasury, shall adopt the 
administrative measures and regulations it deems nece ssary for proper control of operations subject to 
the customs regime.  For this purpo se, it shall adopt all the provisions it deems necessary in order to 
exercise permanent customs supervision and control over entry and exit into the export processing 
zones so as to prevent and repress smuggling or any other form of customs fraud, and prevent and 
punish any infringement of the legal or regulatory provisions in force.   The costs incurred by the operation of custom s offices within the processing zones shall be 
borne in their entirety by the promoter of the proces sing zone.  The promoter sh all coordinate with the 
Ministry of Finance and the Treasury with regard  to these costs and the relevant regulations. 
 
 Article 57.  The national and municipal authorities sha ll be responsible for maintaining public 
order, safety, and public health, environmental prot ection, and supervising re fuse collection and the 
treatment of waste water and other measures in the export processing zones, in conformity with the 
legislation of the Republic of Panama. 
 
 The costs incurred by the environmental protec tion, refuse treatment,  waste water treatment 
and other activities shall be met by the industries and companies operating within the zones in accordance with the provisions established by th e National Commission on Export Processing Zones. 
 
 Article 58.  This Law replaces Law No. 16 of 6 November 1990, temporarily suspends the 
effects of Article 77 of the Labo ur Code, adds number 16 of paragraph A and paragraph C of 
Article 213 of the Labour Code, and paragraph ( b )  o f  A r t i c l e  6 2  o f  D e c r e e  L a w  N o .  3 0  o f  
26 December 1991. 
 
 Article 59.  This Law shall enter into force on the date of its enactment. 
 
FOR COMMUNICATION AND PUBLICATION 
 
done in Panama City on the twenty third day of November  
one thousand nine hundred and ninety two.  G/SCM/Q3/PAN/13 
 Page 25 
 
 
 
Executive Decree No 281 
of 19 May 1993 
 
Establishing Regulations under Law No. 25 of 30 November 1992 
 
THE PRESIDENT OF THE REPUBLIC 
in the exercise of his legal powers, 
 
WHEREAS: 
 
 Law No. 25 of 30 November 1992 established a Special, Integrated and Simplified Regime 
for the Establishment and Operation of Export Processing Zones; 
 
 The establishment and operation of export pro cessing zones will contribute towards Panama's 
development and the generation of employment and foreign currency;  
 The development of the export processing zones requires the adoption of appropriate 
measures, especially as regards migration, for which purpose a Special Migr ation Regime has been 
established, granting foreigners the right to a perman ent residence visa in their capacity as investors; 
  For which reasons it has been necess ary to establish these Regulations; 
 
HEREBY DECREES 
 
 Article 1.   The amount of not less than TWO HUNDRED AND FIFTY THOUSAND 
BALBOAS (B.250,000.00) to whic h Article 41 of Law No. 25 of 30 November refers, and which 
those foreigners who wish to obtain a residence visa in their capacity as investors in export processing 
zones must prove that they have invested in enterp rises legally authorized as promoters and operators 
of export processing zones or in enterprises esta blished within such zones, shall consist of capital 
investments or of fixed assets such as buildings, ma chinery and the like.  They shall not include those 
investments which are not considered to be essentia l for the operation of the export processing zones 
or which consist of government bonds, fixed-te rm deposits, negotiable in struments and the like. 
 
 Article 2.
2  A foreign investor in the export processing zones who wishes to be granted, in 
accordance with Article 46 of Law No. 25 of 1992, permanent residence with the right to a personal identity card and a special residence permit shall s ubmit to the Technical Secretariat of the National 
Commission on Export Processing Zones an application accompanied by the supporting documents 
referred to in Article 3 below. 
 
 Article 3.  In order to establish proof of the investment referred to in Article 41 of Law 
No. 25 of 30 November 1992, the interested  parties must submit the following documents: 
 
 An audited statement by an authorized charte red accountant recording the capital investments 
that have been made or the fixed assets of the ente rprise in an export processi ng zone in the Republic 
of Panama; 
 
                                                     
 
1 Published in Official Journal No. 22.289 of 20 May 1993. 
2 Article 1 of Law No. 28 of 1 February 1996 (Officia l Journal No. 22.965 of 2 February 1996) states. 
"Article 1.  The special passports issued on the basis of Article 46.2 of Law No. 25 of 1992 shall be 
cancelled.  The bearers of such passports shall have a period of sixty (60) days, beginning from the date of 
enactment of this Law, to return them to the competent authorities." G/SCM/Q3/PAN/13 
Page 26  
 
 If the investment, or part of it, is in the form  of immovable property, a certificate showing the 
entry in the Public Register recording this investment; 
 
 A sworn statement by the legal representativ e of the respective export processing zone 
certifying that the applicant has invested no t less than TWO HUNDRED AND FIFTY THOUSAND 
BALBOAS (B.250,00.00); 
 
 If the investment has been made in limited comp anies, in addition to the documents specified 
in the preceding paragraphs, a certificate issued by the secretary of that company and an authorized 
chartered accountant, stating that the share regist er of the company includes a number of shares 
amounting to not less than TWO HUNDRED AND  FIFTY THOUSAND BALB OAS (B.250,000.00) 
duly paid up and recording the type of investment made with these funds. 
 
 Article 4.  The Minister for Trade and Industry shall review the applicati on referred to in 
Article 2 and the supporting documents referred to  in Article 3 in order to determine whether the 
applicant has invested at least TWO HUNDRED AND FIFTY THOUSAND BALBOAS (B.250,000.00) in the export processing zone.  If the Minister for Trad e and Industry approves the 
application, he shall issue a decision stating that the applicant has fulfilled th e requirements laid down 
in Article 41 et seq. of the above-mentioned Law No. 25, authorizing the Immigration Department of 
the Ministry of the Interior and Justice to grant th e applicant permanent residence status with the right 
to a personal identity card, and the National Pass port Directorate to grant the applicant a special 
residence permit.  
 Article 5.  If an investor withdraws or transfers his investment, the privileges established by 
the Law, such as the special residence permit and the personal identity card, shall be automatically 
cancelled.  In order to ensure proper supervision, the Technical Secretariat of the National 
Commission on Export Processing Zones shall inform the Ministry of the Interior and Justice each 
year of the names of the investors wh ose privileges are to be cancelled. 
 
 Article 6.  The officials of the Immigration Departme nt and of the Foreign Service of the 
Republic of Panama shall retain the passports ca ncelled and send them immediately through the usual 
channels to the National Passports  Directorate of the Ministry of the Interior and Justice. 
 
 Article 7.  This Decree shall come into force from th e date of its promulgation in the Official 
Journal. 
 
FOR COMMUNICATION AND PUBLICATION 
  G/SCM/Q3/PAN/13 
 Page 27 
 
 
 
EXECUTIVE DECREE NO. 1-D1 
of 28 January 1994 
 
Establishing Regulations under Law No. 25 of 30 November 1992 with Regard 
to the Movement of Goods by Enterprises Subject to the 
Regime of Export Processing Zones 
 
 Article 1.  All goods and services that enter areas subject to the regime of export processing 
zones and are intended for the use of the operations of the enterprises located in these zones shall be exempt at all time from the payment of direct or indirect taxes, including the tax on the transfer of 
movable tangible property (ITBM), duties and other na tional and provincial taxes, both with regard to 
the entry of such goods into these area s and while they remain within them. 
 
 Article 2.   All the areas to be developed as export processing zones shall be surrounded by 
barriers, walls or fences, so that the entry and ex it of persons, vehicles and goods shall necessarily 
take place through the entrances specifically designed for that purpose. 
 
 Article 3.  The commercial operations undertaken by the enterprises subject to the regime of 
export processing zones shall be covered by a special form issued for such purposes by the 
Panamanian Institute of Foreign Trade in its cap acity as Technical Secretariat of the National 
Commission on Export Processing Zones, and which is annexed to this Decree.  
 Article 4.  The authority and responsibility of the Customs Administration begins, in the case 
of goods received, with the delivery of the goods to the freight warehouses and ends with their 
delivery to the gate of entry into the areas of the export processing zone;  it also has responsibility 
during the withdrawal of the goods from the export  processing zone, from the time the relevant 
documents have been checked, until the goods have been handed over to the person authorized to 
receive them. 
 
 Article 5.  All goods that arrive in the area of an export processing zone shall be consigned to 
a natural or legal person es tablished within that area. 
 
 Article 6.   Goods to be used in the operations of the enterprises established in the export 
processing zones shall be allowed entry into th ese areas, provided that they are consigned to 
enterprises subject to the regime of export processing zones, as indicated on the corresponding shipping documents. 
 
 Article 7.  Goods stored in the export processing zones may only be introduced into the 
customs territory of the Republic if they have  fulfilled all the requirements laid down in the 
Panamanian legislation on importation. 
 
 In such cases, the Technical Secretariat of the National Commission on Export Processing 
Zones shall issue all the documents ne cessary to facilitate such operations. 
 
 At the request of the owner or representative of the enterprise, the Technical Secretariat shall 
prepare the documents required by the country  to which the goods are to be exported. 
  Article 8.  The goods mentioned in Article 27 of Law No.25 of 30 November 1992 which are 
legally within the export processing zones may be transferred between enterprises established within 
that area, provided that such transfers take place under the supervision of the Customs Authority and 
                                                     
 
1 Published in Official Journal No. 22.510 of 7 April 1994. G/SCM/Q3/PAN/13 
Page 28  
 
with the approval of the Technical Secretariat of the National Commission on Export Processing 
Zones. 
 
 Such operations shall use th e special form prepared by the Technical Secretariat of the 
National Commission on Export Processing Zones. 
 
 Any person legally established within the areas of Export processing zones may apply for the 
goods to leave the area, either for export or for any other legitimate purpose, even though the 
dispatcher was not the original importer of the g oods, but has obtained them by one of the means 
mentioned in the previous paragraph. 
 
 Article 9.  Goods imported from abroad to be used in the operations of the enterprises subject 
to the regime of export processing zones shall be subject to the following conditions: 
 
 (a) Their entry into the area of export processing zones shall not be subject to the 
payment of any kind of direct or indirect taxes, including the tax on the transfer of movable tangible property (I.T.B.M.), dues , fees, import duties and national taxes. 
 
 (b) The shipping documentation need not include the consular invoice issued by the 
Panamanian consul in the port of shipment.  It will only be necessary to present the 
bill of lading, the manifest, the commercial invoice duly certified by the manufacturer 
of the goods to be imported and with signature authenticated by the appropriate Panamanian consular official, the relevant permit in the case of restricted imports, 
and a certificate of origin, solely in the case of textile products cut for clothing to be 
exported to the United States of America. 
 
 (c) All the shipping documents shall state that the good is consigned in the name of the 
owner or legal representative of an ente rprise established in the export processing 
zone, who must fill out the Special Form made available to him by the Technical 
Secretariat of the National Commission on Export Processing Zones. 
 
 Article 10.  The goods produced that leave the export processing zones to be exported shall 
be subject to the following conditions: 
 
 (a) They shall pay no kind of direct or indirect  taxes, fees, duties, le vies or export duties. 
  (b) They shall only leave the export processing zones with the authorization of the 
Technical Secretariat and always in the custody of the customs inspectors assigned to 
the respective processing zone, who shall ensure that the goods produced are 
delivered to the ships that provide international services, in the authorized ports 
where there is fiscal supervision. 
 
 Article 11.  The entry of goods into the areas subject to the export processing zone regime to 
be used in the operations of the enterprises subjec t to that regime, shall comply with the following 
procedure: 
 
 (a) Submission to the Technical Secret ariat of the National Commission on Export 
Processing Zones of a "Declaration of the Movement of Goods of the enterprises of 
Export Processing Zones", properly typed, in clear letters and without alterations, 
together with five (5) copies of the shipping documents. 
 
 (b) The competent official of the Technica l Secretariat of the National Commission on 
Export Processing Zones shall check that th e consignee enterprise is authorized to  G/SCM/Q3/PAN/13 
 Page 29 
 
 
bring in the goods declared for use in its operations and shall countersign the inward 
clearance declaration of enterprises of export processing zones. 
 
 (c) The customs officials in the respective export processing zone shall verify the goods 
declared by the enterprise for use in its operations, checking the goods declared 
against the list in the accompanying shipping documents, so as to check the 
description, quantity, weights, shipper and or igin, etc.  If what has been declared is 
found to be in conformity with the corre sponding rules and regulations, the inward 
clearance declaration shall be accepted, the documents being stamped and 
countersigned by the authorized customs official. 
  (d) The inward clearance declaration once approved shall then be given a final control 
number, the separate copies detached, a nd registered in the register of entry 
formalities. 
 
 (e) The copies of the inward clearance declaration of enterprises subject to the regime of 
export processing zones shall be distributed as follows: 
 
 (f) The second, third and sixth copies shall be retained by the Technical Secretariats of 
the National Commission on Export Processing Zones, including the copies of the 
shipping documents mentioned in Article 9(b), while the rest shall be returned to the 
representative of the consignee. 
 
  The second copy of the inward clearance declaration shall be sent to the customs 
archives, together with a copy of the shipping documents. 
 
  The third copy, together with the original  of the commercial invoice, a copy of the 
bill of lading, a copy of the manifest and a copy of  the perm its in the case of 
restricted goods, shall be sent with a monthly clearance report, within the first 
fifteen (15) days of each month, to the Co mmercial Consular Directorate of the office 
of the Comptroller-General of the Republic. 
 
  The sixth copy of the inward clearance declaration together with a set of all the other 
documents presented for processing shall be sent to the archives and control unit of 
the Technical Secretariat of the National Commission on Export Processing Zones. 
  (g) The remaining copies of the inward cleara nce declaration, together  with the other sets 
of documents for processing, will be presen ted at the customs terminal or customs 
area where the goods are to be collected.  In the clearance area, the goods declared by 
the enterprise for use in its operations will be physically checked, their transfer to the 
consignee enterprise authorized in accordance with the control procedure for goods 
not entering the national territory, and the fourth copy of the inward clearance 
declaration retained.   
 
 (h) The customs official on duty in the consignee enterprise shall receive and physically 
examine the goods, recording their arrival in the entry register.  The fifth copy of the 
inward clearance declaration shall be reserved for the customs archive of the 
consignee enterprise.  The original of the inward clearance declaration of enterprises in the export processing zones, together with a set of the shipping documents with the reception stamps and signature of the custom s official on duty in the enterprise, shall 
be returned to the consignee enterprise. 
 
 Article 12.   In case of goods that are to be used in  the operations of enterprises subject to the 
regime of export processing zones and require a prior special permit under regulations on quarantine G/SCM/Q3/PAN/13 
Page 30  
 
inspections or sanitary regulations or any other re gulation, the enterprises shall arrange to obtain the 
permits prior to placing the orders. 
 
 Article 13.   Enterprises subject to the regime of export processing zones may purchase the 
raw materials and semi-manufactured goods listed in the Official Register from enterprises 
established in the Colón Free Zone.  In such cases, they shall present, as the shipping document 
required for the entry procedures, the certified clea rance document from the Free Zone instead of the 
bill of lading, together with the shipping doc uments mentioned in the previous Articles. 
 
 Article 14.  All the enterprises operating under the regime of export processing zones shall 
have, on their premises, the services of at least one official of the Directorate-General of Customs and shall meet the costs involved in the recruitment of that official, which shall be done in coordination 
with the Ministry of Finance and the Treasury. 
 
 Article 15.   The Directorate-General of Customs ma y, at any time, carry out a supervisory 
inspection, an inventory or audit, or an investigation of the enterprises subject to the regime of export processing zones, with a view to determining whether the theoretical inventories correspond to the 
physical inventories. 
 
 Article 16.  Enterprises subject to the regime of export processing zones shall comply with 
the following export formalities:   (a) Submit to the Technical S ecretariat of the National Commission on Export Processing 
Zones the outward clearance declaration of  enterprises of the export processing 
zones, properly typed, in clear letters an d without alterations, including five (5) sets 
of the shipping documents (certified commerci al invoice, manifest, bill of lading and 
request for certification of national origin). 
 
 (b) The Technical Secretariat shall check that the dispatching enterprise is authorized to 
export the products declared and that they correspond to the goods finished on the 
basis of previously authorized raw materials.   If everything is in order, the outward 
clearance declaration shall be stamped and countersigned. 
 
 (c) The customs officials on duty in the enterprises of the export processing zones shall 
examine the categories assigned to the goods declared and shall check what has been 
declared against the list on the clearance documents. 
 
  If everything is found to be in order, the outward clearance declaration shall be 
accepted and the documents stamped and signed by the authorized customs official. 
 
  The outward clearance declaration, once approved, shall be listed with the clearance 
control number.  When clearance has fina lly been authorized, the official shall 
prepare the withdrawal of the goods, retain ing the fifth copy of the outward clearance 
declaration to be registered and placed in the archives. 
 
 (d) The copies of the outward clearance decl aration of enterprises in export processing 
zones shall be distributed as follows: 
   The second, third and sixth copies shall be  retained by the Technical Secretariat of the 
National Commission on Export Processing Zones, together with the corresponding 
sets of copies of the shipping documents,  while the rest shall be returned to the 
interested party, including the endorsed original of the commercial invoice in the case 
of exports to the United States, and the original of the certificate of origin. 
  G/SCM/Q3/PAN/13 
 Page 31 
 
 
  The second copy of the outward clearance declaration, together with copies of the 
shipping documents, shall be sent with the monthly clearance report to the 
Commercial Consular Directorate of the Of fice of the Comptro ller-General of the 
Republic. 
 
  The sixth copy of the outward clearance declaration, together with copies of the 
shipping documents, shall be sent to the ar chives and control limit of the Technical 
Secretariat of the National Commission on Export Processing Zones. 
 
 (e) The goods may then be transferre d to the customs terminal for export. 
  (f) The customs officials in the termin al area shall receive the goods dispatched, 
retaining the fourth copy of the outwar d clearance declaration and authorizing the 
dispatch of the goods abroad. 
 
 Article 17.   Supervision and control of the fiscal regime of the export processing zones shall 
be the responsibility of the Ministry of Finance and the Treasury. 
 
 Article 18.  This Decree shall come into force as of the date of its promulgation in the 
Official Journal. 
 
FOR COMMUNICATION AND PUBLICATION G/SCM/Q3/PAN/13 
Page 32  
 
 
 
Law No. 28
1 
of 1 February 1996 
 
Cancelling the special passports issued on the basis of Law No. 25 of 1992 
and introducing other measures 
 
THE LEGISLATIVE ASSEMBLY 
 
HEREBY DECREES: 
 
 Article 1.   The special passports issued on the basis of Article 46.2 of Law No. 25 of 1992 
shall be cancelled.  The bearers of such passports shall have a period of sixty (60) days, beginning 
from the date of enactment of this Law, to return them to the competent authorities. 
  Article 2.   The export processing zones and the enterp rises installed in these zones, which are 
referred to in Law No. 25 of 1992, and the enterpri ses that operate within the free petroleum zones, 
referred to in Cabinet Decree No. 29 of 1992, shall be excluded from the app lication of Article 701 of 
the Fiscal Code, as amended by Article 5 of Law No. 28 of 1995. 
  PARAGRAPH .  The enterprises that operate in the free petroleum zones shall pay by way of 
income tax fifteen per cent (15%) on the taxable in come from their foreign operations and shall be 
exempt from the payment in advance stipulated in Article 5 of Law No. 28 of 1995. 
 
 Article 3.   This Law repeals Article 46.2 of Law No. 25 of 1992 and all legal provisions and 
regulations that are contrary to it. 
 
 Article 4.   This Law shall come into force as of the date of its enactment. 
 
FOR COMMUNICATION AN D IMPLEMENTATION 
                                                     
 
1 Published in Official Journal No. 22.965 of 12 January 1996.  G/SCM/Q3/PAN/13 
 Page 33 
 
 
 
DECREE LAW No.31 
of 7 January 1997 
 
INTRODUCING AN ADDITIONAL ARTIC LE INTO LAW NO. 25 OF 1992, 
 
Establishing a Special, Integrated and Simplified Regime 
for the Establishment and Operation of 
Export Processing Zones 
 
THE PRESIDENT OF THE REPUBLIC 
 
In the exercise of his constitutional powe rs and in particular the power conferred 
upon him by Law No.1 of 1997 
having heard 
the favourable opinion of the Cabinet Council 
 
HEREBY DECREES: 
 
 Article 1.  With regard to Law No. 25 of 30 November 1992 establishing a special, integrated 
and simplified regime for the establishment and operation of export processing zones, the following 
Article shall be added with a view to integrati ng and simplifying the whole labour regime in such 
processing zones and in the enterprises established th erein, both with regard to the administrative 
aspect and labour relations: 
  Article 9-A:  The following provisions shall apply to the export processing zones already 
established in Panama or to be established in the future, as well as to the enterprises 
established therein or to be  established in the future; 
 
 SECTION A.  In order to streamline the proc essing and approval of all the documentation 
required by the Ministry of Labour and Social  Welfare, and other State agencies from the 
enterprises interested in establishing themselves in the export processing zones, including 
investors, a Single Window Office is hereby  created and shall function as follows: 
 
 1. Its functions shall be of an institutional nature and, consequently , the regulations laid 
down in this Decree-Law shall not affect  nor limit the provisions regulating 
procedures and approval with regard to en terprises subject to the export processing 
zones regime in the Republic of Panama. 
 
 2. It may operate in any part of Panamanian territory, including the Inter-Oceanic 
Region, where its administrative headquarters shall be located in the offices of the 
Inter-Oceanic Region Authority, in the Atlant ic Sector and in the Pacific Sector.  This 
office shall act as the coordinator and admi nistrator of the Single Window Office, but 
the officials appointed by each institution shall remain independent as regards 
application of the regulations and technical aspects established by each institution.  In 
the rest of Panama, the administrative headquarters shall be in the Ministry of Trade 
and Industry, through the Panamanian Foreign Trade Institute. 
 
 3. It shall be composed of the following bodies:  
  (a) Ministry of Labour and Social Welfare; 
                                                     
 
1 Published in Official Journal No. 23.201 of 11 January 1997. G/SCM/Q3/PAN/13 
Page 34  
 
  (b) Ministry of Trade and Industry; 
  (c) Ministry of Finance and the Trea sury; Directorate General of Customs; 
  (d) Ministry of the Interior and Justice, Directorate of Immigration and 
 Naturalization Department; 
  (e) Inter-Oceanic Region Authority; 
  (f) Panamanian Foreign Trade Institute;   (g) Institute of National Water Supply and Sewage Systems; 
  (h) Institute of Water Resources and Electrification; 
  (i) respective municipal authority. 
 
 4. The Minister, Administrator or Director of the relevant body shall appoint the 
personnel to act on behalf of his office in the Single Window Office.  The official 
appointed shall have the authority, capacity and competence necessary to carry out 
his functions;  he shall remain permanently av ailable at his place of work to carry out 
the formalities required through the Single Window system, although where the 
volume of work so requires he shall move ph ysically to the offices of the agency that 
acts as coordinator and administrator of the Single Window Office, where he shall 
make his services available on a full-time basis. 
 
 5. The Ministry of Labour and Social Welf are shall have a permanent office in the 
respective processing zone in order to streamline and speed up issue of the work 
permits needed and the Ministry of Finance and the Treasury shall also have an office 
for the purpose of customs controls, which shall be carried out by the Directorate 
General of Customs. 
 
 6. The institutions and agencies that belonging to the Single Window Office shall draw 
up the office's procedure for processing and approving the documentation required by 
enterprises, including investors, interested  in establishing themselves and operating 
within export processing zones.  The Ministry of Trade and Industry or the Inter-Oceanic Region Authority, as appropriate, shall periodically review this procedure 
with a view to streamlining it, as shall the institutions that make up the office. 
 
 7. The Executive may grant concessions for the establishment of export processing 
zones in any area of Panamanian territory, including the Inter-Oceanic Region zones 
when the Inter-Oceanic Region Authority so requests, without the need to draw up a 
public deed, that is to say, by means of a direct agreement, and may also negotiate 
agreements for the establishment of such export processing zones. 
 SECTION B. 
 
 1. The promoting and operating enterprises located within export processing zones shall 
establish, in coordination with the Ministry of Labour and Social Welfare and 
INAFORD, vocational training and skills improvement programmes for employees. 
  2. The promoting and operating enterprises located in export processing zones shall pay 
the legal minimum wage to their employees for their services.  The wages shall be 
paid at least once a fortnight.  In addition to the legal minimum wage, in order to 
improve output and productivity among employees, the promoting and operating 
enterprises located in export processing zones may provide systems for the  payment of wages through profit-sharing, production premiums, productivity incentives,  G/SCM/Q3/PAN/13 
 Page 35 
 
 
bonuses, rewards, gifts and the like, provided  that such incentives, or any other such 
payments do not exceed fifty per cent (50%) of the basic wage and are exempt from 
contributions to educational insurance and social security. 
 
 3. The parties shall freely determine the w eekly rest day and how it should be utilized, 
either on fixed days or on a rotating basis.   W o r k  o n  t h e  w e e k l y  r e s t  d a y  s h a l l  b e  
remunerated at an additional rate of fifty per cent (50%), without prejudice to the 
right to enjoy another day of rest. 
 
 4. In order to create more jobs, the promoting and operating enterprises located in 
export processing zones shall seek to estab lish, in coordination with the Ministry of 
Labour and Social Welfare, systems of work that avoid, as far as possible, overtime 
by the workforce, and shall instead seek to recruit new staff. 
 
  In any event, overtime shall not exceed th ree (3) hours per day and shall be paid at an 
additional rate of twenty  five per cent (25%). 
 
 5. The employer may indicate in advance the time when the employee shall begin his 
holidays, taking into account as fully as poss ible the interests of the enterprise and of 
the employee, in accordance with the operating cycles of the establishment or 
industry.  Accordingly, the employer may decide that all or some of the staff take their holidays at fixed times of the year, even when they have not yet accrued sufficient leave.  In such cases, an equal period of time must be worked later on to 
make up for the holidays taken.  The employer may divide the annual holidays of the 
employees into, at the most, two (2) equal parts. 
 
 6. The employer may place the employee by turns on different production lines or 
transfer him from one production line to anot her from time to time in accordance with 
the needs of the enterprise, provided that there is no deterioration in the conditions 
enjoyed by the employee. 
 
 7. The Ministry of Labour and Social Welf are shall process as expeditiously as possible 
the specific systems and regulations for the evaluation of output and productivity 
referred to in paragraph 16A of Article 213 of the Labour Code, properly backed up 
by specific studies of production.   
   If at the conclusion of the period of sixty (60) calendar days, the administrative labour 
authority has not dealt with the correspondi ng application, the system or regulations 
shall be considered to be fully approved in law and the employer may apply them 
with immediate effect. 
 
 8. Fluctuations in the international market leading to a decline or loss of exports shall 
entitle the employer to terminate the employ ment contract, in addition to the grounds 
laid down in Article 213(c) of the Labour Code.  The employer shall inform the 
administrative labour authorities and sha ll explain the grounds  for his action. 
 
 9. The promoting and operating enterprises lo cated in export processing zones may, at 
the request of their employees or of their respective social organizations or on their 
own initiative, conclude agreements relatin g to the conditions of work or other 
benefits at work. 
 
 10. The Ministry of Labour and Social Welfare shall establish a special department to 
monitor individual and collective disputes re lating to the export processing zones, and G/SCM/Q3/PAN/13 
Page 36  
 
which would also seek to ensure improvements for the workforce in the zones, both at 
the professional level and with regard to safety at work. 
 
  In order to settle any labour dispute that  might occur in the export processing zones 
located in the Inter-Oceanic Region, in confor mity with the provisions of Article 2 of 
Law No. 5 of 25 February 1993, the main of fices of the special department mentioned 
in the previous paragraph shall be sited in  the regional agencies established by the 
Inter-Oceanic Region Authority for such zones, either as promoter, operator, 
concessionaire or in any other form, with rega rd to the assets that will revert in the 
Pacific Sector or Atlantic Sector as a result of the implementation of the Panama Canal Treaties and their Annexe s (Torrijos-Carter Treaties). 
 
  Notwithstanding the above, should it prove necessary, offices or sub offices may be 
established within, or in the vicinity of, other export processing zones. 
 
 11. Within the above-mentioned special department, there shall be a Tripartite 
Conciliation Commission, consisting of a representative of the promoting and 
operating enterprises and a government representative appointed by the Ministry of 
Labour and Social Welfare. 
 
  The exclusive purpose of this Commission shall be to reconcile the interests of the 
employers and the employees, whenever disputes of a collective nature arise or may arise, with a view to preventing stoppages of work in the enterprise or enterprises 
affected.  To this same end, it shall direct  the proceedings to be initiated to conclude 
the agreements referred to in paragraph 9 of th is section.  In both cases, the interested 
party shall place before the Commission the issu e or issues in dispute, or its proposed 
agreement. 
 
 12. At the end of this period, the Commission sh all meet jointly with both parties so as to 
reach a common understanding on the dispute or the proposed agreement.  For such 
purposes, the Commission shall have a period of twenty (20) working days to achieve 
a settlement or the signing of the agreement. 
 
  During this period, the Commission shall me et jointly or separately  with both parties, 
as it deems advisable, and may hold as many hearings as it considers useful, without 
being subject to any formal procedure.  It may also request technical, scientific or professional advice on the matter submitted for its examination with a view to 
achieving a rapid solution. 
 
 13. If no agreement can be reached, the Commission shall submit to the parties, within 
five (5) days following the end of the above-mentioned period, a proposal for the 
settlement of the matters in dispute, which sh all be accepted or re jected by the parties 
within a period of twenty-four (24) hours. 
 
 14. The above-mentioned procedure shall not prevent the parties from settling their 
disputes themselves or negotiating agreements directly or, at any time, the employees 
or their respective social organization, or both of them, from submitting their disputes 
to an Arbitration Tribunal, in which case the procedure laid down in Cabinet Decree 
No. 252 of 1971 (Labour Code) shall be followed, it being understood that the decision adopted by that Tribunal shall be binding on both parties. 
 
 15. At the end of the period of twenty-four (24) hours referred to in paragraph 13 above, 
the employees or their respective social orga nization may exercise the right to strike, 
in which case the provisions of Cabinet Decree No. 252 of 1971 (Labour Code) shall  G/SCM/Q3/PAN/13 
 Page 37 
 
 
apply, regarding the status of the strike, which shall be covered by the ordinary labour 
laws and be subject to the procedure estab lished in that body of labour legislation. 
 
 16. It is understood that any work stoppage that fails to observe the procedures stipulated 
down here shall give the employer the righ t to request the employment tribunals to 
end the employment contracts with the employee(s) who had incited the illegal 
stoppage, or to request the administrative  authorities to impose a fine of between 
50 Balboas (B.50.00) and five hundred Balboas (B.500.00) on the employee(s) who 
had participated in the incitement. 
  ARTICLE TWO.  This Decree-Law replaces Decree Laws Nos. 1 and 2 of 11 January 1996 
and 26 February 1996 respectively and shall enter into force as of the date of its enactment. 
 
FOR COMMUNICATION AND PUBLICATION 
   G/SCM/Q3/PAN/13 
Page 38  
 
 
 
 
 
 
 
 
 
 
 
OFFICIAL INDUSTRY REGISTER  G/SCM/Q3/PAN/13 
 Page 39 
 
 
Law No. 31 
of 20 March 1986 
 
Adopting a regime of incentives for the promotion and  
development of the national industry and exports 
 
THE LEGISLATIVE ASSEMBLY 
 
HEREBY DECREES: 
 
CHAPTER I 
 
Purpose and scope of application 
 
 
 Article 1.  The purpose of this Law is to afford appropriate inducements for the promotion of 
industrial activity and exports, which are important for the country's economic progress and 
development.    Article 2.  All enterprises, including small- and medium-sized enterprises, engaged in 
industrial manufacturing or assembly activities in the territory of the Republic shall be eligible for 
benefits and incentives under this Law. 
 
 For the above purposes, manufacturing enterprises shall be deemed to be those engaged in processing raw materials and semi-finished products and producing goods, including those of agricultural, livestock, forestry and marine origin. 
 
 Assembly industries shall be deemed to be those engaged in the manufacture of finished 
products by putting together inputs and semi-finished parts. 
 
 TRANSITIONAL PARAGRAPH.  Until such time as special legislation is enacted on the 
subject, enterprises eligible under this Law sha ll include those engaged in non-traditional high-
technology production intended solely for export, mainly in the sphere of electronics applied to 
communications, international transport, and the creation, storage, conversion and transfer of data and 
programs, as well as any other similar activities re quiring a high level of non-traditional technological 
capacity, and activities directly related to the sp ecialized equipment needed to develop such 
production.  It shall be understood that exports by enterprises covered by this Paragraph shall not be 
entitled to Tax Credit Certificates. 
 
 Article 3.  Industrial enterprises engaged in producing and processing agricultural and 
forestry raw materials in an integr ated process shall be eligible for benefits under this Law in respect 
of all integrated operations. 
 
 Enterprises engaged in complementary activities that do not involve industrial processing, 
such as the marketing, wrapping or packaging of industrial products, shall not be entitled to benefits under this Law.  
  Article 4.  The regime provided for in this Law shall not be available to assembly industries 
unless they are wholly engaged in export production, it being understood that their exports shall not 
be eligible for Tax Credit Certificates. 
 
                                                     
 
1 Published in Official Journal No. 20.518 of 24 March 1986. G/SCM/Q3/PAN/13 
Page 40  
 
 Article 5.  Enterprises wishing to avail themselves of  the benefits under this Law are required 
to be entered in the Official National Industry Regi ster, as stipulated in Chapter V of this Law. 
 
 
CHAPTER II 
 
Benefits 
 
 Article 6.  Enterprises that avail themselves of the regime established by this Law and are 
wholly engaged in export production shall be entitled to the following tax incentives: 
 
 (a) Full (100 per cent) exemption from taxe s on entry, contributions, levies and customs 
duties and fees, and from the tax on the tr ansfer of moveable tangible property 
(ITBM) on imports of machinery, equipmen t and spare parts used in the production 
process, with the exception of construction materials, vehicles, furniture, office supplies and any other inputs not used in the production process; 
 
 (b) full (100 per cent) exemption from inco me tax on profits, with the exception of 
mining industries or industries using the country's natural resources; 
 
 (c) full (100 per cent) exemption from export taxes;  
 (d) full (100 per cent) exemption from sales taxes; 
 
 (e) full (100 per cent) exemption from production taxes; 
  (f) full (100 per cent) exemption from taxes on  the enterprises' capital or assets, with the 
exception of licence and immovable property taxes. 
 
Article 7.  For the purposes of this Law, the term "export" shall be understood to mean the 
sale of products outside the Panamanian territory , even where the sale is covered by a contract 
concluded in Panama, for example, the sale of prod ucts to enterprises established in the Colón Free 
Trade Zone for resale to foreign markets or to ships transiting through the Panama Canal on their way 
to foreign ports.  The Executive, acting through the Ministry of Finance and the Treasury, shall 
establish the procedure for controlling sales to the Colón Free Trade Zone under the terms of this 
Article. 
 
 "Export" shall also be understood to mean th e sale of raw materials, semi-finished products, 
domestically-manufactured containers and packagin g on the Panamanian market, provided that such 
raw materials, semi-finished products, containers and packaging are supplied to enterprises exporting 
no less than ninety per cent (90%) of their produc tion, it being understood that such production shall 
not be eligible for Tax Credit Certificates. 
  Article 8.  Raw materials, intermediate goods, semi-finished parts and other inputs, including 
containers and packaging entering the Panamanian territory for use by industries exporting 
one hundred per cent (100%) of their production, shall be regarded as temporary imports and shall 
therefore not be subject to any tax, contribution, levy, duty or fee.  Entry into Panama shall only 
require submission of the commercial invoice, a manifest and the corresponding bill of lading. 
 
 The Ministry of Finance and the Treasury shall adopt the measures it deems necessary or 
appropriate for the proper control of incoming and outgoing raw materials, intermediate goods, semi-
finished parts, other inputs, containers and packagi ng, as well as finished or assembled products.  It 
shall ensure that inspectors are permanently pr esent on the premises of each enterprise.  G/SCM/Q3/PAN/13 
 Page 41 
 
 
 
 Article 9.  Enterprises that avail themselves of th e regime established in this Law and 
produce goods for the domestic market shall be entitled to the following tax incentives: 
 
 (a) Full (100 per cent) exemption, for the first five (5) years following the entry into force 
of this Law, from taxes on entry, contributions, levies and customs duties and fees on imports of raw materials, semi-finished or intermediate goods and any other inputs, 
spare parts for machinery and equipment, and containers and packaging that enter into 
the product's composition or manufacturing proc ess;  only the tax on the transfer of 
moveable tangible property (ITB M) shall be levied.  As of the sixth year, in addition 
to the tax on the transfer of moveable ta ngible property (ITBM), only an import tax 
amounting to three per cent (3%) of the c.i.f.  value of foreign inputs shall be payable 
on imports of raw materials, semi-finished  or intermediate goods, spare parts for 
machinery and equipment, containers, packaging and other inputs entering into the 
product's composition or manufacturing process.  This paragraph shall be understood to exclude any other tax, contribution, levy or customs duty or fee on such imports. 
 
 PARAGRAPH.  Enterprises partly engaged in export production may apply for a refund of 
taxes on imports of raw materials, semi-finished or intermediate goods, containers and packaging used 
for output actually intended for export.  The Ministry of Finance and the Treasury shall establish the 
procedures for refunding such taxes.  
(b) Exemption from income tax on net profits reinvested to expand production capacity 
or to produce new articles, to the extent that  the amount reinvested exceeds twenty per 
cent (20%) of taxable income during the fiscal period in question. 
 
(c) Special regime permitting the carry-over of losses for income tax purposes, under 
which losses incurred in any given year may be deducted from taxable income over 
the three (3)-year period immediately following the year in which they occurred.  The 
deduction may be made during any one of those three (3) years or spread over the 
entire period. 
   Losses not deducted during the prescrib ed period shall not be deductible or 
refundable by the Treasury in subsequent years. 
 
(d) Calculation of depreciation on capital goods, using one of the following methods: 
 
1. Application of an annual rate of twelve and a half per cent (12.5%) of the 
value of the enterprise's machinery and equipment, without exceeding the 
residual value thereof; 
 
2. application of a fixed and constant pe rcentage to the diminishing balance of 
the total investment, without deducting the residual value. 
 
This percentage shall be no higher than twice the maximum percentage of 
depreciation specified in the Fiscal Code Depreciation Table for the relevant 
fiscal period, in the case of enterpri ses whose depreciation percentages differ 
from those established in the Fiscal Code. 
 
Once the taxpayer has opted for a depreciation calculation method for a given capital good, 
the selected method may not be changed without pr ior authorization from the Directorate-General of 
Revenue. 
 G/SCM/Q3/PAN/13 
Page 42  
 
Article 10.  Enterprises engaged in domestic production may import machinery and 
equipment used in the production process, subject only to an import tax amounting to three (3) per 
cent of the c.i.f. value of foreign inputs, in additio n to the tax on the transfer of moveable tangible 
property (ITBM).  This Article shall be understood to exclude any other tax, contribution, levy or 
customs duty or fee on such imports. 
 
Article 11.  Items imported tax free under this Law may not be sold or transferred in the 
Republic without paying the corresponding fiscal charges, calculated on the basis of the value of the 
items at the time of sale or transfer, with the ex ception of raw materials incorporated in processed 
products, used containers and packaging, and manufacturing byproducts.  
The sale or any other form of transfer of imported items among enterprises covered by this 
Law shall only require the approval of th e Ministry of Finance and the Treasury. 
 
 Article 12.  Enterprises partially engaged in export  production shall be eligible for the 
incentives provided under Article 6(b), (c), (d) an d (e), in direct proportion to the amount of 
production actually intended for export. 
 
 PARAGRAPH.   For the purposes of income tax exemption, as specified in Article 6(b) of 
this Law, industrial enterprises that partly engage in export production after this Law has come into 
effect may deduct from their taxable income fixed costs, such as interest, depreciation, maintenance, repairs to installations and other general costs, when  calculating profits on their export sales, provided 
that total export sales do not exceed twenty per cent (20%) of the total value of their sales during the 
relevant fiscal period. 
 
 Industrial enterprises engaged in export sales at  the time of entry into force of this Law shall 
be eligible for the benefit provided in this Paragraph, but only in respect of the portion of exports 
exceeding their average export sales over the past th ree (3) years and provided that that portion is no 
higher than twenty per cent (20%) of the total value of sales during the relevant fiscal period. 
 
 The benefit set forth in this Paragraph shall not apply to the aforementioned percentage where 
the exports in question have benef ited from Tax Credit Certificates. 
 
 Export sales that exceed the aforementioned pe rcentage shall be eligible for Tax Credit 
Certificates, and the corresponding profits shall be calculated according to generally accepted 
accounting standards, in conformity with the applicable tax provisions.  
 Article 13.  In order to ensure an equitable distribution of industrial production throughout 
Panama and prevent emigration, the following additi onal incentives shall be granted to enterprises 
established, or in the process of being established, in the districts of David, Renacimiento, Santiago, 
Chitré, Bugaba, Chorrera, Los Santos, Las Tablas, Aguadulce, Natá, Penono mé, and the province of 
Colón: 
 
(a) Full (100 per cent) exemption from property tax for ten (10) years on land, buildings 
and installations for manufacturing activities; 
 
 (b) full (100 per cent) exemption from income tax on profits from sales on the domestic 
market for the enterprise's first five (5) years of production, and fifty per cent (50%) exemption for the subsequent three years. 
 
 Article 14.  To foster industrial development and promote exports, the State will encourage: 
 
 (a) The establishment of small-scale industr ies under technical and financial assistance 
programmes;  G/SCM/Q3/PAN/13 
 Page 43 
 
 
 
 (b) the development and implementation of vocational training programmes in order to 
meet the domestic industry's needs for skilled labour on an ongoing basis; 
 
 (c) the design and implementation of feas ibility studies for the development of new 
industrial activities, geared towards the optimum use of domestic resources; 
 
 (d) the allocation of sufficient resources to the Panamanian Foreign Trade Institute for the 
development of its programmes aimed at identifying exportable supply, promoting 
domestic production in the international ma rket, penetrating foreign markets, setting 
up regional offices to assist producers and exporters, and establishing trade bureaux abroad, with a view to expa nding foreign trade activity; 
 
 (e) the establishment of special programmes, through the country's credit institutions, for 
the financing of export activities on preferential terms;  
  (f) the creation of privately-owned or St ate-supported marketing enterprises, through the 
Panamanian Foreign Trade Institute, with a view to ensuring the rational channelling 
of domestic production into foreign markets. 
 
 
CHAPTER III 
 
Industrial Policy Commission 
 
 Article 15.  The Industrial Policy Commission is hereby established as a body designed 
exclusively to advise the Executive on policy matte rs relating to the promotion and protection of 
domestic industry.  The Commission sh all be composed of the following: 
 
(a) The Minister for Trade and Industry, who shall act as chair; 
 
(b) the Minister for Finance and the Treasury; 
 
(c) the Minister for Agricultural Development; 
 
(d) a representative of the Pana manian Manufacturers' Union; 
 
(e) a representative of the Panamanian Ch amber of Commerce, Industry and Agriculture; 
 
(f) a representative of the Panamanian Exporters' Association. 
 
The Ministers of State serving on this Commission may delegate their powers to their 
respective Vice-Ministers.  The representatives of the private sector and their alternates shall be 
appointed by the Executive for a period of three (3 ) years, on the recommendation of their respective 
associations. 
 
 TRANSITIONAL PARAGRAPH.   The terms of office of the first Commission members 
proposed by the private sector and their alternates shall be one, two or three years, so that every year will see a member reaching the end of his term, the respective duration of wh ich shall be determined 
by casting lots at the Commission's first meeting. 
 
Article 16.  The Industrial Policy Commission shall adopt its own Rules of Procedure and 
shall have a Technical Secretariat under the responsi bility of the Directorate-General of Industry of G/SCM/Q3/PAN/13 
Page 44  
 
the Ministry of Trade and Industry.  The Comm ission's Technical Secretary shall attend all its 
meetings with the right to speak, but not to vote, in the proceedings. 
 
Article 17.  Where it deems necessary, the Industr ial Policy Commission shall make 
recommendations to the Cabinet Council for establishing or modifying customs tariffs to protect the 
domestic industry, on the basis of studies and calcul ations by the Directorate-General of Industry of 
the Ministry of Trade and Industry. 
 
Likewise, the Industrial Policy Commission shall follow up variations in unit production costs 
resulting from cost reductions for production-related factors such as public utilities (energy and water), transport, port services and fuel, and shall recommend cuts in the respective customs tariffs, so that the benefits are passed on to the consumer. 
 
 
CHAPTER IV 
 
Protection of Industrial Production  
 
Article 18.  Enterprises availing themselves of th is Law shall enjoy adequate protection 
against foreign competition, through the setting of appropriate customs tariffs in accordance with the 
terms of this Chapter.  
Article 19.  Customs tariffs to protect the production of the industries established may be 
maintained at the levels applied at the time of entry into force of this Law.  The Industrial Policy 
Commission shall revise these tariffs and, in accord ance with the studies and calculations made by the 
Directorate-General of Industry of the Ministry of Trade and Industry, shall make recommendations 
to the Cabinet Council for reducing tariffs found to provide excessive levels of protection.  On no 
account may the protective customs tariffs applied at the time of entry into force of this Law be 
raised. 
 
Article 20.  Customs tariffs for the protection of established industrial production applicable 
on the date of enactment of this Law shall be reduced,  in five (5) equal stages over a period of five (5) 
years as of one (1) August one thousand nine hundred and eighty six (1986), to a rate not exceeding 
sixty per cent (60%) ad valorem  of the c.i.f. price of foreign products, except for agro-industrial or 
industrial products whose production characteristics  warrant otherwise, in which case and having 
regard to the relative importance of the producers concerned for the national economy, tariffs may be 
raised to a maximum of ninety per cent (90%) ad valorem  on the c.i.f. price of the foreign products. 
 
The list of products eligible for protective customs tariffs exceeding sixty per cent (60%) 
ad valorem  shall be subject to approval by the Cabine t Council, through the Ministry of Trade and 
Industry, before one (1) August one thousand nine hundred and eighty six (1986).  No new products 
may be added to the list after that date. 
 
Products which enjoy tariff protection on the date of entry into force of this Law and whose 
production has been discontinued shall be regarded as new products when production resumes and 
shall therefore be subject to the provisions of Article 22 of this Law. 
 
Article 21.  In order to ensure adequate protection for existing domestic production, a system 
of customs tariffs expressed in ad valorem  and in specific terms shall be  maintained.  Specific tariffs 
shall remain subject to the foregoing Article and sha ll accordingly be reduced, in five (5) equal stages, 
over a period of five (5) years as of one (1) August one thousand nine hundred and eighty six (1986).  
At each of the stages, the percentages in the tariff reductions expressed in specific terms shall be equal 
to the percentages used in reducing customs tariffs expressed in ad valorem  terms. 
  G/SCM/Q3/PAN/13 
 Page 45 
 
 
Protective customs tariffs on products for which production began after the entry into force of 
this Law shall be expressed solely in ad valorem  terms. 
 
Article 22.  Tariff protection for products the produc tion of which began after the entry into 
force of this Law may not exceed a rate of twenty per cent (20%) ad valorem  of the c.i.f. price of 
foreign products, with the exception of industrial products of agricultural or livestock origin, for 
which tariff protection may not exceed thirty per cent (30%) ad valorem  of the c.i.f. price of the 
foreign products. 
 
Article 23.  The Ministry of Trade and Industry may,  on the basis of a substantiated request 
and subject to a recommendation by the Industrial Policy Commission, establish administrative procedures to prevent the entry into Panama of fo reign products whose declar ed entry price indicates 
unfair international competition (dumping), which sh all be understood to exist wherever the selling 
price of the product concerned in the manufacturing country is higher than the f.o.b. price at which the 
product is being sold to a Panamanian importer.  Such procedures shall in general comply with the 
accepted principles in international trade legisl ation and shall specify the manner in which a 
compensatory tariff shall be determined, to be equiva lent to the difference between the declared entry 
price and the f.o.b. price of the product in the market of the manufacturing country. 
 
Article 24.  Machinery, equipment, spare parts, raw materials, semi-finished products, 
containers, packaging and other inputs for production for domestic consumption may not be imported tax-free or at a preferential cust oms tariff rate where they are produced domestically in sufficient 
quantity, at an acceptable standard of quality and a competitive price. 
 
For the purposes of this Article , prices of domestic products shall be regarded as competitive 
where they do not exceed the c.i.f. value of like or substitute foreign products by more than the 
percentage of tariff protection. 
 
 Article 25.  Enterprises wholly engaged in export production may import all their inputs tax-
free.  Where such inputs are available locally in  sufficient quantity, at an acceptable standard of 
quality and at the same price or at prices equivalent  to the c.i.f. prices of  foreign inputs, preference 
shall be given to domestic products.  The same tr eatment shall apply, in respect of exports, to 
enterprises partially engaged in export production, provided that it does not run counter to the spirit of 
Article 23 of this Law. 
 
 It shall be understood, however, that enterp rises engaged in assembly activities that avail 
themselves of the regime established in this Law under the terms specified in Article 4 may import all 
their inputs tax-free, re gardless of whether these are being pr oduced domestically in sufficient 
quantity, at an acceptable standard of quality and at a competitive price. 
 
 PARAGRAPH.   Any discrepancy in terms of quality and quantity that may arise as a result 
of applying this and the foregoing Articles shall be resolved by the Ministry of Trade and Industry.  
The Panamanian Industrial and Technical Standa rds Commission (COPANIT) shall hear appeals 
against decisions on product quality reached by the Ministry of Trade and Industry. 
 
 
CHAPTER V 
 
Official National Industry Register 
 
 Article 26.  The Official National Industry Register is hereby established under the authority 
of the Directorate-General of Industry of the Ministry of Trade and Industry.  Enterprises wishing to 
avail themselves of the incentives regime provided in this Law are required to be entered in the 
Register. G/SCM/Q3/PAN/13 
Page 46  
 
 
 Article 27.  For the purposes of registration in th e Official National Industry Register, 
enterprises shall complete a form, to be supplied  by the Ministry of Trade and Industry at a cost 
exceeding ten Balboas (B10.00) which shall include the following information: 
 
 (a) Applicant's full name, nationality and pers onal identity card or passport number;  in 
the case of legal persons, the name of th e business, the name of the country under 
whose laws the business was established, deta ils of registration in the Public Register, 
and name and particulars of its legal representative; 
  (b) exact address of the industrial establishment's current or future location;  
 (c) description of the industrial activity in which the establishment is, or will be, engaged 
and a brief account of the production process, including a description of the 
product(s) which it proposes to manufacture; 
  (ch) amount of capital that it undertakes  to invest in the launching of operations; 
 
 (d) number of jobs that it plans to create; 
 
 (e) description of the types of machinery, equipment, spare parts, raw materials, semi-
finished or intermediate goods and other in puts required for the production process. 
 
 Article 28.  The following documents shall be attached  to the form referred to in the 
foregoing Article: 
 
 (a) Authenticated copy of the applicant's pers onal identity card or passport, in the case of 
natural persons; 
 
 (b)  in the case of legal persons, authenticated copies of the personal identity card or 
passport of the legal representative and of th e public registration certificate, to be sent 
within thirty (30) days prior to submission  of the application and specifying that the 
enterprise is duly in operation, the names of  its directors, senior executives and legal 
representative, the amount of its equity capi tal and the certificate's term of validity; 
 
(c) certificate attesting that no  tax fraud has been committed; 
 
 (ch) certificates attesting to paymen t of national and municipal taxes; 
 
 (d) proof of payment of the registration fee. 
 
 Article 29.  An enterprise's registration in the Official National Industry Register shall be 
ordered in a Resolution issued by the Ministry of Trade and Industry and shall give the holder the 
right to enjoy the benefits and incentives provided under this Law as of the date of its issue and 
throughout the period of validity of the registration. 
 
 A duly authenticated copy of the Resolution sh all be transmitted to the enterprise concerned, 
specifying the period of validity of the registra tion.  Resolutions issued in conformity with the 
provisions of this Article shall be published in the Industrial Property Bulletin.  In addition, a full list of enterprises registered as benefiting under the incentives regime shall be published annually in the 
year's first issue of the Industrial Property Bulletin. 
 
 Article 30.  Registration of enterprises in the Official National Industry Register shall be 
valid for a period of ten (10) years, except for enterprises that are being set up or are already  G/SCM/Q3/PAN/13 
 Page 47 
 
 
established in the areas specified in Article 13 of this Law, whose registration shall be valid for a 
period of fifteen (15) years.  After the expiry of these periods and in the absence of any other relevant 
legislation, established enterprise s that are operating normally may enjoy the benefits under this Law 
on an annual basis, updating their registration each year. 
 
 Registration of enterprises in the Official Natio nal Industry Register shall be subject to an 
annual fee of fifty Balboas (B50.00).  The initial fee or the relevant proportionate amount thereof shall 
be payable upon submission of the application for registration.  Subsequently, the fee shall be due 
within the first three (3) months of each year.  Fa ilure to comply with this requirement shall entail 
suspension of the benefits provided under this Law.   
CHAPTER VI 
 
Obligations of enterprises 
 
 Article 31.   All enterprises availing themselves of benefits under this Law are required to: 
 
 (a) Invest the capital indicated in their applications in their industrial activities and 
maintain that investment for the duration of the registration period; 
  (b) initiate the investment within a period not exceeding six (6) months as of the date of 
registration in the Official National Industry Register; 
 
 (c) commence production within a period not exceeding two (2) years as of the date of 
registration, except where in cases where th e Ministry of Trade and Industry decides 
that a longer period is necessary due to the type of production; 
 
 (ch) produce and supply quality products fo r domestic consumption, in accordance with 
the standards established for the respective product classes by the Panamanian 
Industrial and Technical Standards Commission (COPANIT); 
 
 (d) label their products in conformity with the requirements of the Panamanian Industrial 
and Technical Standards Commission (COPANIT); 
 
 (e) maintain accurate records of tax-free ar ticles, which shall be made available to the 
competent officials of the Ministry of Finance and the Treasury and the Ministry of 
Trade and Industry;  
 
 (f) promote domestic production of raw material s and articles that are derived, or can be 
developed, from such materials; 
 
 (g) take all reasonable precautions to av oid environmental pollution and fully comply 
with the relevant regulations and instruct ions adopted by the competent authorities; 
 
 (h) renounce all complaints through diplomatic channels, in the case of foreign-owned 
enterprises or enterprises with foreign capital participation. 
  G/SCM/Q3/PAN/13 
Page 48  
 
CHAPTER VII 
 
Penalties 
 
 Article 32.   Failure on the part of an enterprise to  comply with the obligations laid down in 
Article 31(a), (b) and (c) of this  Law shall entail cancellation of its registration, except where such 
failure is found to be due to force majeure  or unforeseen circumstances. 
 
 Registration shall be cancelled by a Resolution of the Ministry of Trade and Industry, which 
shall be notified to the person concerned and published in the Industrial Property Bulletin. 
  Article 33.   Where an enterprise does not comply with  the obligations laid down in 
Article 31(ch) and (d) of this Law, it sh all be liable to the following penalties: 
 
 (a) Issue of a written warning to the enterprise, which shall be given a period of ninety 
(90) calendar days to remedy the deficiency noted in finished products ready for consumption; 
 
 (b) where the enterprise fails to remedy th e deficiency within the prescribed deadline, 
products that are of inferior quality, un labelled or incorrectly labelled, as duly 
ascertained by the Directorate-General of Industrial Standards and Technology of the Ministry of Trade and Industry, shall be withdrawn from consumer outlets, without prejudice to the rights of and legal remedi es sought by clients and consumers to 
obtain compensation from the enterprise for the damages and injury incurred; 
 
 (c) where the enterprise fails to comply a second time, the processing of applications for 
tax-free imports of machinery, equipment, raw materials, containers, packaging and 
other inputs shall be susp ended until the enterprise ha s resolved the problem; 
 
 (ch) where the enterprise persists in disregarding the specified requirements, its 
registration shall be cancelled, pu rsuant to the foregoing Article. 
 
 Article 34.  Failure on the part of an enterprise to  comply with the other obligations laid 
down in Article 31 of this Law shall entail suspension of the processing of applications for tax-free 
importation, until the enterprise satis fies the obligation in question. 
  Article 35.  Without prejudice to the provisions in the foregoing Articles, enterprises wholly 
engaged in export production and covered by this La w or by prior legal provisions shall be liable to 
the following special penalties: 
 
 (a) For introducing into the country finished products or products with a higher degree of 
processing than that authorized by the Ministry of Trade and Industry, a fine of 
twenty-five thousand Balboas (B25,000.00) and seizure of the infringing goods; 
 
 (b) for selling products in Panamanian fiscal territory, a fine of twenty-five thousand 
Balboas (B25,000.00) or an amount equivalent to fifty per cent (50%) of the selling 
price of the products in question, whichever figure is highest, and seizure of the 
goods; 
  (c) in the event of repetition of the afor ementioned infringements, the enterprise's 
registration and entitlement to the benefits and incentives under this Law shall be 
cancelled.  In the case of a contract with the State, the matter shall be resolved 
through administrative channels and the corresponding bond shall be posted with the 
Treasury.  G/SCM/Q3/PAN/13 
 Page 49 
 
 
 
 Article 36.  Except for the provisions of Article 11 of  this Law, any natural or legal person 
importing machinery, equipment, raw materials, containers, packaging and other inputs, and semi-
finished or intermediate goods under this Law that sells, leases, transfers, disposes of, or in any way 
uses the foregoing for purposes other than those fo r which the exemption has been granted shall be 
liable to the penalties laid down in Articles 24 et seq. of Law No. 30 of 1984. 
 
 Article 37.  Any natural or legal person importing products or goods in violation of this Law 
shall be liable to the penalties laid down in Articles 24 et seq. of Law No. 30 of 1984. 
  Article 38.  Enterprises availing themselves of this Law that object to or impede the revision 
and examination of accounting records and ledgers and the inspection of shops, warehouses, factories 
and other installations by officials of the Ministry of Trade and Industry and the Ministry of Finance 
and the Treasury shall incur a fine ranging from five hundred Balboas (B.500.00) to one thousand 
Balboas (B.1,000.00) and suspension of the processing of applications for tax-free importation, until 
the prescribed fine has been paid.  
 
CHAPTER VIII 
 
General Provisions 
 
 Article 39.   Official and semi-official bodies, au tonomous and semi-autonomous institutions, 
municipalities, State-owned en terprises and other public or private institutions that receive financial 
support from the State or are partly State-funded are required to purchase raw materials, containers, 
packaging, fuel, lubricants, finished products and other items produced in Panama, to the extent that 
these are available when needed at an acceptable standard of quality and a competitive price, as 
stipulated in Article 24 of this Law.  All impo rts of raw materials, containers, packaging, fuel, 
lubricants, semi-finished and finished products and other foreign items shall be subject to Articles 535 
et seq. of the Fiscal Code. 
 
 Natural and legal persons engaged in projects and works under contracts concluded with the 
State or any of the institutions specified above shall be subject to the same conditions. 
 
 Article 40.  Industrial enterprises which, on the date of enactment of this Law, had industrial 
development contracts concluded under the provisions of Cabinet Decree No. 413 of 
30 December 1970 or other laws, may avail themselves of this Law by rescinding such contracts, it 
being understood that the additional incentives provi ded in Article 13 of the Law shall not apply to 
enterprises that benefited from such incentives under previous contracts. 
 
 Article 41.  Contracts in force on the date of enactment of this Law and based on prior legal 
provisions shall remain valid until the expiry of their respective terms.  Once the contracts have 
expired, enterprises may avail themselves of th is Law, it being understood that the additional 
incentives provided under Article 13 shall not apply to  enterprises that benefited from such incentives 
under the expired contracts. 
 
 Article 42.  The Executive shall introduce regulations  for this Law when more effective 
implementation of its provisions so requires.  
  Article 43.  Cabinet Decree No. 413 of 1970, Cabinet Decree No. 172 of 1971, Law No. 92 
of 1976, Law No. 24 of 1978, Law No. 31 of 1978 and all other provisions that are inconsistent with 
this Law are hereby repealed.  
 G/SCM/Q3/PAN/13 
Page 50  
 
 Article 44.  This Law shall take effect fr om the date of its enactment. 
 
FOR COMMUNICATION AND PUBLICATION 
  G/SCM/Q3/PAN/13 
 Page 51 
 
 
Law No. 281 
of 20 June 1995 
 
Adopting Measures Extending the Scope of Production Tax Incentives and 
Establishing Other Provisions 
 
 
THE LEGISLATIVE ASSEMBLY 
 
HEREBY DECREES: 
 
 
 Article 1 .  Article 431-A of the Fiscal Code is hereby added, which reads as follows: 
 
 Article 431-A .   he drawback regime, duty-free stock replenishment regime, temporary 
admission for inward processing regime and temporary export for outward processing regime are hereby established. 
 
 The drawback regime authorizes producers expo rting merchandise to re cover all of the taxes 
paid at the time of import on the goods used in the production of these exports. Exporters eligible for 
this regime shall receive a refund of the taxes paid upon import.   The duty-free stock replenishment regime au thorizes duty-free imports of merchandise 
equivalent - i.e., similar in type, quality and te chnical characteristics - to lawfully imported 
merchandise used to obtain products defi nitively exported at an earlier date. 
 
 The temporary admission for inward processing regime permits the import into a customs territory, 
for a specific period, of certain merchandise intended for export after undergoing processing, manufacture 
or repair, with suspended import duties and taxes and subject to a guarantee for the total amount of these 
duties and taxes.  
 The temporary export for outward processing regime permits the export, for a specific period, 
of domestic or definitively imported merchandise for processing, manufacture or repair abroad, prior 
to being re-imported with full or partial exemption from import duties and taxes. 
 
 The Director of the respective Customs shall appl y the regime and its term shall be fixed in the 
Resolution establishing it, depending on the period of time considered necessary in the light of the nature of 
the processing work to be conducted abroad. 
 
 The Executive shall regulate the verification procedure for goods coming under the duty-free stock 
replenishment regime, temporary admission for inward processing regime and temporary export for 
outward processing regime. 
 
 The Cabinet Council may restrict  the application of these regimes to certain goods or categories 
thereof. 
 
 Article 2 .  Article 592 of the Fiscal Code shall read as follows: 
  Article 592 .  The following shall be elig ible for the drawback regime: 
 
1. Goods on which import taxes have been paid and which have undergone processing, manufacture 
or repair for re-export or been physically incorporated in an export product. 
                                                     
 
1 Published in Official Journal No. 22.810 of 22 June 1995. G/SCM/Q3/PAN/13 
Page 52  
 
 
2. Elements which play an auxiliary role in the processing, manufacture or repair of export goods. 
 
3. Goods which have been imported under the duty-free stock replenishment regime and are used in 
the production of export goods. 
 
4. Goods which have been exported within six (6) m onths of definitive import, provided that they have 
not been used nor undergone any kind of processing or manufacture subsequent to import and their value 
exceeds one thousand balboas (B.1,000.00). 
  For the purposes of Articles 431-A and 592 of the Fiscal Code, export shall be understood to mean 
the sale outside Panama of agricultural, aquaculture, marine, agro-industrial and industrial products, whether 
as crude, semi-processed or processed materials; the sale of such products to an enterprise located in a free-
trade or export processing zone; international transpor t in transit through the Republic of Panama, the final 
destination of which is export; and international transpor t vessels in transit through the Republic of Panama. 
  For the same purposes, export shall also be understood to mean the sale on the domestic market of 
raw materials, semi-processed products and locally-produced containers and packing, provided that these 
are supplied to enterprises that export no less  than ninety per cent (90%) of their products. 
 
 Article 3 .  Subparagraph (ch) is hereby amended and subparagraph (d) added to paragraph 1 of 
Article 697 of the Fiscal Code, as follows:  
 Article 697 ... 
 
 PARAGRAPH 1 . 
 
 ... 
 
 (ch) Thirty per cent (30%) of investments in ag ricultural, livestock and agro-industrial activities, 
although in such cases the deduction may not exceed forty per cent (40%) of taxable 
income before the right conferred by this subparagraph is exercised and provided that as the 
sums invested originate from sources other than the specified activities. 
 
  For the purposes of this Article, the purchase of bonds shall not be considered an investment 
in the agricultural sector. 
 
  The benefit of special deductibility for inve stments in agricultural, livestock, aquaculture 
and agro-industrial activities shall cease to be effective on 31 December 2002. 
 
 (d) With regard to credits guaranteed by way of deposits, only the differential between the 
amount paid by the taxpayer as interest and the interest on the deposits guaranteeing the 
obligation shall be tax-deductible. Financial in stitutions regulated by Law No. 20 of 1986 
are exempt from this regulation. 
 
 Article 4 .  Article 699 of the Fiscal Code shall read as follows: 
 
 Article 699 .  Legal persons shall pay income tax at a rate  of thirty per cent (30%) tax on their taxable 
net income for the fiscal years 1995 and onwards.  
 Legal persons entered in the Official Industry Register or holding a contract with the State on the 
basis of Cabinet Decree No. 413 of 1970 or an industry development contract shall pay the following rate of 
income tax on their taxable net income: 
  G/SCM/Q3/PAN/13 
 Page 53 
 
 
 up to B.500,000  30 per cent 
 
 over B.500,000   B.150,00 0 plus 34 per cent on the amount exceeding B.500,000. 
 
 Article 5 .  Subparagraph (d) of Article 701 of the Fiscal Code shall read as follows: 
 
 (d) Natural and legal persons established or setting up in the Colón free zone or any other 
existing or future free-trade zone shall pay,  in accordance with th e rates established in 
Articles 699 or 700 of this Code, as applicable, all income tax on the taxable income from 
their domestic operations - domestic operations being understood to mean sales to purchasers located in the customs territory of Panama's free-trade zones. 
 
 Persons established in the Colón or any other free-trade zone in the Republic of Panama shall pay 
income tax at the single rate of fifteen per cent (15%) on the taxable income from their foreign operations as 
1 July 1995. 
  Taxpayers shall pay an estimated amount of advanc e income tax - calculated on the basis of their 
exports during the previous fiscal year on the basis of the table below - on their taxable income from foreign 
operations in three (3) equal instalments falling due in si x (6), nine (9) and twelve (12) months as of the date 
of the end of their fiscal year. 
  Advance income tax payable on re-exports in millions of balboas is as follows:  
 Up to 2.0 million   B.8,500.00; 
 From 2.0 to 5.0 million    30,000.00; 
 From 5.0 to10.0 million    60,000.00; 
 From 10.0 to 20.0 million  100,000.00; 
 From 20.0 to 40.0 million  175,000.00; 
 From 40.0 to 80.0 million  275,000.00; 
 From 80.0 to 120.0 million  400,000.00; 
 Over 120.0 million   500,000.00. 
 
 The above table shall not apply to goods forwardi ng agents who operate in free-trade zones, who 
shall pay the sum of eight thousand five hundred balboas (B.8,500.00) as advance income tax on their foreign 
operations.  Taxes are payable at the end of the fiscal period at the single rate of fifteen per cent (15%).  
Foreign operations shall be understood to mean the operations or other remuneration which these agents receive for re-exporting goods from abroad. 
 
 These companies shall pay income tax on their inco me from domestic operations in accordance with 
the rates established in Articles 699 or 700 of the Fiscal Code, as applicable. 
 
 Forwarding agents are persons engaged in providing goods forwarding services at national and/or 
international level, such as transport,  storage, services related to the physical distribution of goods by carriers, 
either on their own account or on be half of the owners of the goods or their authorized re presentatives.  
Goods forwarding agents, to be considered as such, may not purchase the documents of title or engage in the 
purchase or sale of the goods which they handle for third parties. 
 
 At the end of the corresponding fiscal period, taxpayers established in free-trade zones shall submit their respective sworn declarations, pursuant to Article 710 of the Fiscal Code, and shall pay the difference between the estimated advance income tax on foreign operations and the income tax generated by the taxable 
income from these foreign operations, calculated on the basis of the singl e rate of fifteen per cent (15%). 
 
 If the taxes calculated on the basis of the sworn declaration of income are less in any fiscal year than 
the estimated amount paid for that fiscal year, the taxp ayer may use this surplus as a tax credit against the G/SCM/Q3/PAN/13 
Page 54  
 
income tax payable in the year immediately following that in which the credit was generated, but only on the 
taxes, either paid in advance or declared, generated on the foreign operations of the fiscal period immediately 
subsequent.  The said tax credit shall, as a result, be va lid only in the fiscal period following the year in which 
it was generated. 
 
 For the purposes of this Article, the foreign or e xport operations of persons established in free-trade 
zones shall be understood to mean sales transactions involving domestic or foreign goods exported from 
these free-trade zones and bound for clients outside Panama. Conveyance between natural or legal persons 
established in free-trade zones and income from comm issions on foreign operations conducted in free-trade 
zones shall also be considered foreign or export operations.   The employees of the natural and legal persons es tablished in free-trade zones shall pay income tax 
pursuant to Article 700 of this Code. 
 
 All sworn declarations shall be submitted using the magnetic media or forms authorized by the 
Directorate-General of Revenue of the Minist ry of Finance and the Treasury and state, inter alia , the amount 
of taxable operations and the aggregate amount payable. 
 
 The late submission of the decl aration referred to in the preceding paragraph or arrears in the 
payment of any of the three (3) instalments of advanc e income tax shall incur the surcharges and interest 
provided for in Article 1072-A of this Code.   Enterprises which set up in a free-trade zone in th e territory of the Republic of Panama shall pay no 
advance income tax of any kind during their first year of operations or part thereof. At the end of this period, 
such enterprises shall pay income tax at th e single rate of fifteen per cent (15%). 
 
 TRANSITIONAL PARAGRAPH :  The estimated amount of tax payable shall be calculated in 
accordance with an attestation from a chartered accountan t stating the aggregate amount of foreign operations 
conducted in the immediately preceding fiscal year.  Th is attestation shall be submitted to the Directorate-
General of Revenue of the Ministry of Finance and the Treasury on the forms furnished by the former within 
the first ninety (90) days of the fiscal calendar. 
 
 With regard to the 1995 fiscal year, taxpayers sh all pay proportional advance income tax on their 
foreign operations for the period 1 July 1995 until the end of the fiscal period. 
 
 Article 6 .  Subparagraph (d) and five paragraphs are he reby added to Article 702 of the Fiscal Code, 
as follows: 
 
 Article 702 . 
 
 ... 
 
 (d) With regard to activities that are not eligible for other incentives or tax credits established 
under other Laws, as of 1 July 1995, income taxpayers shall be entitled to a credit of up to 
25 per cent only of the income tax paid in each period for direct investment made in 1995 
and the following five (5) years in the activities stated hereunder: 
 
1. Investment in technological research and de velopment, genetic improvement and acquisition of 
state-of-the-art technology in the related sector;  
2. Investment in infrastructure which guarantees connection to and/or the continuous supply of electric 
power and water essential for production; 
  G/SCM/Q3/PAN/13 
 Page 55 
 
 
3. Investment in infrastructure, transport equipment and communications for production operations 
which bring about a direct reduction in the operating costs of production; 
 
4. Investment in infrastructure and port and airport equipment which bring about a direct reduction in 
the operating costs of production; 
 
5. Investment in training for plant staff which is essential for production; 
 
6. Investment in the production of new arti cles or expansion of production capacity. 
  PARAGRAPH 1.   The direct investment tax credit may be used over several fiscal years until 
100 per cent of the investment which gave rise to it is covered. It may also be used by persons making such 
investments using the financial leasing method regulated by Law No. 7 of 1990.  This credit may be neither 
offset nor transferred.  
 
 PARAGRAPH 2.   Enterprises established in export processing zones or which are engaged in the 
exploration and exploitation of metal ore for export shall not be subject to time restrictions on the execution 
of investments made under the general cr edit system established by this Law. 
 
 PARAGRAPH 3.   All taxpayers shall be eligible for the credit provided in points 1, 2 and 3 of this 
section provided that the investment is made indirect ly, by way of bonds, shares or other securities, in 
enterprises which carry out such activities, and that it gives rise to a specific construction and that the 
corresponding work begins at the very latest in the fi scal year subsequent to that in which the indirect 
investment is made. 
 
 PARAGRAPH 4.   Taxpayers who avail themselves of the tax credit mentioned in this section and 
acquire goods that are liable to depreciate may not deduc t such depreciation as a cost when calculating their 
net taxable income. 
 
 PARAGRAPH 5.   The agricultural sector is exempt from this provision. Agricultural enterprises 
with legal contracts with the State or other contracts or in special registers shall not be eligible for this 
exception. 
 
 Article 7 .  Article 705 of the Fiscal Code shall read as follows: 
 
 Article 705 .   For annual taxation purposes, the taxable year covers a twelve (12) month period, 
as follows: 
 
1. The general calendar year beginning on 1 January and ending on 31 December. 
 
2. A special period requested by the taxpayer, beginning on the first day of the chosen month for a 
twelve (12)-month period. 
 
 For annual taxation purposes, this shall apply fr om the time of its entry into force for the entire 
current fiscal period of the taxpayer. 
 
 Article 8 .  Subparagraph (s) of Article 708 of the Fiscal Code reads as follows: 
  (s) The income of natural or legal persons engaged in agriculture whose annual gross revenue 
is less than one hundred thousand balboas (B.100,000.00). 
 
 Article 9 .  Subparagraph (c) of paragraph 1 of Article 710 of the Fiscal Code shall read as follows: 
 G/SCM/Q3/PAN/13 
Page 56  
 
 (c) Natural persons engaged in agriculture and whose annual gross revenue is less than one 
hundred thousand balboas (B.100,000.00). 
 
 Agriculture is to be understood as the produc tion of foodstuffs, salt and timber as well as 
agricultural, livestock, poultry and timber raw materi als and other agricultural products. Livestock production 
includes cattle breeding, pig breeding, poultry farming, bee-keeping, aquaculture and commercial breeding of 
other animal species.  
 Article 10 .  Article 733 of the Fiscal Code shall read as follows: 
 
 Article 733 .  With the exception of dividends or profit -sharing in the activities covered by paragraph 
2 of Article 694, subparagraph (b) of Article 702, subpar agraphs (e), (f), (l), (m) and (o) of Article 708 and 
Article 699-A of this Code, legal persons shall deduct ten per cent (10%) of the sums which they distribute to 
their shareholders or partners as divi dends or equity participation.  If no dividends are distributed or the total 
distributed as dividends or equity participation is le ss than forty per cent (40%) of the net profits for the 
corresponding fiscal period, less the taxes paid by the legal person, the latter shall cover ten per cent (10%) of the difference. The amount thus deducted shall be remitted to the tax-collector within ten (10) days of the date 
of deduction. These deductions and withholdings shall be definitive. 
 
 Branches of foreign legal persons shall pay ten per cent (10%) tax on one hundred per cent (100%) 
of their taxable income generated in Panama, less the taxes paid on this income in the country. This deduction is definitive and shall be paid upon submi ssion of the corresponding sworn declaration. 
 
 Legal persons shall not be liable to make the deduc tion referred to in this Article on their income 
from dividends, provided that the corporation which di stributes such dividends has paid the corresponding 
tax and made this deduction. 
 
 Neither shall legal pe rsons be liable to make the deduction referred to in this Article on their income 
from dividends, provided that the legal person that distributes such dividends is, in turn, exempt from the 
obligation to make such a deduction. 
 
 All natural and legal persons who must remit sums  corresponding to income of any kind generated 
in Panama, with the exception of dividends and other fo rms of equity participation, to a natural or legal 
person who is not resident in the Republic of Panama shall, when remitting such sums in any form, deduct 
the amount established in Articles 699 or 700 of this C ode and remit it to the tax collector within ten (10) 
days of the date of deduction.  
 To calculate the deduction, all payments, drafts , credits and contributions  made to the taxpayer 
during the year shall be added to the amount being paid, dr awn or credited and the rate established in Articles 
699 or 700 of this Code applied to this total. Any de ductions already made during the taxable year shall be 
subtracted from this figure. 
 
 PARAGRAPH.   Notwithstanding the above, the holders of bearer shares shall pay income tax at a 
rate of 20 per cent.  Legal persons distributing dividends shall apply the deduction, which shall be definitive.  
If a company which distributes dividends has different cl asses of shares, the tax sha ll be paid in accordance 
with the rates established herein and the type of shares. 
 
 When less than forty per cent (40%) of net profits are distributed or if no such distribution is made, 
surtax provisions shall be applied irrespective of the type of shares issued by the company.  
 Article 11 .  Subparagraph (e) is hereby added to Article 739.7 of the Fiscal Code, as follows: 
 
 (e) Panamanians and foreigners with permanent residence in the national territory. 
  G/SCM/Q3/PAN/13 
 Page 57 
 
 
 Article 12 .  Article 3 of Law No. 106 of 1974, amended by Law No. 31 of 1991, shall read as 
follows: 
 
 Article 3 .  The conveyance tax paid by the seller may only be deducted from the income tax on the 
disposal of the immovable property being conveyed an d is determined in accordance with the procedure 
established in subparagraph (a) of Article 701 of the Fi scal Code and up to the full amount of the latter tax. 
 
 Article 13 .  Article 5 of Law No. 108 of 1974, amended by Law No. 2 of 1991, shall read as 
follows: 
  Article 5 .  Until 31 December 2000, natural and legal persons exporting non-traditional goods 
that are wholly or partly produced or processed in  Panama may, in accordan ce with this Law, apply 
for Tax Credit Certificates (CATs) equivalent to twenty per cent (20%) of th e national value added of 
the exported goods. 
 
 From 1 January 2001 until 31 December 2002, exporters of non-traditional goods shall still be entitled to apply for Tax Credit Certificates, but the va lue of the CATs shall be reduced to fifteen per 
cent (15%) of the national value added of the exported goods. 
 
 Article 14 .  Article 5 of Law No. 3 of 1985, amended by Law No. 11 of 1990 and extended by Law 
No. 5 of 1994, shall read as follows: 
 
 Article 5 .  The difference between the benchmark and the lower rate actually charged by creditors at 
their own discretion on preferential mortgage loans shall be known as the preferential rate band.  This rate 
band may not exceed two percentage points (2%) on lo ans for housing with a purchase price or construction 
value of over forty thousand balboas (B.40,000.00), but not exceeding sixty-two thousand five hundred 
balboas (B.62,500.00).  It may not exceed three percentage points (3%) on loans for housing with a purchase 
price of less than forty thousand balboas (B.40,000.00), but more than twenty-five thousand balboas 
(B.25,000.00), and may not exceed five percentage poin ts (5%) on loans for housing with a purchase price or 
construction value of not more than  twenty-five thousand balboas (B.25, 000.00). It is, however, understood 
that the National Banking Commission may, from ti me to time and without ex ceeding the above-mentioned 
limits, set a ceiling for preferential rate bands on th e basis of money market conditions and housing sector 
requirements, whilst always maintaini ng a difference of up to two percentage points (2%) between the said 
loan rates, with the exception of the preferential rate for housing with a purchase price or construction value 
of less than twenty-five thousand balboas (B.25,000.00). 
  Constructions for which the occupancy permit is ob tained within not more than two (2) years of the 
date of enactment of this Law shall be exempt from this provision and shall be governed by the regime in 
force prior to this amendment. 
 
 See Resolution No. 26-95 of 29 June 1995, issued by the National Banking Commission, which sets 
a ceiling for the preferential rate for mortgage loans.  Official Journal No. 22.822 of 10 July 1995. 
 
 Article 15 .  Article 3 of Law No. 7 of 1993 shall read as follows: 
 
 Article 3 .  The original date of processing of imported poultry products shall be publicly displayed 
in order to give consumers a guarantee of the quality of poultry products in ge neral and to protect public 
health. Domestic poultry products shal l also comply with this requirement. 
  Article 16 .  Articles 4.1 and 4.2 of Law No. 7 of 1993 shall read as follows: 
 G/SCM/Q3/PAN/13 
Page 58  
 
 Article 4 ... 
 
1. That the country has no infectious or contagious diseases which have been brought under control 
or do not exist in the Republic of Panama or which, although they do exist in the Republic of Panama, are 
only present to an infinitesimal degree and are subjec t to surveillance, preventive or eradication measures, 
diseases which could affect domestic production or hum an or animal health or any of the other diseases 
reported periodically by the Ministry of Agricu ltural Development or the Ministry of Health. 
 
2. That the country has sanitary legislation applicable to the breeding and slaughter of and 
establishments for poultry and the processing of poultry products which establishes an appropriate level of sanitary protection, in accordance with pertinent laws and regulati ons of the Republic of Panama. 
 
 Article 17 .  Article 8 of Law No. 7 of 1993 shall read as follows: 
 
 Article 8 .  On the basis of the requirements for th e approval of domestic establishments, the 
Ministry of Health shall only approve foreign establishments which, following an inspection of the premises, comply with the health, hygiene and other requirements la id down in the laws of the Republic of Panama and 
the regulations issued to this effect by the Executive  through the Ministry of Health, including ante- and 
post-mortem inspections of poultry products by veterinary surgeons authorized by this Ministry.  Approval 
of foreign establishments, like that of domestic establishments, shall be renewed on an annual basis and may 
be withdrawn at any time by the Ministry of Health if it determines that an establishment does not satisfy the 
requirements laid down in this and others laws regulating the issue. 
 
 Article 18 .  Article 13-A is hereby added to Law No. 7 of 1993, as follows: 
 
 Article 13-A .  The regulations issued pursuant to this Law by the Executive through the Ministries 
of Agricultural Development and of Health, respective ly, shall follow the general outline of the relevant 
international treaties which the Republic of Panama  has ratified or may ratify at a future date. 
 
 Article 19 .  Article 1 of Law No. 4 of  1994 shall read as follows: 
 
 Article 1 .  Local loans to the agricultural sector and the agro-industrial sector exporting non-
traditional products shall be eligible for a discount on the interest rate agreed with the bank or financial 
lending institution and shall be repaid by applying the deductions made by the banks or institutions by way of 
measures provided for under the Law. 
  Entitlement to such a discount requires loans to satisfy the following conditions: 
 
1. Maximum amount per production cycle per line of business; two hundred thousand balboas 
(B.200,000.00), with the exception of loan s to agricultural pr oduction associations. 
 
 If the nature of the production cycle of qualified ag ricultural sector activities is impossible to define 
it shall be understood to be the year-end. 
 
2. Beneficiaries: natural and legal persons with agricultural producer status. 
 
3. Activities and objectives: as set fort h in Article 6 of Law No. 4 of 1994. 
 4. Number of operations: one loan per production cy cle per line of business per natural or legal person. 
 
5. Penalties: non-compliance with the conditions set out herein shall incur the penalties established in 
Article 7 of Law No. 4 of 1994. 
  G/SCM/Q3/PAN/13 
 Page 59 
 
 
 Loans granted by banks and financial institutions to the Agricultural Development Bank are eligible 
for the interest rate discount established by this Article. 
 
 PARAGRAPH 1.   The annual credit surplus of the Special Interest Compensation Fund (FECI), 
referred to in Article 3 of Law No. 4 of 1994, shall, once the required technical reserves have been 
constituted, be allocated as a loan at one per cent (1%) annual interest, in the following proportion:  seventy-
five per cent (75%) to the Agricultural Development Bank and twenty-five per cent (25%) to agricultural 
credit cooperatives, in accordance with the terms and conditions agreed by these bodies with the National 
Banking Commission. 
  Use of the funds received by  the Agricultural Development Bank and agricultural credit 
cooperatives pursuant to this paragraph shall be subject to compliance with the conditions stipulated in the 
second paragraph of this Article. 
 
 PARAGRAPH 2.   Agricultural bonds issued prior to the entry into force of this Law shall retain the 
subsidy of which they have been benefici aries up until they have been repaid. 
 
 Article 20 .  Article 2 of Law No. 4 of 1994 shall read as follows: 
 
 Article 2 .  The interest rates for personal, commercial and local loans of over B.5,000.00 granted by 
banks and financial institutions as of the entry into force of the Law Extending the Scope of Production Tax Incentives shall include for deduction a sum equivalent to one per cent (1%) per year of the same amount used as a basis for interest calculation. Fifty per cent (50%) of all such amounts shall be remitted to 
the Agricultural Development Bank  and the remaining fifty per cent  (50%) to the Special Interest 
Compensation Fund. 
 
 Loans granted prior to the entry into force of this  Law shall maintain the one per cent (1%) surcharge 
until the loan is repaid. 
 
 Cooperatives which grant credits to their members and agricultural production associations 
recognized under Law No. 38 of 1980 shall be exempt from the surcharge equivalent to one per cent (1%) 
referred to in the preceding clauses. 
 
 Article 20 of Law No. 28 of 20 June 1995 has been amended by Article 116 of Law No. 56 of 
27 December 1995. 
  Article 116 .  Article 20 of Law No. 28 of 1995, amending Article 2 of Law No. 4 of 1994, is hereby 
amended as follows: 
 
 Article 2 .  The interest rates for personal, commercial and local loans of over B.5,000.00 granted by 
banks and financial institutions as of the entry into force of this Law shall include for deduction a sum 
equivalent to one per cent (1%) per year of the same amo unt used as a basis for interest calculation.  Fifty per 
cent (50%) of all such amounts shall be remitted to the Agricultural Development Bank and the remaining 
fifty per cent (50%) to the Spec ial Interest Compensation Fund. 
 
 Loans granted prior to the entry into force of this  Law shall maintain the one per cent (1%) surcharge 
until the loan is repaid. 
  The following shall be exempt from the surcharge equi valent to one per cent (1%) referred to in this 
Article: 
 
1. Loans to cooperatives which grant credits to their partners and agricultural production associations 
recognized under Law No. 38 of 1980. 
 G/SCM/Q3/PAN/13 
Page 60  
 
2. Interbank loans, external loans, funding through the issue of bonds and securities and loans to the 
financial institutions regulated by Law No. 20 of 1986. 
 
3. Loans to enterprises which operate credit card systems, provided that the funds are earmarked for 
direct financing to which the deduction will subsequently be applied. 
 
4. Loans fully guaranteed by savings or fixed-term  deposits in banks established in Panama and the 
surrender values of life insurance policies until the proportion thus guaranteed has been fully contributed. 
 
 PARAGRAPH .  This Article is a matter of public polic y and therefore has retroactive effect to 
13 June 1995.  
 Text of Article 20, as amended by Article 11 6 of Law No. 56 of 27 December 1995.  Official 
Journal No. 22,939 of 28 December 1995. 
 
 Article 21 .  Article 3 of  Cabinet Decree No. 44 of 1990 shall read as follows: 
 
 Article 3 .  As from 1996, profits on the sale of immo vable property which are reinvested in new 
constructions shall be exempt from the payment of income tax, provided that the cost of the new 
constructions is at least four (4) time s the profits in each instance and that the reinvestment is made directly in 
the following sectors:  1. For work undertaken in 1996, total reinvestment shall be in housing with a sales value not exceeding 
two hundred thousand balboas (B.200,000.00); 
 
2. For work undertaken in 1997, total reinvestment shall be in housing with a sales value not exceeding 
one hundred thousand balboas (B.100,000.00); 
 
3. For work undertaken from 1 January 1998 onwards, total reinvestment shall be in housing with a 
sales value not exceeding sixty two thousa nd five hundred balboas (B.62,500.00). 
 
 PARAGRAPH :  Up to twenty per cent (20%) of the amount of the reinvestment commitment may 
be used in each of the fiscal periods established in this  Article and may be invested in vocational training for 
permanent employees engaged in the taxpayer's production activities. 
 
 Such vocational training shall be conducted in  accordance with programmes authorized by the 
competent authorities for this purpose. 
 
 The taxpayer may only make direct investment , i.e., construction work, although temporary 
partnerships or joint accounts for improvements which qualify as reinvestment shall be permitted. 
 
 The period for making the reinvestment may not exceed two (2) years as of the date on which the 
taxpayer determined the profits from the sale of the immovable property. 
 
 Persons wishing to take advantage of this in centive shall enclose wi th their sworn income 
declaration documentary evidence of the building permit, issued by the Municipal Engineering Department 
of the corresponding district and stating the construction cost. Taxpayers who have been unable to process 
their respective building permits by the date of submi ssion of their tax declaration may ask the Directorate-
General of Revenue to allow them to take advantage of  the incentive referred to in this Article, with the 
proviso that they undertake to submit the supporting documentation within a maximum of nine (9) months. 
 
 Taxpayers who fail to obtain an occupancy permit for improvements within two (2) years of the date 
of the building permit shall assess and pay the income tax for which an exemption was granted, plus the legal 
surcharges.  G/SCM/Q3/PAN/13 
 Page 61 
 
 
 
 The Directorate-General of Revenue may extend this period when the characteristics of the 
construction so justify. 
 
 If the taxpayer is unable to fulfil the obligations laid down in this Article by the prescribed deadlines, 
he shall be liable for the exempted or reduced tax, plus surcharges and interest as from the date on which 
payment legally fell due. 
 
 Article 22 .  The conveyance and import of building mate rials for the use of enterprises operating in 
the Colón free zone and whose final destination is not outside the Republic of Panama shall be liable for customs import duties and the tax on the transfer of movable tangible property. 
 
 Article 23 .  Enterprises which, upon the entry into force of this Law, are entered in the Official 
Industry Register or have a contract with the State on the basis of Cabinet Decree No. 413 of 1970 or an 
industry development contract shall retain the tax benefi ts granted by such registration, pursuant to Law No. 3 
of 1986, or under such a contract, as applicable, for the rest of the period during which the registration or contract is effective. 
 
 The Ministry of Trade and Industry shall have legal powers to implement these development 
regimes for as long as the above-mentioned State contracts and Official Industry Registers remain in force. 
  The above-mentioned enterprises shall not be eligible for any of the benefits, incentives or exemptions granted under this Law. They may, however, withdraw from the Register or rescind the contract, 
as applicable, at any time and avail themselves  of the benefits granted under this Law. 
 
 PARAGRAPH.   Enterprises which are not entered in the Official Industry Register upon the entry 
into force of this Law shall be entitled to full exemption from income tax on the profits from their export 
sales.  The exemption provided in this paragraph shall remain in force until 31 December 2002. 
 
 Enterprises enjoying full exemption from income  tax on profits from export sales shall not be 
eligible for Tax Credit Certificates (CATs). 
 
 The Ministry of Trade and Industry may extend the registration of enterprises engaged in identical 
or similar activities up to the date of expiry of the last registration of an enterprise in the same line of 
production so as to avoid placing enterprises whose registration expired before the date in question at 
a disadvantage.  
 Article 24 .  Local lending to the agricultural sector, gr anted under previous legislation and still in 
force on the date of enactment of this Law shall mainta in the reduced interest rate s agreed with the bank or 
financial institution until the obligation has been disc harged. Banks and institutions  shall be reimbursed for 
the reduced rates offered to this end, pursuant to Law No. 4 of 1994. 
 
 Article 25 .  Until such time as the Ca binet Council, at the suggestion of the Ministry of Trade and 
Industry or the Ministry of Agricultural Development,  as applicable, sets another rate, all inputs, raw 
materials and intermediate and capital goods imported at the rate established in Articles 9 and 10 of Law 
No. 3 of 1986, shall, as of the enactment of this Law, pay import duty of three per cent (3%) of their cost, 
insurance and freight (c.i.f.) value,  in addition to the tax on the transfer of movable tangible property 
(ITBM), irrespective of whether the importer is entered in the Official Industry Register.   The import of agricultural, industrial or other inputs and raw materials which, in the opinion of the 
Executive, constitute sensitive produc ts shall be handled under a licens ing and tariff-rate quota regime. 
 
 The Cabinet Council shall establish which additional inputs, raw materials, intermediate and capital 
goods may be imported upon payment of the duty established in this Article. G/SCM/Q3/PAN/13 
Page 62  
 
 
 Article 26 .  Inputs, packing and raw materials used by the domestic pharmaceutical industry in 
the manufacture of medicinal products shall be exempt from import tax and the tax on the transfer of 
movable tangible property (ITBM). The Executive, through the Ministry of Trade and Industry, is authorized 
to regulate this matter. 
 
 Local purchases of packaging materials used by dome stic pharmaceutical plants in the preparation of 
medicines are exempt from ITBM. 
 
 Article 27 .  Enterprises benefiting from Tax Credit Certificates may not enjoy full exemption from 
income tax for the export activities established under this Law.  
 Persons engaged in agricultural and agro-industrial exports of non-traditional products shall be 
exempt from this provision until the effective date of the Tax Credit Certificates. 
 
 Article 28 .  Laws No. 108 of 1974, No. 2 of 1991, No. 4 of 1993 and No. 12 of 1993 are hereby 
repealed as of 31 December 2002. 
 
 Article 29 .  Article 14 of this Law shall en ter into effect on 1 July 1995. 
 
 Article 30 .  This Law amends Article 592;  subparagra ph (ch) of paragraph 1 of Article 697;  
Article 699; subparagraph (d) of Article 701;  Article 7 05;  subparagraph (s) of Article 708;  subparagraph (c) 
of paragraph 1 of Article 710;  and Article 733 of the Fiscal Code.  It also amends Article 3 of Law No. 106 
of 1974, as amended by Law No. 31 of 1991;  Article 5 of Law No. 1008 of 1974, amended by Law No. 2 of 
1991;  Article 5 of Law No. 3 of 1985, as amended by Law No. 11 of 1990 and extended by Law No. 5 of 
1994;  paragraph 5 of Article 3, Articles 4.1 and 4.2 an d Article 8 of Law No. 7 of 1993;  Articles 1 and 2 of 
Law No. 4 of 1994;  and Article 3 of Cabinet Decree No . 44 of 1990.  It adds Article 431-A;  subparagraph 
(d) of paragraph 1 of Article 697;  subparagraph (d) an d five paragraphs to Article 702;  and subparagraph (e) 
to Article 739.7 of the Fiscal Code.  It also adds Article 13-A to Law No. 7 of 1993 and repeals subparagraph 
(a) of Article 702 and subparagraphs (r) and (u) of Arti cle 708 of the Fiscal Code, as added by Law No. 31 of 
1991;  Law No. 3 of 1986;  Article 5 of Law No. 2 of 1991;  Article 16 of Law No.  2 of 1986; paragraph 4 of 
Article 3, paragraph 3 of Article 4, paragraph 4 of Ar ticle 9 and Articles 5, 10 and 11 of Law No. 7 of 1993. 
 
 Article 31 .  This Law is a matter of public policy and shall enter into force immediately. 
 
FOR COMMUNICATION AN D IMPLEMENTATION 
 
 Done at Panama City on the thirteenth day of June one t housand nine hundred and ninety five.  
 
 
  G/SCM/Q3/PAN/13 
 Page 63 
 
 
Executive Decree No. 2741 
of 29 December 1995 
 
Establishing Regulations under Law No . 28 of 20 June 1995, regarding 
the General Application of Tax Incentives 
 
THE PRESIDENT OF THE REPUBLIC 
 
in the exercise of his legal powers 
 
HEREBY DECREES: 
 
Chapter I 
Customs Regimes 
 
 Article 1.   Any person wishing to avail himself of th e customs drawback regime shall bring in 
the goods using the ordinary import procedure, indicating in the declaration that he is invoking this 
customs regime.  Such an indication does not imply acceptance of the request by the Directorate-
General of Customs. 
 
 The importer who does not so indicate in th e declaration may still be eligible for the 
drawback regime, provided that the goods are under customs control and supervision.  
 Article 2.  There shall be no refunds under the drawback regime in the case of goods on 
which the import duties and taxes have been or w ill be refunded by virtue of other provisions. 
 
 Article 3.  Any goods that enter the country under the temporary admission regime for inward 
processing so as to be processed, manufactured or repaired must enter through the ports authorized to 
handle foreign trade, and their transfer to the pla ce of processing shall take place under the system of 
security or custody deemed appropriate by the Directorate-General of Customs. 
 
 Article 4.   For the purposes of the duty-free stock replenishment regime, import duties and 
taxes shall be understood to mean the duties, taxe s and levies payable at the time that the goods are 
imported. 
 
 Article 5.  The import of goods equivalent to those legally imported and used in products that 
have already been exported, shall be totally exempt from the paymen t of import duties and taxes, 
except in the case of duties and taxes that were reimbursed or exempted at the time of export. 
 
 Article 6.  Exemption from import duties and taxes may be granted for raw materials and 
semi-manufactured goods, as well as for spare-parts and pieces equivalent to those which, without 
having been processed, have been in corporated into an exported product. 
 
 Article 7.  The Ministry of Trade and Industry and the Directorate-General of Customs shall 
determine the type, quality, technical specificati ons and quantity of the goods in free circulation 
contained in the products to be exported with the right to duty-free stock replenishment, on the basis 
of the actual conditions in which these products were obtained and, if required, the chemical analysis 
of samples.   Article 8.  Goods such as catalysts, accelerators or retarders of chemical reactives which are 
used to make products for export, but which totall y or partially disappear during their use without 
being really contained in the products for export, may be considered in the same way as the goods 
                                                     
 
1 Published in Official Journal No. 22.956 of 22 January 1996. G/SCM/Q3/PAN/13 
Page 64  
 
used to make such products and may be granted th e same exemption from import duties and taxes as 
those goods. 
 
 This exemption shall not apply to those elements that are used in an ancillary capacity in the 
manufacture of goods. 
 
 Article 9.  Accordingly, the Directorate-General of Customs shall assign assessors to control 
and supervise manufacturing operations that use raw materials, when this is thought to be necessary.  
Such services shall be provided on a basis of a contract with the State for permanent fiscal 
surveillance.   In order to check on the use of goods in maki ng products for export, the Directorate-General 
of Customs shall, through the Department of A uditing and Procedures, monitor the manufacturing 
operations by inspecting the accounts of the manufacturer of goods to be exported. 
 
 Article 10.  When a time-limit is set for the export of  the goods, after which they may benefit 
under the above-mentioned regimes, consideration shall be given, in setting that time-limit, to the 
nature of the transformation or processing that such goods may undergo, as well as to the various 
factors, in particular, those of a comm ercial nature, that may be involved. 
 
 When a time-limit has been set for the export of the goods, it may be extended at the request of the party concerned, on grounds accepted as valid  by the Directorate-General of Customs, it being 
for the competent Regional Customs Administrator to grant the authorization. 
 
 Article 11.  A person who has recourse to any of the above-mentioned customs regimes and 
who has completed the expo rtation concerned shall a pply for the return of the taxes, securities or 
recognitions of the right to import with exemption from customs duties, as appropriate, to the 
Director-General of Customs, who shall give his ruling in the form of a reasoned decision. 
 
 The responsible official shall take the necessary measures with the appropriate public bodies 
that are responsible for the return of the security and the taxes in question so as to ensure they are 
handed over or returned as quickly as possible. 
 
 The application submitted must be accompanie d by, at least, the final customs clearance 
declaration for the import of the goods, the final customs clearance declaration for their export, and by 
a certificate from the Directorate-General of Customs on the processing of the product exported.  
 Article 12 .  The temporary admission of goods for inward processing involves the total 
suspension of import duties and taxes and shall be granted upon the deposit of security for the amount 
of the respective import duties and taxes. 
 
 Article 13.  The operations involved in the temporary admission of goods for inward 
processing may be carried out on the premises belonging to the enterprises concerned by such 
operations, under customs supervision and control. 
 
 Article 14.   Waste materials resulting from the manufacture, processing or repair of goods 
subject to the regime of temporary admission for inward processing, which have some commercial 
value, shall be taxed in accordance with their tari ff classification, if they remain in the customs 
territory.  
 Waste materials that cannot be recovered or reused shall be exempt from taxes and shall be 
destroyed at the expense of whomsoever imported them.  To that end, the Directorate-General of 
Customs must be given detailed information beforehand of the waste materials to be destroyed, and  G/SCM/Q3/PAN/13 
 Page 65 
 
 
the importer must keep in his records a statement by a chartered accountant certifying that they have 
been destroyed. 
 
 The Directorate-General of Customs may, if it considers it to be necessary, participate in 
destruction operations.  The statement issued in such cases shall replace the certificate from the 
chartered accountant. 
 
 Article 15.   With regard to the duty-free stock replenishment regime and the drawback 
regime, the Ministry of Trade and Industry shall fix the percentage of return on processing operations 
on the basis of the actual conditions under which such  operations take place and of the kind, quality 
and quantity of the various compensatory products.  
 Article 16.  Before having recourse to the duty-free st ock replenishment or drawback regimes 
the interested party must obtain from the Ministry  of Trade and Industry a certificate regarding the 
goods to be imported and their direct relati onship to the manufacturi ng process concerned. 
  To obtain the certificate in question, an app lication must be made through the Ministry of 
Trade and Industry, accompanied by the final clea rance declaration relating to the raw materials, 
inputs, machinery and equipment to be imported for use in the manufacture of the products for export. 
 
 The Ministry of Trade and Industry shall issue the certificate within a period not exceeding fifteen (15) working days.  If it fails to do so, the application shall be understood to have been approved. 
 
 Article 17.   The declaration to the Directorate-General of Customs for the temporary 
admission of goods for inward processing shall not be valid unless accompanied by the declaration for 
the export of the goods and proof of their r eception on board the means of transport. 
 
 Article 18.   Persons who wish to avail themselves  of the exportation regime for outward 
processing shall apply to the competent Regional Customs Administrator, identifying the goods, 
indicating the nature of the process to be undergone by the goods, and stating the place, the enterprise 
that will carry out the operation in question, and the period of time that the goods will be abroad, 
which may not exceed six (6) months. 
 
 In the case of goods that have been imported an d which, at the time of making the application, 
possess a factory guarantee, proof of this must be provided.  
 The competent Regional Customs Administrato r shall give his ruling in the form of a 
reasoned decision within a period of ten (10) days, stating how long the goods may remain abroad 
within the period requested by the applicant.  If no decision has been issued within the above-
mentioned period of time, it shall be assumed that permission has been granted and the interested 
party shall provide evidence thereof on the basis of a copy of the application bearing the original 
stamp showing that the document was received by the administration. 
 
 If necessary, security shall be required equivalent to the export tax payable on the goods 
eligible for this regime, so as to guarantee the payment of such taxes should the goods remain abroad. 
 
 Article 19.   The goods that come under the temporary export regime for outward processing 
shall be declared on the customs export form, specifying that they are leaving the country under this regime, and must be accompanied by a certified copy of the decision of the appropriate Regional 
Customs Administration or, failing that, a cer tified copy of the application received. 
 
 Article 20.   The reimportation of temporarily expo rted goods shall follow the ordinary 
procedures for the importation of goods. G/SCM/Q3/PAN/13 
Page 66  
 
 
 The customs duty to be paid shall be calculat ed on the basis of the added value of the goods 
presented to the Directorate-General of Customs,  plus the corresponding insurance and freight 
charges. 
 
 The goods shall be classified under the relevant tariff heading, it being re corded that they left 
the country under the temporary export regime, and wi th a note of the registration number of the final 
customs clearance declaration for export. 
 
 In the case of the reimportation of goods that had a factory guarantee when they left, no customs duty shall be payable, even when other equiva lent goods enter rather than the original goods. 
 
 In the latter case, a copy of the previous final customs clearance declaration shall also be 
provided. 
 
 Article 21.   Persons who have recourse to the above-mentioned customs regimes shall be 
liable for payment of the tax on the transfer of mov eable property for the importation or reimportation 
of goods, products or waste materials, as appropriate. 
 
 
Chapter II 
Special Income Tax Regimes 
 
 Article 22.   The following article - Article 48(a) - shall be incorporated into Executive Decree 
No. 170 of 27 October 1993: 
 
 Article 48a.   Indirect investments in agricultural and agro-industrial activities. 
 
 For the purposes of Article 697 (ch).2 of th e Fiscal Code, only investments in registered 
bonds in enterprises involved in agro-industrial acti vities or aquaculture shall be deductible.  Such 
investment may be made through the acquisition of registered bonds issued by enterprises involved in 
agro-industrial activities, in accordance with De cree No. 7 of 12 March 1987, or in aquaculture. 
 
 The issuing enterprises shall keep appropriate accounting records, to be updated each year, on 
such investments and shall obtain a certificate from  a chartered accountant stating that the funds 
raised from the issue of the bonds referred to in this Article were used in conformity with all the 
requirements established by the law.  This certifi cate shall be kept available for inspection by the 
Directorate-General of Revenue. 
 
 For the purposes of Article 697 (ch).2 of the Fiscal Code, investments in registered shares 
issued by enterprises involved in agro-industrial ac tivities, aquaculture or agriculture, in accordance 
with Decree No. 7 of 12 March 1987, shall also be deductible. 
 
 The deductions referred to in this Article shall be available to the original holder of registered 
bonds in agroindustrial activities and aquaculture, or to  the original holder of registered shares in the 
two latter activities and in agricultur e, or to the subsequent holder, but, in the latter case, only if the 
original holder or the previous holders had not availed themselves of this benefit. 
  It is not possible to benefit more than once and,  in case of doubt, only the first holder will be 
recognized. 
 
 Article 23.  The following article – Article 133a – shall be incorporated into Executive 
Decree No. 170 of 27 October 1993: 
  G/SCM/Q3/PAN/13 
 Page 67 
 
 
 Article 133a.  Tax rates. 
 
 The income tax rates applicable to taxable net income are: 
 
 (a) For natural persons: 
 
 After applying the deductions stipulated in Article 709 of the Fiscal Code, natural persons 
shall pay income tax on their taxable net inco me in accordance with the following rates: 
 
If the taxable net inco me is: The tax will be: 
Up to B.3,000 Zero 
Over B.3,000 up to B.3,250 52% on the amount over B.3,000 up to B.3,250 
Over B.3,250 up to B.4,000 B.130 for the first B.3,250 and 4% on the 
remainder up to B.6,000 
Over B.4,000 up to B.6,000 B.160 on the first B.4,000 and 6.5% on the 
remainder up to B.6,000 
Over B.6,000 up to B.10,000 B.290 on the first B.6,000 and 11% on the 
remainder up to B.10,000 
Over B.10,000 up to B.15,000 B.730 on the first B.10,000 and 16.5% on the 
remainder up to B.15,000 
Over B.15,000 up to B.20,000 B.1,555 on the first B.15,000 and 19% on the 
remainder up to B.20,000 
Over B.20,000 up to B.30,000 B.2,505 on the first B.20,000 and 22% on the 
remainder up to B.30,000 
Over B.30,000 up to B.40,000 B.4,705 on the first B.30,000 and 27% on the 
remainder up to B.40,000 
Over B.40,000 up to B.50,000 B.7,405 on the first B.40,000 and 30% on the 
remainder up to B.50,000 
Over B.50,000 up to B.200,000 B.10,405 on the first B.50,000 and 33% on the 
remainder up to B.200,000 
Over B.200,000 30% on the total taxable net income 
  (b) For legal persons: 
 
 Legal persons shall pay income tax at a rate of thirty per cent (30%)on their taxable net 
income for the fiscal years 1995 and onwards. 
 
 Legal persons entered in the Official Industry Re gister or holding a contract with the State on 
the basis of Cabinet Decree No. 413 of 1970, or an industry development contract, shall pay the 
following rate of income tax on their taxable net income: 
 
Up to B.500,000 30% 
Over B.500,000 B.150,000 plus 34% on the amount exceeding 
B.500,000 
 
 Article 24.   Section IV of chapter VII of Execut ive Decree No. 170 of 27 October 1993 shall 
read as follows: 
 
 G/SCM/Q3/PAN/13 
Page 68  
 
 
SECTION IV 
FREE ZONES 
 
 Article 100.  Taxation Regime – Free Zones. 
 
 The taxation regime established in paragraph (d) of Article 701 of the Fiscal Code applies to 
natural and legal persons authorized by the respective free zone admini strations or by the special laws 
establishing them, as appropriate, to carry on activities that generate income from Panamanian 
sources.   Article 101.   Activities 
 
 The following are activities that generate income from Panamanian sources within the free 
zones: 
  (a) Domestic operations:  sales made from a fr ee zone to purchasers located in the rest of 
the customs territory of the Republic of Panama. 
 
 (b) Foreign operations: 
 
(i) sales transactions involving domestic or foreign goods for export or reexport; 
(ii) the running of transport and storage operations and services relating to the 
movement of goods, as well as the commissions arising from the 
performance of such activities by freight companies; 
(iii) the transfer of goods intended for export  within a free zone or from one free 
zone to another.  In any event, when th e operation consists of the transfer and 
entry of construction materials importe d for the use of the enterprises that 
operate in the Colón Free Trade Zone, it shall be considered a domestic 
operation, unless there is evidence to the contrary. 
 Article 102.   Passive subjects. 
  The passive subjects of tax laws in the free zones are those natural and legal persons who, 
within the said free zones, generate taxable in come from any of the operations mentioned in the 
previous Article, either on their own account or on behalf of thir d parties, such as exporters, re-
exporters, wholesalers, goods forwarding agents, commission agents, freight consolidators, 
consignees, storage services, packing or packaging services.   Article 103.  Goods forwarding agents. 
 
 Goods forwarding agents are those persons who, located in a free zone, provide goods 
forwarding services, at the national or international level, for which they receive a financial payment, 
such as:   (a) Transport handlin g and freight agents; 
 (b) storage or warehousing; 
 (c) services relating to the physical distribution of goods by consolidated or individual 
carriers, such as: 
  G/SCM/Q3/PAN/13 
 Page 69 
 
 
(i) Distribution and deliveries or receipt of goods; 
(ii) packing and packaging; 
(iii) loading and shipping. 
 The fact that the service is supplied in a disc ontinuous or sporadic fashion within a fiscal 
period shall not detract from the status of "goods forwarding agent".   However, the ancillary activities carried out as a direct consequence of the sale of goods and 
those activities ordered by a competent authority sha ll not be considered, for these purposes, as goods 
forwarding activities. 
 
 Article 104.   Goods forwarding agents that carry out other foreign operations. 
 
 Taxpayers identified or classified as goods forwarding agents, who undertake other foreign 
operations on their own account, shall pa y an advance on income tax as follows: 
  (a) As "goods forwarding agents":  B.8,500.00. 
 
 (b) For their own foreign operations, including the transport fees and commissions 
received on foreign operations: 
 
  The respective amount indicated in the ta ble referred to in Article 105c of this 
Decree. 
 
 Article 105.   Taxation. 
 
 The taxable net income earned from the various  activities or operations carried out by the 
natural or legal persons established or setting up in free zones shall be taxed as follows: 
 
 (a) Domestic operations:  in conformity with the tariffs listed in Articles 699 and 700 of 
the Fiscal Code depending on the taxpayer concerned. 
 
 (b) Foreign operations:  in accordance with the rate of fifteen per cent (15%) indicated in  
subparagraph 2 of paragraph (d) of Article 701 of the Fiscal Code. 
 
 The employees of natural or legal persons established in Panama's free zones shall pay income tax in accordance with Article 700 of the Fiscal Code. 
  Transitional Paragraph :  as of 1 July 1995 the rates applicable to the taxable net income 
obtained from foreign operations shall be as follows: G/SCM/Q3/PAN/13 
Page 70  
 
 
END OF FISCAL YEAR APPLICATION OF THE 
RATES  
 2.5% to 8.5% 15% 
31/7/95 11 months 1 month 
31/8/95 10 months 2 months 
30/9/95 9 months 3 months 
31/10/95 8 months 4 months 
30/11/95 7 months 5 months 
31/12/95 6 months 6 months 
31/1/96 5 months 7 months 
28/2/96 4 months 8 months 
31/3/96 3 months 9 months 
30/4/96 2 months 10 months 
31/5/96 1 month 11 months 
30/6/96  12 months 
 
 For such purposes, the taxpayer shall calculat e the annual tax, applying separately the two 
rates on taxable net income.  The corresponding number of months shall then be applied 
proportionately to each calculation and the total amo unt to be paid shall be the result of the sum of 
both calculations. 
 
 Article 105a.  New taxpayers 
 
 New taxpayers who begin foreign operations fo r the first time in the free zones shall be 
subject to the following treatment for the first fiscal year or fraction thereof: 
 
(a) No advance payment shall be due for foreign operations; 
(b) the tax due on the basis of the sworn declaration for this first year of operation or 
fraction thereof shall be paid at the rate  of 15 per cent for foreign operations. 
 However, those who acquire establishments or businesses located within free zones shall be 
subject to the provisions of Article 750 of the Fiscal Code. 
 
 Article 105b.  Advances on income tax. 
 
 The taxpayers mentioned in Article 102 of this Decree shall pay an advance on income tax as 
follows:  
(a) For domestic operations in accordance with th e rates laid down in Articles 699 or 700 
of the Fiscal Code, on the estimated taxable income for the following fiscal period. 
(b) For foreign operations: 
(i) It shall be calculated on the total volume of foreign operations during the 
previous year, determining the correspo nding amount payable in the table for 
re-exports. 
(ii) Goods forwarding agents shall pay an advance of B.8,500.00 for such 
activities. 
  G/SCM/Q3/PAN/13 
 Page 71 
 
 
 Article 105c.  Calculation of the advance. 
 
 In order to calculate the advance on income tax to be paid by taxpayers for foreign operations, 
the following rate for re-exports stipulated in Law No. 28 of 20 June 1995 shall apply. 
 
 Advance income tax payable on re-exports in millions of balboas is as follows: 
 
 Advance  
Up to 2.0 million B.8,500.00 
From 2.0 to 5.0 million 30,000.00 
From 5.0 to 10.0 million 60,000.00 
From 10.0 to 20.0 million 100,000.00 
From 20.0 to 40.0 million 175,000.00 
From 40.0 to 80.0 million 275,000.00 
From 80.0 to 120.0 million 400,000.00 
Over 120.0 million 500,000.00 
 
 Paragraph:  Taxpayers identified or classified as goods forwarding agents who undertake 
other foreign operations shall appl y the reference table for the other foreign operations that they 
undertake and shall add to this amount the B.8,500.00 due as an advance, which correspond to the 
advance they must pay as goods forwarding agents. 
 
 Article 105d.  Application of the table. 
 
 For the purposes of the advance on income tax for foreign operations referred to in 
paragraph (d) of Article 701 of the Fiscal Code, th e reference table shall apply to foreign operations 
consisting of: 
  1. Exporting;  
 2. re-exporting; 
 
 3. transfers;  
 4. commissions. 
 
 Article 105e.  Payment of the advance. 
 
 The advance on income tax shall be paid in three (3) equal instalments at the end of the six (6), nine (9) and twelve (12) months as of the date of the end of the taxpayer's fiscal year.  
 Article 105f.  Exceptions to the payment of an advance. 
 
 All taxpayers who begin domestic or foreign operations in the free zones shall be exempt 
from the obligation to pay the advance on income tax during their first fiscal period. 
 
 A similar exemption shall apply to those pe rsons established in free zones that do not 
undertake foreign operations, as defined in Article 101 of this Decree. 
 G/SCM/Q3/PAN/13 
Page 72  
 
 Article 105g.  Fiscal credits. 
 
 When the tax calculated on the basis of the sworn declaration of income from foreign 
operations is less than the advance paid for that same  fiscal year, the taxpayer may use surplus of the 
advance over the income tax due as a tax credit for the year immediately following, to be applied in 
the following way: 
 
 (a) To the estimated tax due for the subsequent period. 
 
 (b) If there is still a credit balance, it shall be applied, finally, to the sworn declaration for 
that period, that is to say, when the previous estimate has become a sworn declaration. 
 
 (c) If there is still, even then, a balance re maining, after having calculated the credits and 
charges, that balance may not be applied to any anticipated or declared balance.  Such 
credits may not be the subject of any negotiations or transfers, even when awaiting legal confirmation for the subsequent period, since their legal origin or grounds stem 
from an advance payment duly applied in conformity with the legal regulations. 
 
 Article 105h.  Obligation to keep records. 
  Natural or legal persons establ ished or setting up in any free zone shall keep official records 
for commercial purposes, as stated in the Commercial Code. 
 
 Article 105i.  Obligation to keep separate accounts. 
 
 Natural or legal persons established or setting up in any free zone, including goods 
forwarding agents, shall keep accounts for their dome stic and foreign operations separately from those 
arising from their activity as goods forwarding agents. 
 
 When the Directorate General of Revenue carr ies out investigations on taxpayers who carry 
out operations within the free zones, it may in any event require that they provide information on the 
income from the various kinds of operations, and on their costs, for the purposes of determining the 
obligations that derive from the various operations. 
 
 If the taxpayer is unable to provide sufficient  evidence, accounts or documents that clearly 
reveal the proportion or amount of income and costs attributable to the various kinds of operations, 
the Directorate General of Revenue may use all the means permitted by the Law in order to determine 
the obligations in both areas of taxation arisin g from the operations carried out by the taxpayer. 
 
 Article 105j.   Obligation to invoice. 
 
 Taxpayers operating in free zones shall keep i nvoices and record separately all the foreign 
and domestic operations and other services or activiti es carried out on their own account or on behalf 
of third parties and, in turn, set out in detail and/or  classify fully the transfers, commissions, mandates, 
allocations and agency fees so that  they may be easily identified. 
 
 Article 105k.   Invoicing requirements. 
  The implementation and/or invoicing of domes tic and foreign operations and operations by 
goods forwarding agents shall contain at the mini mum the following information:  name, single 
taxpayer's registration number (RUC)  and serial number, consignee and address, details and owners 
of the goods, key number, type of operation, total amount of the operation and date of shipment. 
  G/SCM/Q3/PAN/13 
 Page 73 
 
 
 Transitional paragraph.  Persons established in the free zones shall have until 
1 January 1996 to fulfil all the conditions require d by this Decree for the implementation of their 
operations. 
 
 Article 105l.  Assignment of the business 
 
 In conformity with Article 750 of the Fiscal Code, when a natural or legal person ceases its 
activities through the sale, assignmen t or transfer of his business or industry to another person, the 
person acquiring it shall be liable for the taxes on th e property acquired due by the seller or assignor. 
  Article 105m.  Dividends and distribution of profits resulting from income from foreign 
operations. 
 
 The natural or legal persons referred to in pa ragraph (b) of Article 702 of the Fiscal Code 
shall not be obliged to pay tax on dividends or other distributions of profits to shareholders or partners 
arising from income obtained from foreign operations, unless the person has paid income tax on such dividends or other distributions of profits in a foreign country and has been credited for the tax at the 
rates applicable in Panama.  Accordingly such persons shall be obliged to pay the corresponding tax 
in Panama up to the amount of the credit granted. 
 
 The evidence referred to in paragraph 2 of that Article must be presented to the Directorate-General of Revenue within three (3) months follow ing the date on which the credit requested in the 
foreign country was authorized and, with the pres entation of that evidence, the additional payment 
referred to in the said paragraph 2 shall be made. 
 
 Failure to present such evidence or pay the additional tax within the period of 
three (3) months stipulated above shall be pena lized by the Directorate-General of Revenue in 
accordance with the law. 
 
 Article 25.  The following section - Section Thirteen  – shall be added to Chapter VII of 
Executive Decree No. 170 of 27 October 1993: 
 
 
Section Thirteen 
Direct and indirect investment credits 
 
 Article 123a.  Investment credits. 
 
 By virtue of Article 6 of Law No. 28 of 20 J une 1995, taxpayers shall be entitled to a tax 
credit for investment of up to twenty-five per cent (2 5%) only of the income tax paid in each fiscal 
period, provided that: 
 
(a) They have not had recourse to laws on in centives to promote specific economic 
activities or been granted tax credits for the same purpose under other special laws. 
 Paragraph:   In the case of the agricultural sector, such tax payers shall be eligible for this 
credit, provided that they do not have contracts with  the State, other contracts or special registrations. 
 
(b) They undertake the investments indicated in the following Article, even on the basis 
of a lease. 
(c) Or they undertake the investment s indirectly, where applicable. G/SCM/Q3/PAN/13 
Page 74  
 
 Article 123b.  Investments that give entitlement to credit. 
 
 The investments that give entitleme nt to income tax credits are: 
 
1. Investment in technological research and development relating to genetic improvement and 
acquisition of state-of-the-art t echnology in the related sector. 
 
2. Investment in infrastructure which guarantees connection to and/or the continuous supply of 
electric power and water essential for production. 
 3. Investment in the communications field relatin g to transport infrastruc ture and equipment so 
that such operations may directly reduce the operating costs of production. 
 
4. Investment in the infrastructure and equi pment relating to port an d airport activities which 
bring about a direct reduction in the operating costs of production. 
 5. Investment in training for plant st aff which is essential for production. 
 
 These investments include the following expenditure, for which due proof must be provided: 
 
 - Instructors' fees;   - travel and subsistence expenses; 
 
 - registration and cost of courses; 
 
 - teaching materials for the respective training programmes. 
 
6. Investment in the production of new articles or expansion of production capacity relating to 
infrastructure and equipment so as to increase the production activities of the enterprise. 
 
 Article 123c.  Proof of the direct and indirect investment. 
 
 In order to be eligible for the benefits estab lished in the previous Ar ticle, the taxpayer shall 
provide proof in the form of a declaration by a chartered accountant certifying: 
 
(a) The amount of the investment made an d that it corresponds to the activities 
recognized in the previous Article. 
(b) That he is not availing himself of any other benefit under other incentive laws. 
(c) That such investments are necessary for th e production of goods and the supply of 
services. 
 To these ends, the chartered accountant's certified declaration shall be accompanied by a 
report by a competent, duly recognized academic, tech nological or scientific public authority, or by 
private bodies of recognized capacity or expertise, that are devoted to that activity.  
 The investment relating to training of plant staff shall be carried out in accordance with 
existing training plans or programmes, which must be endorsed by the competent academic, 
technological or scientific author ity duly recognized and/or authorized to issue such reports. 
 
 The taxpayer shall make available to the Directorate-General of Revenue of the Ministry of 
Finance and the Treasury the certified declarations and other reports or supporting documents referred  G/SCM/Q3/PAN/13 
 Page 75 
 
 
to in the previous paragraphs, when so required.  The Directorate-General of Revenue shall issue the 
relevant instructions on the basis of such certified declarations and reports. 
 
 Article 123d.  Direct and indirect investment. 
 
 The investment mentioned in Article 123b may be: 
 
(a) Direct:  where the taxpayer invests utilizing  his own economic or financial resources, 
including investment through leasing. 
(b) Indirect:  where investment is through the acquisition of bonds, shares and other 
securities issued by enterprises that ca rry out or are devoted to the activities 
mentioned in paragraphs 1, 2 and 3 of Article 123b. 
 Article 123e.  Application of the credit. 
 
 The credit shall be applied to the income tax paid in each fiscal period, covering up to one hundred per cent (100%) of the investment, provided that:  
(a) The annual investment (direct or indirect) is made in the year 1995 or within the tax 
payer's following five (5) fiscal years. 
(b) The investment is one of those menti oned in Article 123b of this Decree. 
 Article 123f.  Conditions and requirements for indirect investment. 
  In addition to complying with the stipulati ons of Article 123c of this Decree, indirect 
investment shall meet the following requirements: 
 
 (a) It shall be investment intended for the ac tivities mentioned in paragraphs 1, 2 and 3 of 
Article 123b of this Decree; 
 
 (b) that the enterprise that issues the bonds or securities initiates the investment in the 
relevant activity no later than the fiscal year following that in which the indirect 
investment was made; 
 
(c) that the above-mentioned securities (bonds, shares, etc) are authorized and/or 
registered with the National Securities Commission by the company issuing them, in 
the case of a takeover bid. 
  Investment in the form of bonds must be duly registered with proper accounting 
records so as to allow their identification and supervision by the taxation authority; 
 
(d) that the instruments, bonds, shares or secu rities issued for indirect investment are 
registered by name; 
(e) that the taxpayer, being understood as any person who makes an indirect investment 
through the acquisition of such bonds, shares  or other securities, obtains a certificate 
from the enterprise issuing such bonds, shares or securities, stating that it has received 
the funds resulting from the investment, which shall serve as proof for the 
Directorate-General of Revenue of the Mi nistry of Finance and the Treasury, if 
required.  This certificate issued by the ente rprise issuing the said securities shall be 
endorsed by a chartered accountant and shall include the number and single 
taxpayer's registration number (R UC) of the taxpayer concerned. G/SCM/Q3/PAN/13 
Page 76  
 
 Article 123g.  Investment in depreciable goods. 
 
 In the case of investment made in conformity with Article 123b of this Decree consisting of 
the acquisition of depreciable goods, the depreciation may not be considered as a deductible expense 
for determination of the taxpayers' taxable income. 
 
 Article 123h.  Investment through leasing. 
 
 By virtue of paragraph 1.2 and paragraph 4 of section (d) of Article 702 of the Fiscal Code, 
investment through leasing shall be treated as follows:  
(a) The investment shall be considered to have  been made by the lessor when he takes 
over the tax credit referred to in Article 123( a) of this Decree.  The amount of the 
investment shall be the total cost of the prope rty acquired.  In this case, there shall be 
no deduction for the cost of depreciation of the depreciable goods. 
  Consequently, the lessee shall only be entitled to claim deduction of the royalties paid 
during the fiscal period in question as costs; 
 
(b) when the lessee is considered to be an investor, he shall not be entitled to use the tax 
credit if he deducts as an expense the ro yalties paid to the lessor as permitted by 
Article 23 of Law No. 7 of 1990 by which this incentive regime is excluded from the tax credits referred to in section (d) of Article 702 of the Fiscal Code. 
  Consequently, the lessor shall only be en titled to claim deductions for depreciation of 
the depreciable goods acquired as costs. 
 
 Article 123i.  Exceptions to the time-limit for investment. 
  Enterprises established in export processing zones or which are engaged in the exploration 
and/or exploitation of metallic mineral resources for export shall not be subject to the time-limits for 
investment provided in section (a) of Article 123e of this Decree. 
 
 Article 123j.  Certificates or approbations. 
  Enterprises that avail themselves of credits refe rred to in this Section shall keep available for 
the benefit of the Directorate-General of Revenue the respective certificates and approbations which 
the competent authorities issue with regard to state-of-the-art technology and other investment that 
qualify for the benefits of this credit, as well as fo r the benefits that are not covered by other fiscal 
incentives or credits granted by other special laws. 
 
 Article 123k.  Definitions. 
 
 For the purpose of this Section, the fo llowing definitions ha ve been adopted: 
 
 GENETIC IMPROVEMENT:  This is the art and science of changing and improving the inherited characteristics of plants and animals wi th a view to increasing their productivity and, 
consequently, their economic value.  It includes plan t production (production of crops and forests) and 
animal production (livestock and fish eries activities), either in their prim ary state or as a final product. 
 
 STATE-OF-THE-ART TECHNOLOGY:  This refers to the fundamental transformations 
resulting from discoveries in the basic sciences, which have revolutionized, transformed, or re-
oriented the technological field, exercising a decisive influence on the economic and production 
structure of the country at the national level, and have reached a sizeable sector of the population.  G/SCM/Q3/PAN/13 
 Page 77 
 
 
 
 The four areas of state-of-the-art technology ar e:  industrial equipment and processes, micro-
electronics, biotechnolog y, and new materials. 
 
 TECHNOLOGY AND DEV ELOPMENT:  This refers to those activities most closely related 
to investment capital and particularly  to the levels of social well-bein g at the national level that affect 
a sizeable sector of the population.  Such technology and development is principally required by the 
products generated by state-of-the-art technology. 
 
 Article 26.  Article 124 of Executive Decree No. 170 of 27 October 1993 shall be amended as 
follows:  
 Article 124.  Fiscal year 
 
 For annual taxation purposes, th e taxable year covers a twelve (12-) month period as follows: 
 1. The general calendar year beginning on 1 January and ending on 31 December; 
 
2. A special period requested by the taxpayer be ginning on the first day of the chosen month for 
a twelve (12)- month period. 
  For annual taxation purposes, this shall apply to  the whole of the taxpayer's fiscal period as 
laid down in the respective law. 
 
 Article 27.   Article 132(f) of Executive Decree No. 170 of 27 October 1993 shall be amended 
as follows: 
 
 Article 132.  Taxpayers exempt from submitting an annual sworn declaration. 
 
 The following shall not be obliged to submit an annual sworn declaration: 
 
 … 
 
(f) Natural persons engaged in agriculture wh ose annual net income does not exceed 
one hundred thousand balboas (B/1000,000.00). 
 Article 28.  Article 175 of Executive Decree No. 170 of 27 October 1993 shall be amended as 
follows: 
 
 Article 175.  Documents or contracts that require an  attestation of the payment of tax. 
 
 When the person concerned cannot provide proof that there are no outstanding payments due 
to the National Treasury or the Social Security Fund for income tax, education insurance, worker-
employer dues and occupational risk contributions , the following acts or contracts shall not be 
authorized, permitted or allowed by public or private officials: 
 
(a) Payments by the National Treasury, municipa l treasuries and other public treasuries, 
except those corresponding to wages, sala ries and/or remuneration for professional 
services rendered; 
(b) the yearly motor vehicle inspection for vehicles with commercial number plates; 
(c) the sale of tickets to travel abroad and the granting of exit visas to persons resident on 
the national territory, except for the following cases: G/SCM/Q3/PAN/13 
Page 78  
 
(i) Professional diplomats and consuls accredited to the Republic of Panama.  
Diplomats need only show their passports, duly endorsed by the national 
authorities.  Consuls must prove their exemption by means of a statement 
issued by the Ministry of Foreign Affairs; 
(ii) persons who are exempt from this tax by public treaties; 
(iii) minors aged under eighteen (18); 
(iv) students with a student visa or passport;  and 
(v) Panamanians and foreigners permanently resident in Panama. 
 For the purposes of this Article, the Social Security Fund shall periodically forward to the 
Ministry of Finance and the Treasury a list of thos e employees who are in arrears with their payments 
of worker-employer dues and occupational risk contributions.  
 Article 29.   Article 92 of Executive Decree No. 170 of 27 October 1993 shall be amended to 
read as follows: 
 
 Article 92.  Options for the taxpayer. 
 
 The taxpayer may choose any of the following ways for the calculation and payment of 
income tax arising from the disposal of immovable property for remuneration: 
 
(a) Paying as a prior requirement for the granting of a public conveyancing deed for the 
transfer of ownership, income tax at the rate of five per cent (5%) on the total of the 
following values: 
(i) The land value of the property on the date when the seller acquired it; 
(ii) the value of the improvements carried out on the property; 
(iii) ten per cent (10%) of the abov e-mentioned land value and of the 
improvements for each full calendar y ear between the date of acquisition and 
the date of sale of the property and, if appropriate, between the date of 
incorporation of the improvements and of the sale. 
 The taxpayer who chooses this option will not have to submit an income tax declaration with 
regard to the profit deriving from the sale of the property. 
 
(b) Paying as a prior requirement for the gran ting of the public de ed, the transfer tax 
referred to in Law No. 106 of 1994, at a rate of 2 per cent (2%) on whichever amount 
is the greater among the following: 
(i) The value agreed in the above-mentioned deed; 
(ii) the land value of the property on the da te when the seller acquired it, plus the 
value of the improvements carried out on the property, plus a sum equivalent to five per cent (5%) of the above-mentioned land value and of the 
improvements, for each full calendar ye ar between the date of acquisition and 
the date of sale of the property and, if appropriate, between the date of 
incorporation and declaration of the improvements and the date of sale.  G/SCM/Q3/PAN/13 
 Page 79 
 
 
 Subsequently, when submitting his annual income tax declaration, the taxpayer shall calculate 
the income tax arising from the sale by applying the procedure laid down in Article 701(a) of the 
Fiscal Code and in Articles 93 et seq. of this Decree. 
 
 As of the fiscal period covered by Law No. 28 of June 1995, the transfer tax paid by the 
person disposing of the property may only be deduct ed from the income tax arising from the transfer 
of the immovable property in question, calculated in accordance with the procedure established in the 
previous paragraph, and up to the amount of the latter tax. 
 
 Article 30.  Article 94 of Executive Decree No. 170 of  27 October 1993 shall be amended as 
follows:  
 Article 94.  Procedure for the calculation of tax. 
 
 Once the profit on each property has been calculated, it shall be divided by the number of full 
twelve-month calendar years, i.e. from 1 January to 31 December, that have elapsed in the period between the date on which the property came into the ownership of the seller and the date of its 
transfer.  These two dates shall be those on which the document actually registered was submitted to 
the Journal of Public Registration.  The result of th is division shall be added to the seller's taxable 
income obtained from other sources during the year in which the transfer was made. 
  On the basis of the amount obtained, the effe ctive rate applicable shall be calculated in 
accordance with the rates in Articles 699 and 700 of th e Fiscal Code.  Once the effective rate has been 
obtained, it shall be multiplied by the total profit on the transfer of the pr operty, discounting the 
profits from other sources, and the result shall be the tax that corresponds to the transfer. 
 
 If the taxpayer disposes of two or more prope rties in any one fiscal year, the coefficient 
referred to in the two previous paragraphs shall be obtained by calculating the weighted average of the 
total amount of the various profits and the time during which each property was owned by the 
transferor.  The formula for the application of th e weighted average will be set out in the forms 
distributed by the Directorate-General of Revenue. 
 
 If any of the disposals of property result in a loss, prior to the application of the formula 
mentioned in the previous paragraph this shall be deducted from the profits on other disposals of 
property made in the same fiscal year.  To that en d, the calculation shall begin with the property that 
has been owned for longest by the taxpayer.  
 
 Article 31.   The following Article 28 shall be added to ARTICLE ONE of Decree No. 5 of 
8 February1991: 
 
 Article 28.  Up to 31 December 2000, natural or legal persons engaged in the export of goods 
produced or processed totally or  partially in Panama, which qualif y as non-traditional exports, in 
conformity with the provisions of Law No. 28 of 20  June 1995, may apply for Tax Credit Certificates 
(CAT) equivalent to twenty per cent (20 %) of  the national value added of the goods exported. 
 
 As of 1 January 2001 and up to 31 December 2002, applications may be made for Tax Credit 
Certificates on non-traditional expo rts, but the value of the CAT will be limited to the equivalent of 
fifteen per cent (15 %) of the national added value of the exported goods.   Article 32.  Article 9 of ARTICLE ONE of Decree No. 5 of 8 February 1991 shall be 
amended as follows: 
 
 Article 9.  Natural or legal persons who comply with the requirements established in 
Law No. 108 of 30 December 1974 and in this Regulation may apply for a Tax Credit Certificate G/SCM/Q3/PAN/13 
Page 80  
 
(CAT) equivalent to twenty per cent (20%) and fifteen per cent (15 %) respectively of the national 
value added of the goods exported. 
 
 The exporter shall have a maximum period of six (6) months after exportation to apply for 
this incentive. 
 
 Applications for Tax Credit Certificates (CAT) must be accompanied by a certified 
declaration by a chartered accountant stating that the goods have been imported
∗, the amounts and 
description of the goods exported, and that the enterprise is not availing itself of the benefit of total 
exemption from income tax.  The Di rectorate-General of Revenue shall issue the relevant instructions 
regarding the content of the certified declaration.   This certified declaration shall replace the 
inspection of the goods to be exported. 
 
 Paragraph 1.  In conformity with Article 23 of Law No. 28 of 20 June  1995, no enterprise 
availing itself of the benefit of total exemption fr om income tax on the profits arising from export 
activities shall be eligible for the incent ive of Tax Credit Certificates (CAT). 
 
 Paragraph 2.  In conformity with Article 27 of Law No. 28 of 20 June 1995, no enterprise 
availing itself of the incentive of Tax Credit Certif icates shall be eligible  for total exemption from 
income tax for export activitie s established in this Law. 
 
 This provision shall not apply to persons involv ed in agricultural and agro-industrial activities 
for the export of non-traditional products as long  as the Tax Credit Certific ates remain in effect. 
 
 Article 33.   Article 1.L of Decree No. 58 of 8 July 1985 shall be amended as follows: 
  L.  Tax Credit:  This is the credit applicable to the payment of income tax to which the legal 
person granting a preferential mortgage loan is entitled on the basis of compliance with the legal 
requirements established in this Regulatory Decree.  This credit is transferable under the terms of 
Article 7 of Law No. 3 of 20 May 1985, as amended by Law No. 11 of 26 September 1990, Law No. 5 of 17 May 1994, and Article 8 of these Regulations.  
 Article 34.  Article 3(e) of Decree No. 58 of 8 July 198 5 shall be amended to read as follows: 
 
 (e) That the amount of the loan shall not exceed B.62,500.00.  However, this maximum 
figure, like the figure of B.25,000.00 mentioned in Article 5 of Law No. 3 of 20 May 1985, as amended by Law No. 11 of 26 September 1994 and Law No. 5 of 17 May 1994, may be increased annually during the period of application of the said 
Law by Resolution of the Ministry of Finance and the Treasury so as to bring it up to 
date in response to the circumstance s prevailing in the building industry. 
 
 Article 35.   Article. 5 of Decree No. 58 of 8 July 1985 shall be amended as follows: 
 
 Article 5.  The preferential tranche may not exceed two percentage points (2%) on loans for 
houses whose purchase price or construction va lue is higher than forty thousand balboas 
(B.40,000.00) but does not exceed sixty two thousand five hundred balboas (B.62,5000.00);  it may 
not exceed three percentage points (3%) on loans fo r houses whose purchase price is lower than forty 
thousand balboas (B.40,000.00) but higher than twenty five thousand balboas (B.25,000.00);  and may not exceed five percentage points (5%) on loan s for houses whose purchase price or construction 
value is lower than twenty five thousand balboas (B.25,000.00). 
 
                                                     
 
∗ To read "exported".  See Official Journal No. 22.965 of 2 February 1996.  G/SCM/Q3/PAN/13 
 Page 81 
 
 
 The National Banking Commission may peri odically fix the maximum levels of the 
preferential tranche, without exceeding the above- mentioned ceilings and taking into account the 
situation in the money market and the needs of the housing sector, but always maintaining a 
difference of up to two percentage points (2%) betw een the indicated loan tranches, except in the case 
of the preferential tranche for houses whose purchase price or construction value is lower than twenty 
five thousand balboas (B.25,000.00). 
 
 Paragraph 1.   Whenever maximum levels for the preferential tranche are set by the National 
Banking Commission, they shall apply to all the lo ans registered after such maximum levels have 
been fixed.   Paragraph 2.   This measure shall not apply to thos e constructions for which the occupancy 
permit is obtained within a period of less than two (2) years from the date of promulgation of 
Law No. 28 of 20 June 1995, to which the previous regime shall apply. 
 
 Paragraph 3.   In accordance with Article 29 of Law No. 28 of 20 June 1985, the provisions 
of this Article shall come into force on 1 July 1995. 
 
 Article 36.   Article 14 of Decree No. 58 of 8 July 1985 shall be amended as follows: 
 
 Article 14.   The persons indicated in Article 2 of  these Regulations may, for a period of 
five (5) years as of 21 May 1994, avail themselves of the benefits of the fiscal regime of Law No. 3 of 20 May 1995, as amended by Law No. 11 of 26 September 1990 and Law No. 5 of 17 May 1994. 
 
 Article 37.   The benefits of the incentive of inco me tax exemption for reinvestment in new 
buildings under Article 21 of Law No. 28 of 20 June 1995, shall be available to any natural or legal 
person who fulfils the following conditions: 
 
1. Profits are obtained from the transfer of immovable property as of 1 January 1996. 
 
2. The reinvestment is made directly in the following sectors: 
 
(a) For work undertaken in 1996, total reinvestment shall be in housing with a sales value 
not exceeding two hundred thousand balboas (B.200,000.00); 
(b) for work undertaken in 1997, total reinvestment shall be in housing with a sales value 
not exceeding one hundred t housand balboas (B.100,000.00); 
(c) for work undertaken from 1 January 1998 onwards, total reinvestment shall be in 
housing with a sales value not exceeding sixty-two thousand five hundred balboas 
(B.62,500.00). 
3. The period for making the reinvestment may not exceed two (2) years as of the date on which 
the taxpayer determined the profits from the sale of the immovable property. 
 
4. The reinvestment consists in the kinds of construction work referred to in paragraph 2 of this Article, either constructed directly or throu gh temporary partnerships or joint accounts. 
 
5. The reinvestment in new cons tructions takes place in the same fiscal period in which the 
profit from the disposal of the immovable properties was earned.  For such purposes, the reinvestment 
shall be considered to have taken place on the da te of the building permit issued by the Municipal 
Engineering Department of the corresponding district certifying that construction has begun, or on the 
date of presentation through the journal of the Regi stry of Public Deeds in those cases in which the G/SCM/Q3/PAN/13 
Page 82  
 
investment consists in a new improvement, except for the stipulations in Article 41 of this Executive 
Decree. 
 
6. In each of the periods established in paragrap h 2 of this Article, up to twenty per cent (20%) 
of the reinvestment commitment may be invested in  the vocational training for permanent employees 
engaged in the taxpayer's production activities. 
 
 Such vocational training shall be conducted in accordance with existing training programmes 
or plans, which must be endorsed by a competent ac ademic, technological or scientific authority duly 
recognized and/or authorized to issue such reports.   In that case, the taxpayer may only make such investments directly or on the basis of a 
temporary partnership or joint accounts. 
 
 Paragraph:   In order to check that the reinvestment referred to in this paragraph has been 
made, the provisions in paragraph 5 of Article 12 3(b) and in Article 123(c) of Executive Decree 
No. 170 of 27 October 1993 shall apply. 
 
 Article 38.   Whomsoever fulfils the requirements me ntioned in the previous Article for the 
purpose of income tax exemption shall present jointly with his sworn declaration of income a detailed 
list either in documentary or electronic form of  the building or certification permits from the 
Municipal Engineering Department of the corresponding district and/or the public deeds mentioned in paragraph 5 of the previous Article, as proof of th e value of the investment in new constructions.  In 
addition, the taxpayer shall prove that the im provements have been completed through the 
presentation of the respective occupancy perm it issued within the following two years. 
 
 Article 39.  The total reinvestment shown in the building permits and/or improvement 
transfer deeds shall be compared with the tota l profit obtained from the disposal of immovable 
property during the same fiscal period and, depe nding on the proportion, the total amount (100%) of 
the profits shall be exempt when the reinvestment is at least four times greater than the profit. 
 
 Article 40.  If, upon completion of construction, it is de termined that the real cost differs from 
the cost shown in the building perm it, a rectification of the original declaration of income must be 
presented when that situation alters the amount of the exemption.  When this means that the 
exemption granted was greater than that to which the taxpayer was entitled on the basis of the final 
cost, he must pay the corresponding tax.  
 Article 41.  Persons wishing to take advantage of the incentive referred to in Article 21 of 
Law No. 28 of 20 June 1995 and who have been unab le to process their respective building permits or 
title deeds by the date of submission of their tax declaration for the respective fiscal year may ask the 
Directorate-General of Revenue to grant them the dela y stipulated in that article.  In such cases, the 
taxpayer shall undertake to submit the supporting documentation (building permits and/or deeds) 
within a maximum of nine (9) months after the dead line for the submission of their tax declaration.  
However, if the taxpayer does not submit the supporting documentation within the period allowed, he 
shall be liable for the exempted or reduced tax, plus surcharges and interest as from the date on which 
payment legally fell due. 
 
 Article 42.  Taxpayers who have benefitted from the above-mentioned incentive but have not 
completed the new construction within a period of two (2) years from the date of the building permit shall pay the exempted or reduced tax, plus surcharg es and interest due at the date when they should 
legally have paid the tax, except for the case in the following Article. 
  G/SCM/Q3/PAN/13 
 Page 83 
 
 
 Article 43.  The period of two (2) years to complete the new construction work may be 
extended by the Directorate-General of Revenue fo llowing an application by the interested party 
justifying the extension. 
 
 Article 44.  Taxpayers who determine their taxable income in accordance with the general 
rules established in the Fiscal Code  and its regulatory decree due to the disposal of a certain number 
of immovable properties and who also have other income that does not arise from the disposal of 
immovable properties, must calculate the taxable income from the disposal of immovable properties 
separately, in accordance w ith the rules established in the Fiscal Code, in order to be eligible for the 
exemption referred to in Article 21  of Law No. 28 of 20 June 1995. 
  In order to be eligible for exemption from in come tax for reinvestment in new constructions, 
the taxpayer may not include as part of his new reinvestment the value of the land or plot where the 
new building is to be constructed. 
 
 Article 45.  For the purposes of regulating implementation of Article 23 of Law No. 28 of 
20 June 1995, the following procedure is established: 
 
 (a) In order to withdraw from the Official Industry Register, or rescind a contract with 
the State or an industry development contract: 
 1. Enterprises that wish to withdraw shall apply to the Ministry of Trade and Industry, by means of a memorandum addressed to the Minister, for the cancellation of their Official Registration, 
contract or development contract , as appropriate.  The application shall be submitted by the 
enterprise's legal representative, accompanied by a certificate of validity of the management board 
issued by the Public Registry. 
 
2. By means of a resolution, the Ministry of Trade and Industry shall take a decision on the 
requested cancellation within a maximum period of five working days.  Upon the expiry of that 
period, if no cancellation resolution has been issued , it shall be deemed to have been approved. 
 
 (b) In order to extend the period of validit y of official registration, up to the date of 
expiry of the latest registration of an enterprise of the same kind: 
 
1. Submission of a memorandum, through a power granted to an attorney, requesting the 
extension of the registration, accompanied by the foll owing documents:  certificate attesting to public 
registration, certificate of national and municipal ta x clearance, certificate th at no tax-fraud has been 
committed, financial statements for the latest fis cal period and most recent Social Security Fund 
records, and payment of the registration fee. 
 
2. If the Ministry of Trade and Industry has proof that the enterprise has not fulfilled the 
obligations established in Article 31 of Law No. 3 of 20 March 1986, it shall immediately reject the 
application for extension. 
 
3. The Ministry of Trade and Industry shall issue the resolution extending the period of validity 
of registration in the Official Industry Register, wh ich shall be endorsed by the Comptroller General 
of the Republic. 
  Article 46.   Paragraph 7 of Article 174 of Executive Decree No. 170 of 27 October 1993 shall 
be amended as follows: 
 
 Article 174.   Annual income report. 
 
 … G/SCM/Q3/PAN/13 
Page 84  
 
 
7. The reports referred to in this Article sha ll cover the taxpayer's fiscal period and shall be 
submitted to the Directorate-General of Revenue toge ther with the sworn declaration of income for 
each year, either by electronic means or on forms which the said Directorate shall prepare for that 
purpose.  In both cases, the reports shall contai n the names of the persons covered by this Article, 
their corresponding single tax registration number (RUC), the total amount of the sums paid and/or 
credited to such persons and the basis on which they have made the payment in accordance with the 
enterprise's normal accounting method. 
 
 
CHAPTER III 
Special provisions 
 
Section I 
Import of inputs, raw materials, intermediate goods and capital goods 
 
 Article 47.   For the purposes of Article 25 of Law No. 28 of 20 June 1995, the Directorate-
General of Revenue shall only process the custom s clearance declaration based on the official list 
approved by the Cabinet Council of all the inputs , raw materials, intermediate and capital goods 
imported on the basis of Articles 9 and 10 of Law No. 3 of 20 March 1986 and the inputs, raw 
materials, intermediate and capita l goods that the Cabinet Council has determined may be imported in 
addition to the official list, in accordance with the procedures established in Article 52 of this 
Executive Decree. 
 
 Article 48.  The processing of the customs clearance declaration for those inputs, raw 
materials, intermediate goods and capital goods that were imported occasionally on the basis of 
Articles 9 and 10 of Law No. 3 of 20 March 1986 shall be carried out according to the following 
procedure: 
 
(a) The importer shall submit the import application to the Ministry of Trade and 
Industry, indicating the tariff heading, the description of the products, the volume to 
be imported, and the c.i.f. price of the product abroad. 
(b) The Directorate-General of Industry shall transmit the application submitted to the 
person concerned for publication for three (3) consecutive days in a national 
newspaper, so that within a period of ten (10) working days calculated from the last 
date of publication any interested party may formally oppose the application, together 
with the evidence substantiating opposition. 
(c) The Directorate-General of Industry of the Ministry of Trade and Industry shall deal 
with any opposition to the app lication on the part of ente rprises, in accordance with 
Law No. 33 of 1984. 
 In the case of opposition regarding quality, the do mestic enterprise shall provide proof that its 
product complies with national stan dards (COPANIT standards), international or company standards.  
The Directorate-General of Standards and Industrial Technology shall be responsible for carrying out the relevant technical analyses and its findings shall serve as a basis for the decision on the application. 
 
 Article 49.  If the input, raw material, intermediate or capital good is included in a tariff 
heading that covers products either manufactured or not manufactured in the country or includes other 
products that are not eligible for the benefits gran ted under Law No. 3 of 1986, the tariff heading shall 
be split in accordance with the proc edure envisaged in the import tariff , provided that the international  G/SCM/Q3/PAN/13 
 Page 85 
 
 
rules so allow, and this shall be brought to the attention of the public through publication in the 
Cabinet Decree granting approval. 
 
 Article 50.  The procedure for bringing goods into Panama at the import duty of three per 
cent (3%) established in Article 25 of Law No. 28 of 20 June 1995, and in conformity with 
paragraph 3 of Article 23 of th at Law, shall be as follows: 
 
(a) If the importer is not entered in the Official  Industry Register, he shall only present to 
the Directorate-General of Customs the relevant import clearance declaration and 
meet the customs requirements. 
(b) If the importer is entered in the Official Industry Register, he shall present to the 
Ministry of Trade and Industry the relevant clearance declaration to be authorized.  
The person concerned must enclose a photocopy of the customs clearance declaration 
for the archives of the Ministry of Trade and Industry. 
 Article 51.  In order to add inputs, raw materials, intermediate and capital goods to the 
products imported at the tariff stipulated in Artic les 9 and 10 of Law No. 3 of 1986, which shall be 
liable for the import duty set in Article 25 of Law No. 28 of 1995, the following requirements shall 
previously have been met: 
 
(a) Interested parties shall submit an application to the Ministry of Trade and Industry 
requesting the inclusion of the new items and providing general information. 
(b) The application shall include mention of the tariff item, a description of the product 
and its role in the indus trial production process. 
(c) The Ministry of Trade and Industry shall evaluate the application submitted, through 
the Directorate-General of Industry, and shall prepare a report to inform the importer 
concerned of any new items of information that need to be provided for its evaluation.  On the completion of this process, the final report shall be sent to the Cabinet Council, which shall approve or reject it.  The Cabinet Council shall make its 
decision known through the publication of the Decree in the Official Journal. 
 
Section II 
Pharmaceutical Industry 
 
 Article 52.  The following paragraph (e) shall be ad ded to Article 7 of Decree No. 59 of 
24 March 1977: 
 
 (e) The import and transport of inputs, pack aging and raw materials used by the domestic 
pharmaceutical industry in the manufacture of medicines shall be exempt. 
 
 Article 53.  The following subparagraph 5 shall be ad ded to paragraph (d) of Article 7 of 
Decree No. 59 of 24 March 1977: 
  (d) Exemption shall also apply to: 
 
 … 
 
5. The local purchase of packaging materials used by domestic pharmaceutical factories in the 
manufacture of medicines.  G/SCM/Q3/PAN/13 
Page 86  
 
 Article 54.  Applications for the import of inputs , packaging and raw materials for the 
pharmaceutical industry exempted from the payment of  the import tax and the tax on the transfer of 
movable property shall be examined and evaluated according to the following hierarchical structure. 
 
1. Directorate-General of Industry. 
 
2. Industrial Inspection Department. 
 
 The Industrial Inspection Department sha ll be responsible for reviewing the import 
applications and the Director-General of Industry, or the person designated by him, for approval.   Article 55.   Applications for the import of inputs, packaging, containers and raw materials 
used by the domestic pharmaceutical industry sha ll be studied and approved in the light of the 
following precepts or definitions: 
 
1. PHARMACEUTICAL INDUSTRY:  This includes the pharmaceutical or pharmaceutical chemical laboratories engaged in the manufacture or preparation of pharmaceutical, chemical or 
biological products.  These may be pharmaceutical specialities, magistral remedies or foods with 
medical substances added.  Pharmaceutical or pharmaceutical chemical laboratories shall possess an 
operating licence in accordance with the requirements of the Ministry of Health. 
 2. MANUFACTURE:  All the operations for the acquisition of raw materials, semi-processed products, containers and packaging and any other input involved in the composition or in the 
manufacturing process of the pharmaceutical products, quality control, approval, distribution of the 
pharmaceutical products and the corresponding controls. 
 
3. PRODUCTION:  All the operations involved in  the preparation of a pharmaceutical product, 
from the reception of the raw materi als, through the processing and pa ckaging stages, up to the time 
when the final product is obtained. 
 
4. PACKAGING:  All the operations, including filling (packing) and labelling, undergone by a 
product in bulk form. 
 
5. PRODUCT IN BULK FORM:  Product that ha s undergone all the production phases except 
the final packaging. 
 6. MEDICAMENT:  Active principle or active substance or medicine.  Any biological or 
chemical substance or combination thereof used in  the manufacture of a specific pharmaceutical form, 
capable of altering the organism's biochemical functions, and employed for the prevention, diagnosis 
or treatment of a particular pathological stat e, either for human, animal or plant use. 
 
 Medicaments also include the substances or combinations thereof used to restore, correct or 
alter a physiological function of human beings or animals. 
 
7. PHARMACEUTICAL FORM/FORM OF DOSAGE:  Form in which the final 
pharmaceutical product is sold, e.g. pastels or tablets, capsules, syrups, suppositories, pills, sugar 
coated pills, suspensions, emulsions, creams, solutions, injections and medicinal soaps. 
 8. ACTIVE PRINCIPLE:  Substance or mixtur e of similar substances having a specific 
pharmacological effect or which, having no activ ity itself, acquires it after administration to the 
organism, as is the case for prodrugs.  The term  pharmaceutical medicine is used as a synonym. 
 
9. EXCIPIENT:  Substance or mixtures of substances which in concentrations have a 
pharmaceutical form, but no pharmaceutical activity.   They make it possible to give medicaments  G/SCM/Q3/PAN/13 
 Page 87 
 
 
their pharmaceutical form, help to improve the properties of the pharmaceutical form and, in some 
cases, give the pharmaceutical form its characteristic properties (in this latter case, they are termed 
base substances).  Auxiliary pharmaceuti cal products come within this category. 
 
10. PHARMACEUTICAL PRODUCT/MEDICINAL PRODUCT:  A pharmaceutical preparation 
that contains the active principle(s) and the excipien ts formulated in a pharmaceutical form or form of 
dosage, i.e. it is the product which has passed thro ugh all the stages of production and packaging. 
 
11. MEDICATING PRODUCT:  All those pharm aceutical forms or forms of dosing or 
mechanical devices that contain a medicament or combination of medicaments, designed for their administration to living beings.  Foods and cosmetics that contain medicaments are also considered to 
be medicating products. 
 
12. BIOLOGICAL PRODUCT:  Prepared on the basis of a virus, therapeutic serum, toxin, anti-
toxin or analogous product, including vaccines of bacterial or viral origin or rickettsias and immune 
serums for the prevention or treatment of diseas es, various miscellaneous products and diagnostic 
products, human blood and products derived therefrom. 
 
13. HOMEOPATHIC PRODUCT:  Prepared on the basi s of plant, animal or mineral material in 
very small concentrations, used in homeopathic medicine. 
 14. BOTANICAL PRODUCT:  Prepared on the ba sis of plants and used for the diagnosis, 
prevention or treatment of diseases. 
 
15. SEMI-MANUFACTURED PRODUCT:  Partially produced material that must still pass 
through other stages of production prior to becoming a product in bulk form. 
 
16. RAW MATERIAL:  All those active or inac tive substances used in  the manufacture of 
pharmaceutical products, whether they remain unalter ed or whether they undergo modifications or are 
eliminated during the process or are eliminated during the manufacturing process. 
 
17. INPUT:  Goods used in the manufacturing and packaging of pharmaceutical products:  
equipment, machinery, instruments, reagents, packin g materials, labels and implements necessary for 
the production of high quality pharmaceutical products. 
 
18. GENERIC NAME:  The name used to distinguish an active principle that is not protected by a trademark.  It is commonly used by different manufacturers and recognized by the competent 
authority to describe pharmaceutical products that contain the same active principle.  The generic 
name normally corresponds to the common name recommended by the World Health Organization. 
 
19. IMMEDIATE PRIMARY CONTAINER:  Recipient or container directly containing the 
medicine in its finished pharmaceutical form. 
 
20. SECONDARY CONTAINER:  Container for distribution and marketing or packaging 
material within which the primary container contai ning the medicine in its finished pharmaceutical 
form is placed. 
 
21. PACKING:  All the materials in which a me dicament is partially or totally contained. 
  Article 56.  Applications to import inputs, raw materi als, packaging and containers shall be 
submitted to the Directorate-General of indust ry on forms for a Single Customs Clearance 
Declaration, adapted to meet the customs requirements in force. 
 G/SCM/Q3/PAN/13 
Page 88  
 
 Article 57.  Applications to import raw materials, inputs, packaging and containers shall be 
set out on the single customs clearance declaration forms, in accordance with the lists previously 
prepared by the Directorate-General of Industry which specify the raw materials, inputs, packaging 
and containers that are exclusively for the pharmaceu tical industry.  These lists shall be periodically 
revised when circumstances so require in order to introduce new medicinal products into domestic 
production. 
 
 In such circumstances, by means of a memora ndum addressed to the Ministry of Trade and 
Industry by the legal representative of the enterprise and signed by the Chief Pharmacist, an enterprise 
may request that the raw materials, inputs, packaging and containers used in the manufacture of new pharmaceutical products be included in the existing list, substantiating the request.  
 Article 58.  The Industrial Inspection Department of th e Directorate-General of Industry shall 
process applications for exempted imports, and sh all monitor compliance with this regulation, for 
which purpose it may seek the cooperation of other State bodies.  Accordingly, when so required it 
shall ensure that machinery, packaging and containers are inspected.  Samples of the imported raw materials shall also be taken for analysis when there are doubts concerning the nature of the imported 
product. 
 
 The Industrial Inspection Department may require proof or information from the enterprises 
themselves, with the prior consent of those in pos session of such information, and in the customs 
areas where the goods are being kept.  
 Article 59.  The analyses and testing shall be carri ed out in accordance with the testing 
methods required under the COPANIT Standards;  if there is no national standard, the analyses and 
testing shall be carried out in conformity with  the provisions established in the United States 
Pharmacopeia (USP) or any other reference documen t recognized and accepted by the Ministry of 
Health or the University of Panama. 
 
 Article 60.   Staff responsible for inspections and supervision, on the basis of a prior written 
order and identification issued by the Director-General  of Industry, shall have access to the enterprises 
and offices of the manufacturer in working hours.  They shall also have access to the warehouses and 
offices of Government agencies and autonomous and municipal bodies. 
 
 Article 61.  Following any inspection, a record shall be drawn up setting ou t the findings and 
it shall be signed by the manufacturer or responsible official and the inspector or inspectors.  
 If the manufacturer or responsib le employee refuses to sign the record, this fact shall be 
included in the record itself and, in any event, that  person shall be given a copy informing him that he 
has eight (8) days as of that date to submit evidence and claims against the facts set out in the record. 
 
 Article 62.  The Industrial Inspection Department shall compile a dossier comprising the 
record drawn up, the results of the laboratory analys es, in the case of substances, and the evidence and 
claims presented by the manufacturer or responsible official. 
 
 This dossier shall be sent to th e Directorate-General of Industry. 
 
 Article 63.   The Directorate-General of Industry, after having studied the dossier, shall 
instruct the competent bodies to apply the sanctions laid down by the existing laws for the following 
cases: 
 
1. Where the inputs, raw materials, packaging and containers do not match those on the 
previously prepared lists that indicate ex clusive use by the pharmaceutical industry. 
  G/SCM/Q3/PAN/13 
 Page 89 
 
 
2. Where the pharmaceutical preparations or medicaments are finished products that do not 
involve any processing in the manufacturing enterprise. 
 
3. Where the substances or products imported have no relationship with the preparation of 
pharmaceutical products. 
 
 Article 64.   The Ministry of Trade and Industry, in conjunction with the Ministry of Health, 
may immediately withdraw a product from the market  when, following the relevant tests, it has reason 
to believe that the health of consumers is or may be endangered or when the life of users is 
endangered.   Article 65.   Those persons considered not to have  met the requirements laid down by the 
Ministry of Trade and Industry and sanctioned by it may avail themselves of the administrative 
remedies established in Law No. 33 of 1984. 
 
 Article 66 .  New pharmaceutical enterprises that are set up for the first time in Panama and 
wish to avail themselves of the provisions of La w No. 28 of 20 June 1995 shall submit the following 
documents to the Ministry of Trade and Industry: 
 
1. A Memorandum on stamped paper addressed to the Ministry of Trade and Industry, 
containing an application by the legal representati ve, with a power of attorney, to benefit from the 
incentives provided under Law No. 28 of 20 June 1995.  
2. A certificate from the public registry listing, in addition to the directors, officers and legal 
representative, the paid up share capital and the period of operation of the company. 
 
3. An authenticated copy issued by the Civil Re gistry of the personal identity card of the legal 
representative.  If he is a foreigner, a copy of th e legal representative's passport authenticated by the 
appropriate consulate. 
 
4. Certificate attesting that there has been no tax fraud. 
 
5. Certificate of national tax clearance. 
 
6. Certificate of municipal tax clearance. 
 7. When it begins operations, the enterprise sha ll present the operating licence and fulfil all the 
requirements laid down by the Ministry of Health. 
 
 Article 67.   With regard to applications to import inputs, containers, packaging and raw 
materials by the enterprises mentioned in the previous  Article, the procedure esta blished in Articles 58 
and 59 of this Decree shall be followed. 
 
 Article 68.   Any pharmaceutical enterprise that benefits from incentives from the Official 
Industry Register, based on Law No . 3 of 20 March 1986, and any enterprise that has a contract with 
the State, based on Cabinet Decree No. 413 of 30 December 1970, and which wishes to avail itself of 
the incentives under Law No. 28 of 20 June 1995, shall meet the provisions stipulated in Article 47 of 
this Decree.   These enterprises shall present the same documents as those required for the new 
pharmaceutical enterprises mentioned above. 
 
 Article 69.   The Director-General of Industry is empowered to hold consultations under these 
regulations with regard to the pharmaceutical industry and may take all the internal measures he G/SCM/Q3/PAN/13 
Page 90  
 
considers advisable to clarify them and facilitate th eir application, while duly informing the Minister 
for Trade and Industry. 
 Final provisions  
 
 Article 70.   The Directorate-General of Revenue is empowered to issue guidelines, by means 
of resolutions, with a view to complementi ng those requirements and formalities for the 
implementation and monitoring of the provisions of  this Decree, in confor mity with Article 6 of 
Cabinet Decree No. 109 of 7 May 1970 as amended. 
  Accordingly, it is empowered to request stat ements and or certificates, reports and other 
supporting documents and formalities from th e interested parties when required.  
 
 Article 71.  Article XXIII of Decree No. 428 of 7 September 1953 sha ll be amended as 
follows: 
  ARTICLE XXIII.   Foreign goods destined for the segregated area of the free trade zone shall 
be subject to the following requirements: 
 
(a) They shall not be subject to the payment of any kind of import taxes, fees or duties 
for entry into the segregated areas. 
(b) They shall not need to include among the shipping documentation the consular 
invoice issued by the Panamanian Consul in the port of shipment.  Only the bill of 
lading and the commercial invoice, duly sworn, shall be required. 
 Instead of the duly sworn commercial invoice for goods that enter the free trade zone 
consigned to agents for the transport of goods and which are solely intended for reexport, they shall 
present a manifest or consignment note showing the quantity, description and trademarks of the goods 
brought in or dispatched.  Goods which enter under this procedure may not be transferred, sold, 
assigned, changed or disposed of and shall be sent to a consignee abroad by the same goods 
forwarding agent that brought them in. 
 
 Foreign enterprises that do not operate in the free trade zone, but which are the owners of the 
goods handled by the goods forwarding agents, require prior authorization from the administration to carry out transactions in that area. 
 
 The replacement of the duly sworn commercial invoice does not apply to goods acquired by 
goods forwarding agents or which are brought in for or transferred to other enterprises established in 
the free trade zone or which are destined for othe r parts of the customs territory of the Republic of 
Panama. 
 
(c) All the shipping documents shall indicate  that the goods are consigned to an 
enterprise or goods forwarding agent estab lished within the free trade zone or to the 
free trade zone. 
(d) They shall be goods whose import is permitted  by the laws of the Republic and these 
Regulations. 
(e) When the owner of goods originally destin ed for a foreign port considers it necessary 
to halt their transport when passing through Panama, and accordingly wishes to use 
the free trade zone, the storage of the goo ds shall be allowed provided that the 
appropriate shipping documents are endorse d to a goods forwarding agent authorized 
to operate in the free trade zone, and that  the corresponding permit to suspend the  G/SCM/Q3/PAN/13 
 Page 91 
 
 
transport is granted.  Both these forma lities require the active intervention of the 
customs authority, which must approve the operation before the goods are accepted 
into the segregated areas.  Goods that enter under this procedure may not be 
transferred, sold, assigned, changed or dis posed of and shall be sent to a consignee 
abroad by the same goods forwarding agent that brought them in. 
 Article 72.   This Executive Decree shall enter into fo rce as of the date of its promulgation in 
the Official Journal. 
 
FOR COMMUNICATION, PUBLICATION AND IMPLEMENTATION G/SCM/Q3/PAN/13 
Page 92  
 
 
Law No .26
1 
of 4 June 2001 
 
Amending Articles 23 and 25 of Law No. 28 adopting measures 
extending the scope of production tax incentives 
 
THE LEGISLATIVE ASSEMBLY 
 
HEREBY DECREES: 
 
 Article 1.  Article 23 of Law No. 28 of 19 95 shall read as follows: 
 
 Article 23.  Enterprises which, upon the entry into force of this Law, are entered in the 
Official Industry Register or have a contract with  the State on the basis of Cabinet Decree No. 413 of 
1970 or an industry development contract shall retain  the tax benefits granted by such registration, 
pursuant to Law No. 3 of 1986, or under such a contract, as applicable, for the rest of the period 
during which the registration or contract is effec tive in each particular case, complying with the 
provisions in Article 25 of this  Law for products deemed to be sensitive for the domestic economy. 
 
 The Ministry of Trade and Industry shall have legal powers to implement these development regimes for as long as the above-mentioned State cont racts and Official Indust ry Registers remain in 
force, with the exception of products deemed to be sensitive, which are subject to the special regime 
provided in Article 25 of this Law, for which th e legal powers shall be exercised by the ad hoc 
commission referred to in Article 147 of Law No. 23 of 1997. 
 
 The above-mentioned enterprises shall not be eligible for any of the benefits, incentives or 
exemptions granted under this Law.  They may, however, withdraw from the register or rescind the 
contract, as applicable, at any time and avail them selves of the benefits granted under this Law. 
 
 PARAGRAPH.  Enterprises which are not entered in th e Official Industry Register upon the 
entry into force of this Law shall be entitled to  full exemption from income tax on the profits from 
their export sales.  The exemption provided in this paragraph shall remain in force until 
31 December 2002. 
 
 Enterprises enjoying full exemption from income tax on profits from export sales shall not be eligible for Tax Credit Certificates (CATs). 
 
 The Ministry of Trade and Industry may extend  the registration of enterprises engaged in 
identical or similar activities up to the date of expiry of the last registration of an enterprise in the 
same line of production so as to avoid placing en terprises whose registration expired before the date 
in question at a disadvantage. 
 
 Article 2.   Article 25 of Law No. 28 of 1995 shall read as follows: 
 
 Article 25.   Until such time as the Cabinet Council, at the suggestion of the Ministry of Trade 
and Industry or the Ministry of Agricultural Development, as applicable, sets another rate, all inputs, 
raw materials and intermediate and capital goods impo rted at the rate established in Articles 9 and 10 
of Law No. 3 of 1986, shall, as of the enactment of  this Law, pay import duty of three per cent (3%) 
of their cost, insurance and freight (c.i.f.) value, in addition to the tax on the transfer of movable 
tangible property (ITBM), irrespec tive of whether the importer is en tered in the Official Industry 
Register. 
                                                     
 
1 Published in Official Journal No 24.317 of 6 June 2001.  G/SCM/Q3/PAN/13 
 Page 93 
 
 
 
 The import of agricultural, industrial or other inputs and raw materials which, in the opinion 
of the Executive, constitute sensitive products and products included in list CXLI of Law No. 23 of 
1997, Section 1-B, deemed to be sensitive for the domestic economy, shall be handled under a 
licensing and tariff-quota regime. 
 
 Where the aforementioned products exceed the volume of imports laid down in the tariff 
quota, the tariff negotiated in the WTO for all the tariff digits shall be payable according to the 
gradual tariff reduction provided in Law No. 23 of 1997.  
  Where the regular quota has been exhausted and the ad hoc commission referred to in Article 147 of Law No. 23 of 1997 so recommends to the Executive, subject to consultation with the 
legally constituted unions repres enting the respective sector, authorization may be given for the 
import of the volume required to ensure normal supply of the product in Panama. 
 
 The Cabinet Council shall establish which additional inputs, raw materials, intermediate and capital goods may be imported upon payment of the dut y of three per cent (3%) established in this 
Article and also add other products that are sensitive for the domestic economy. 
 
 Article 3.   This Law amends Articles 23 and 25 of Law No.28 of 20 June 1995. 
  Article 4.   This Law shall enter into effect as of its enactment. 
 
FOR COMMUNICATION AN D IMPLEMENTATION 
 
 
 
 G/SCM/Q3/PAN/13 
Page 94  
 
 
 
 
 
 
 
 
 
 
 
TAX CREDIT CERTIFICATES (CAT)  G/SCM/Q3/PAN/13 
 Page 95 
 
 
LAW No. 1081 
of 30 December 1974 
 
Granting Export Incentives 
 
THE NATIONAL LEGISLATION COUNCIL 
 
HEREBY DECREES: 
 
CHAPTER I 
Scope and Objectives 
 
 Article 1.  Tax Credit Certificates are hereby in troduced as a means of promoting non-
traditional exports of goods wholly or pa rtly produced or processed in Panama. 
 
 Article 2.   For the purposes of this Law, non-trad itional exports shall mean goods wholly or 
partly produced or processed in Panama, with the following exceptions: 
 
 (a) Cane sugar 
 (b) Bananas and banana purée 
 (c) Honey and cane molasses  (d) Cocoa beans  (e) Raw coffee (beans) 
 (f) Shrimps, fresh, chilled or frozen 
 (g) Bovine meat, fresh, chilled or frozen 
 (h) Bovine cattle leather, not tanned 
 (i) Wooden logs 
 (j) Bovine cattle, swine and horses, other than pure-bred 
 (k) Fish flour 
 (l) Other oils of fish and marine mammals 
 (m) Scrap metal 
 (n) Hawkbill turtles, unworked 
 (o) Extracts of (citrus) fruit 
 (p) Petroleum and petroleum products 
 (q) Sales under bilateral, free or preferential trade agreements 
 (r) Sales made abroad from the Colón Free Zone  (s) Minerals, metals and metal products. 
 
 Article 3:   Any natural or legal person exporting to other countries goods wholly or partly 
produced or processed in Panama may apply for and avail himself of the benefits of this Law, in 
accordance with the following classification: 
 
 (a) Enterprises whose exports have a minimum national content amounting to 20 per cent 
based on the manufacturing or production co st and contain at least 20 per cent of 
national value added;  and 
 
 (b) enterprises whose exports have a minimum national content amounting to 10 per cent 
based on the manufacturing or production cost, provided that they are located outside the metropolitan region, as determined in  the Regulation issued  by the Executive. 
 
                                                     
 
1 Published in Official Journal No. 17.776 of 6 February 1975. G/SCM/Q3/PAN/13 
Page 96  
 
 Article 4:   The benefits to which Article 5 refers sh all be granted by the Ministry of Finance 
and the Treasury within 15 days of the submission  of a favourable opinion by the Commission on 
Export Incentives. 
 
CHAPTER II 
Incentives 
  Article 5:  Natural and legal persons who comply with the requirements laid down in 
Article 3 of this Law and with the provisions of the Re gulation referred to in Article 9 (e) [sic] of this 
Law may apply for a Tax Credit Certificate (CAT) equivalent to 20 per cent of the national value added of the goods exported.  
 If natural or legal persons are exporting or manage to export the equivalent of 150 per cent of 
the value of their production sold in the national te rritory, they may apply for Tax Credit Certificates 
equivalent to 20 per cent of the national value added of the goods ex ported.  However, they may not 
apply for Tax Credit Certificates for exports that exceed the equivalent of the aforesaid 150 per cent of the value of their production sold in the national territory. 
 
 Article 6.  The Tax Credit Certificates authorized  by this Law shall be nominal and non-
transferable documents, exempt from any kind  of tax and non-interest-bearing.  Tax Credit 
Certificates shall be issued by the Ministry of Finance and the Treasury, in national currency, and may be used for paying any of the enterprise's direct national or import taxes.  
 Tax Credit Certificates may be used 12 months after being issued. 
 
 Tax Credit Certificates shall lapse four years after being issued. 
 
 Article 7.  Exporters of non-traditional products sh all receive Tax Credit Certificates after 
complying with all the requirements laid  down in this Law and its Regulations. 
 
 
CHAPTER III 
Technical Commission on Export Incentives 
  Article 8.   A Technical Commission on Export Incentives is hereby established under the 
Ministry of Trade and Industry.  It shall consist of the following members:  
 (a) The Minister for Trade and Industry, who shall chair the Commission, or an official 
designated by the Ministry; 
 
 (b) the Minister for Finance and the Treasury or an official designated by the Ministry; 
 
 (c) the Minister for Planning and Economic Policy or an official designated by the 
Ministry; 
 
 (d) a member of the Legislation Committee designated by the Executive; 
 
 (e) a representative of the Panamanian Manufacturers' Association chosen by the 
Executive from a short-list of three submitted by the Association. 
  G/SCM/Q3/PAN/13 
 Page 97 
 
 
 Article 9.  The Technical Commission on Export Incentives shall have the following 
functions: 
 
 (a) To advise the Panamanian Government on  measures to be taken in connection with 
tax incentives for exporters. 
 
 (b) To give opinions on the national value added content of each exportable product for 
the purpose of establishing the amount of Ta x Credit Certificates, in accordance with 
the Regulations to be issued by the Executive. 
  (c) To recommend to the Executive the mech anisms or instruments it considers necessary 
for promoting exports of non-traditional products. 
 
 
CHAPTER IV 
General Provisions 
 
 Article 10.  Decisions adopted by the Technical Commission on Export Incentives shall be 
published in the Industrial Property Bulletin of the Ministry of Trade and Industry. 
 
 Article 11.  In each case, the Ministry of Trade and Industry may verify that exports granted 
Tax Credit Certificates correspond to the specifi cations submitted to the Technical Commission on 
Export Incentives by the enterpri se when filing its application. 
 
 Article 12.  This Law shall enter into force upon approval. 
 
FOR COMMUNICATION AND PUBLICATION 
  Done at Panama City on the 30
th day of December one thousand nine hundred and seventy 
four. 
 
 G/SCM/Q3/PAN/13 
Page 98  
 
 
LEGISLATIVE ASSEMBLY  
LAW No. 2
1 
of 16 January 1991 
 
Repealing Cabinet Decree No. 64 of 23 February 1990 and bringing 
back into force Law No. 108 of 30 December 1974, as amended 
by Law No. 71 of 22 December 1976 and Law No. 27 of 
23 August 1977, and amending Article 8(d) thereof 
 
THE LEGISLATIVE ASSEMBLY 
 
HEREBY DECREES 
 
 Article 1.  Cabinet Decree No. 64 of 23 Februa ry 1990 is hereby repealed. 
  Article 2.  Law No. 108 of 30 December 1974, as amended by Law No. 71 of 22 December 
1976 and Law No. 27 of 23 August 1977, is brought back into force as follows: 
 
 Article 1.  Tax Credit Certificates are hereby in troduced as a means of promoting non-
traditional exports of goods wholly or pa rtly produced or processed in Panama. 
  Article 2.   For the purposes of this Law, non-trad itional exports shall mean goods wholly or 
partly produced or processed in Panama, with the following exceptions: 
 
 (a) Cane sugar 
 (b) Bananas and banana purée 
 (c) Honey and cane molasses 
 (d) Cocoa beans 
 (e) Raw coffee (beans) 
 (f) Shrimps, fresh, chilled or frozen 
 (g) Bovine meat, fresh, chilled or frozen 
 (h) Bovine cattle leather, not tanned 
 (i) Wooden logs 
 (j) Bovine cattle, swine and horses, other than pure-bred 
 (k) Fish flour  (l) Other oils of fish and marine mammals 
 (m) Scrap metal 
 (n) Hawkbill turtles, unworked 
 (o) Extracts of (citrus) fruit 
 (p) Petroleum and petroleum products 
 (q) Sales under bilateral, free or preferential trade agreements 
 (r) Sales made abroad from the Colón Free Zone 
 (s) Minerals, metals and metal products. 
 
 Article 3.  Any natural or legal person exporting to other countries goods wholly or partly 
produced or processed in Panama may apply for and avail himself of the benefits of this Law, in 
accordance with the following classification:   (a) Enterprises whose exports have a minimum national content amounting to 20 per cent 
based on the manufacturing or production co st and contain at least 20 per cent of 
national value added;  and 
                                                     
 
1 Published in Official Journal No. 21.712 of 25 January 1991.  G/SCM/Q3/PAN/13 
 Page 99 
 
 
 
 (b) enterprises whose exports have a minimu m national content of 10 per cent based on 
the manufacturing or production cost, provided that they are located outside the 
metropolitan region, as determined in th e Regulation issued by the Executive. 
 
 Article 4.   The benefits to which Article 5 refers sh all be granted by the Ministry of Finance 
and the Treasury within 15 days of the submission  of a favourable opinion by the Commission on 
Export Incentives. 
 
 Article 5.  Natural and legal persons who comply with the requirements laid down in 
Article 3 of this Law and with the Regulations issued pursuant thereto may apply for a Tax Credit 
Certificate (CAT) equivalent to 20 per cent of the national value added of the goods exported. 
 
 Article 6.  The Tax Credit Certificates authorized by this Law shall be  nominal documents 
transferable by endorsement, exempt from any ki nd of tax and non-interest-bearing.  Tax Credit 
Certificates shall be issued by the Ministry of Finance and the Treasury, in national currency, and may be used for paying any of the taxpayer's direct national or import taxes. 
 
 Tax Credit Certificates may be used nine (9) months after being issued, provided they are not 
used in the fiscal year in which they are issued. 
  Sums payable to the National Treasury as tax on the transfer of movable tangible property 
with tax credit may be paid by means of these Certificates once the period indicated in the preceding 
paragraph has expired. 
 
 Article 7.  Exporters of non-traditional products sh all receive Tax Credit Certificates after 
complying with all the requirements laid  down in this Law and its Regulations. 
 
 Article 8.   A Technical Commission on Export Incentives is hereby established under the 
Ministry of Trade and Industry.  It shall consist of the following members: 
 
 (a) The Minister for Trade and Industry, who shall chair the Commission, or an official 
designated by the Ministry; 
 
 (b) the Minister for Finance and the Treasury or an official designated by the Ministry; 
  (c) the Minister for Planning and Economic Policy or an official designated by the 
Ministry; 
  
 (d) a member of the Legislature's Public  Finance, Planning and Economic Policy 
Committee chosen by its Steering Committee. 
 
 (e) a representative of the Panamanian Manufacturers' Association chosen by the 
Executive from a short-list of three submitted by the Association. 
 
 Article 9.  The Technical Commission on Export Incentives shall have the following 
functions: 
  (a) To advise the Panamanian Government on  measures to be taken in connection with 
tax incentives for exporters. 
 
 (b) To give opinions on the national value added content of each exportable product for 
the purpose of establishing the amount of Ta x Credit Certificates, in accordance with 
the Regulations to be issued by the Executive. G/SCM/Q3/PAN/13 
Page 100  
 
 
 (c) To recommend to the Executive the mech anisms or instruments it considers necessary 
for promoting exports of non-traditional products. 
 
 Article 10.  Decisions adopted by the Technical Commission on Export Incentives shall be 
published in the Industrial Property Bulletin of the Ministry of Trade and Industry. 
 
 Article 11.  In each case, the Ministry of Trade and Industry may verify that exports granted 
Tax Credit Certificates correspond to the specifi cations submitted to the Technical Commission on 
Export Incentives by the enterpri se when filing its application. 
  Article 3.  From 1 January 1991, Tax Credit Certif icates, including those issued while 
Cabinet Decree No. 64 of 23 February 1990 was in force, shall be entirely governed by the laws 
referred to in Article 2 of this Law. 
 
 Article 4.   This Law brings back into force Law No. 108 of 30 December 1974, as amended 
by Law No. 71 of 22 December 1976 and Law No. 27 of 23 August 1977; amends Article 8(d) of 
Law No. 108 of 30 December 1974; and repeals Cabinet Decree No. 64 of 23 February 1990. 
 
 Article 5.  This Law shall take effect, in respect of  Article 1, from 31 December 1990; in 
respect of Articles 2 et seq., it shall take effect from 1 January 1991, and shall enter into force upon 
promulgation.  
FOR COMMUNICATION AND PUBLICATION 
 
 Done at Panama City on the 29
th day of December one thousand nine hundred and ninety. 
  G/SCM/Q3/PAN/13 
 Page 101 
 
 
 
MINISTRY OF TRADE AND INDUSTRY 
 
Executive Decree No. 51 
of 8 February 1991 
 
Adopting a New Regulation for the Application of Law No. 108 
of 30 December 1974 on Export Incentives 
 
THE PRESIDENT OF THE REPUBLIC 
in application of his legal powers 
 
DECREES: 
 
 Article 1:  A new Regulation for the Application of Law No. 108 of 30 December 1974 on 
Export Incentives, with the following text, is hereby adopted.  
REGULATION 
 
CHAPTER I 
Application 
 
 Article 1.   For the purposes of Article 2 of Law No. 108 of 30 December 1974, non-
traditional exports shall be taken to mean those which relate to goods wholly or partly produced or 
processed in Panama, as described in the Custom s Cooperation Council Nomenclature (CCCN), with 
the following exceptions: 
 
Description        CCCN Heading 
 
 ( a )  C a n e  s u g a r         1 7 . 0 1  
 (b) Bananas and banana purée 
  1.  bananas        08.01 
  2.  banana purée       20.05 
 (c) Honey and cane molasses 
  1.  sugarcane honey       17.02 
  2.  cane molasses       17.03  ( d )  C o c o a  b e a n s         1 8 . 0 1  
 (e) Raw coffee (beans)       09.01 
 (f) Shrimps, fresh, chilled or frozen      03.03 
 (g) Bovine meat, fresh, chilled or frozen     02.01 
 (h) Bovine cattle leather, not tanned      41.01 
 ( i )  W o o d e n  l o g s         4 4 . 0 1  
           4 4 . 0 3  
           4 4 . 0 4  
           4 4 . 0 5  
           4 4 . 0 7  
 (j) Bovine cattle, swine and horses, other than pure-bred 
  1.  bovine cattle, other than pure-bred     01.02   2.  swine, other than pure-bred      01.03   3.  horses, other than pure-bred      01.01 
 ( k )  F i s h  f l o u r         2 3 . 0 1  
 (l) Other oils of fish and marine mammals     15.04 
                                                     
 
1 Published in Official Journal No. 21.753 of 27 March 1991. G/SCM/Q3/PAN/13 
Page 102  
 
 (m) Scrap metal        26.01 
           2 6 . 0 2  
           2 6 . 0 3  
           2 6 . 0 4  
           7 3 . 0 3  
           7 4 . 0 1  
           7 5 . 0 1  
           7 6 . 0 1  
           7 7 . 0 1  
           7 8 . 0 1             7 9 . 0 1             8 0 . 0 1  
           8 1 . 0 1  
           8 1 . 0 2  
           8 1 . 0 3  
           8 1 . 0 4   (n) Hawk-bill turtles, unworked      05.09 
 (o) Extracts of (citrus) fruit       20.07 
 (p) Petroleum and petroleum products        Chapter 27 
 (q) Sales under bilateral, free or preferential trade agreements 
 (r) Sales made abroad from the Colón Free Zone  (s) Minerals, metals and metal products.  
 For the purpose of applying this Article, th e tariff headings listed relate to the specific 
descriptions of the above-mentioned products.  In th is connection, the terms indicated below shall be 
assigned the following definitions. 
 
1. Scrap metal
: All metal waste or scrap intended for the recovery of metal or for the preparation 
of the product or chemical preparations. 
 
 The product may take the following forms: 
 
(a) Waste or scrap from the mechanical working of metals, such as turnings, filings, 
ingot and bar trimmings and the like. 
(b) Old cast iron articles not usable for their original purpose because of breakage, 
cutting up or wear. 
2. Citrus : Any small tree or shrub belonging to th e family Rutaceae, subfamily Aurantiaceae, 
genus Citrus. Includes the following varieties: bitter orange, sweet orange, grap efruit, lemon, lime and 
mandarin. 
 
3. Mineral : Any inorganic substance present on the surface or in the various surface or deeper 
layers of the earth's crust, particularly if of economic interest. 
 
4. Metal : An element which is solid at ordinary temp eratures, except for mercury,  conducts heat 
and electricity and has a distinctive lustre. 
 
 This Article covers minerals and metals exported in the natural state, in ingots or in any other 
raw state that were mined or quarried in the country. 
 
 It does not cover metals that have undergone industrial processing or that come from products 
that are no longer in use or no longer usable or from scrap. 
  G/SCM/Q3/PAN/13 
 Page 103 
 
 
 PARAGRAPH:  For the purposes of the above classification, the Technical Commission on 
Export Incentives shall, where necessary, take in to account the specifications and definitions drawn 
up by the Panamanian Industrial and Technical Standards Commission (COPANIT), the Specialized 
Analytical Laboratory of the University of Panama  (LEA), the Ministry of Agricultural Development 
(MIDA) and other officially approved bodies. 
 
 Article 2.  All natural and legal persons exporting to other countries goods produced or 
processed wholly or partly in Panama may apply for and avail themselves of the benefits of this Law, 
in accordance with the following classification: 
  (a) enterprises whose exports have a minimum national content amounting to 20 per cent 
based on the manufacturing or production co st and contain at least 20 per cent of 
national value added (VAN);  and 
 
  enterprises whose exports have a minimum share national content amounting to 
10 per cent in national content based on the manufacturing or production cost, provided that they are located outside the metropolitan region. 
 
  The metropolitan region shall be taken to comprise the Districts of Panama, San 
Miguelito, Arraiján, La Chor rera, Colón and the Corregimiento Cabercera de Chepo. 
  Article 3.  The manufacturing or production cost sha ll be taken to be the sales cost of the 
product to be exported less profits. 
 
 Profits shall be taken into account up to a lim it of 12 per cent of the capital invested in the 
production of the product to be exported. 
 
 PARAGRAPH:   The exporter shall submit a sworn declaration of national content and 
national value added of the product exported, duly ce rtified by an economist, an industrial engineer or 
a chartered accountant (CPA), showing that Artic le 3 of Law No. 108 of 30 December 1974 and the 
provisions of this Regulation  [have been complied with]. 
 
 The declaration shall be checked by the Technical Commission on Export Incentives and 
recorded on a form prepared by the Commission, a co py of which shall be forwarded to the exporter. 
 
 Certificates issued by the professionals referre d to in this Article that infringe the Code of 
Professional Ethics shall incur penalties in accordan ce with the legal provisions governing the various 
professions, without prejudice to any criminal sanctions to which they may give rise. 
 
 Article 4.  Only the person or enterprise that carri es out the exportation may apply for a Tax 
Credit Certificate, even if the product to be ex ported has not been produced by that person or 
enterprise. 
 
 In these circumstances, the Tax Credit Certificat e shall be granted to the exporting enterprise 
before the product to be exported is purchased by the first intermediary if it fulfils the requirements of 
Law No. 108 of 1974 and this Regulation. 
 
 The value of the Tax Credit Certificate shall be determined on the basis of the value added of the product before purchase by the firs t intermediary (value f.o.b. plant). 
 
 Article 5.  National content shall be taken to mean 100 per cent of the value of the following 
components, insofar as these affect the value of the products to be exported: 
 G/SCM/Q3/PAN/13 
Page 104  
 
 (a) Domestic raw materials (agricultural, marine and non-metallic mineral) used directly 
in the production process; 
 
(b) domestic labour (direct, piece-work) used  in producing the product to be exported, 
namely, wages, national insurance contributions, bonuses, commission and any 
income or benefit received by a worker for work done, excluding indemnities; 
 
 (c) national and municipal taxes, minus those paid by means of Tax Credit Certificates 
(CAT); 
  (ch) utilities, with the exception of the fuel clause;  
 (d) industrial packing and containers. 
 
 Article 6.  Enterprises may base their calculation of national value added (VAN) on either of 
the following two criteria:  
 I. National value added shall consist of the following components, insofar as they affect 
the value of products to be exported: 
 
(a) Domestic labour used in producing the product to be exported, with all the 
associated benefits, comprising wage s, i.e. the remuneration which the 
employer must pay the worker by virtue of the employment relationship, 
including bonuses, commission, shares in the profits and any income or 
benefit received by the worker for work done, excluding indemnities, 
weighted at 100 per cent; 
 
(b) national indirect and municipal taxes, minus those paid by means of Tax 
Credit Certificates (CAT), weighted at 100 per cent; 
 
(c) leasing of land, weighted at 100 per cent; 
 
(ch) interest paid on loans from banks  or financial institutions operating in 
Panama, for the financing of export production, weighted at 100 per cent; 
 
(d) depreciation of Panamanian movable and immovable property relating to the 
manufacture of the product to be exported, weighted at 100 per cent; 
 
(e) profits derived from exports, provided that they do not exceed 12 per cent of 
the capital invested, weighted at 100 per cent; 
 
(f) value added of raw materials used in the production process, provided that it 
is not included in the aforementione d components and that the national 
component equals or exceeds 50 per cent; determined on the basis of the 
following classification: 
 
(f.1) domestic raw materials of agricultural, marine or non-metallic 
mineral origin are weighted at 85 per cent, except for shrimps, fresh, chilled or frozen, and meat, fresh, chilled or frozen, which have a nil or zero (0) weighting; 
 
(f.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;  
in this case, the exporting enterprise that documents the  G/SCM/Q3/PAN/13 
 Page 105 
 
 
apportionment of the value of the raw materials between domestic 
and imported components shall weight the domestic component of the 
raw materials at 85 per cent; 
 
 Raw materials whose imported component exceeds 50 per cent shall 
not be considered for value added purposes, 
 
(g) leasing of Panamanian production-related movable and immovable property, 
weighted at 80 per cent; 
 
(h) payments for services to natural or legal persons established on the national 
territory and involved in the production and internal handling of the product 
to be exported, weighted at 85 per cent; 
 
 The services included under this heading are as follows: 
 
 (h.1) special services (piece-work an d technical work directly related to 
production); 
 
 (h.2) inland freight; 
 
 (h.3) plant insurance; 
 
  (h.4) port charges; 
 
  (h.5) customs charges; 
 
 (h.6) cost of repair and maintenance of equipment directly related to 
production, excluding imported parts and spares; 
 
(i) utility costs (water, telephone and electricity), weighted at 80 per cent;  the 
fuel clause is not computed in the case of electricity; 
 
(j) locally-produced packing and containers used for products to be exported, 
weighted at 35 per cent; 
 
(k) In this case, the exporting enterprise that documents the apportionment of the 
value of the packing and containers between the domestic and imported 
components shall weight the dome stic component at 65 per cent 
 
II. National value added (VAN) shall be taken to mean the following components, 
insofar as they affect the value of products to be exported: 
 
(a) Domestic labour used in producing the product to be exported, with all the 
associated benefits, comprising wages, i.e. the remuneration which the 
employer must pay the worker by virtue of the employment relationship, 
including bonuses, commission, shares in the profits and any income or 
benefit received by the worker for work done, excluding indemnities,  weighted at 100 per cent; 
 
(b) national indirect and municipal taxes, minus those paid by means of Tax 
Credit Certificates (CAT), weighted at 100 per cent; 
 G/SCM/Q3/PAN/13 
Page 106  
 
(c) value added of raw materials used in the production process, provided that it 
is not included in the aforementioned components shall be determined as 
follows: 
 
(c.1) domestic raw materials of agricultural or marine origin are weighted 
at 100 per cent, except for shrimps, fresh, chilled or frozen, and meat, 
fresh, chilled or frozen, which have  a nil or zero (0) weighting; 
 
(c.2) domestic industrial raw material s, with an imported component equal 
to not more than 50 per cent of their value, are weighted at 35 per cent; 
 
In this case, the exporting enterprise that documents the apportionment of the 
value of the raw materials between th e domestic and imported components 
shall weight the domestic component of  the raw materials at 80 per cent; 
 
Raw materials whose imported component exceeds 50 per cent shall not be 
considered for value added purposes, 
 
(ch) payments for special services (piece-w ork and technical directly related to the 
production of the product to be exported), weighted at 100 per cent; 
 
(d) utility costs (water, telephone and electricity), weighted at 100 per cent;  the 
fuel clause is not computed in the case of electricity; 
 
(e) locally produced packing and containers used for products to be exported, 
weighted at 35 per cent. 
 
In this case, the exporting enterprise that documents the apportionment of the 
value of the packing and containers between the domestic and imported 
components shall weight the dome stic component at 65 per cent. 
 
To encourage the creation of new jobs, t hose enterprises which, after the entry 
into force of this Regulation, generate new jobs directly related to the 
production process during its period of validity shall weight the increase at 
200 per cent. 
 
For new enterprises established within two years of the entry into force of this 
Regulation, all labour directly related with the production process shall be 
weighted at 125 per cent. 
 
 PARAGRAPH:   The choice of criteria shall be made once only and the criteria chosen shall 
apply throughout the period of validity of this Regulation. 
 
 
CHAPTER II 
Incentives 
 
 Article 7.  Tax Credit Certificates (CAT) are nominal documents, transferable by 
endorsement, issued by the Ministry of Finance an d the Treasury in national currency and used as a 
means of promoting non-traditional exports of goods  wholly or partly produced or processed in 
Panama. 
  G/SCM/Q3/PAN/13 
 Page 107 
 
 
 Up to 31 December 1990, Tax Credit Certifi cates may be used to pay national taxes.  
From 1 January 1991, these certificates shall only be used to pay tax on income and dividends, 
supplementary, property and import tax, and the tax on transfers of movable tangible property with 
tax credit (ITBM). 
 
 Article 8.  Tax Credit Certificates shall be exempt from every kind of tax and non-interest-
bearing. They may be used nine (9) months after thei r date of issue, provided they are not used within 
the tax period in which they were issued. 
 
 Article 9.  Natural and legal persons who comply with  the requirements laid down in Law 
No. 108 of 30 December 1974 and in this Regula tion may apply for a Tax Credit Certificate (CAT) 
equivalent to 20 per cent of the national value added (VAN) of the goods exported. 
 
 The exporter shall have a maximum period of two (2) years after exportation to apply for this 
incentive. 
  
CHAPTER III 
The Technical Commission on Export Incentives  
  Article 10.  The Technical Commission on Export Ince ntives shall be established under the 
Ministry of Trade and Industry.  It shall consist of the following members:  
 (a) The Minister for Trade and Industry, who shall chair the Commission, or an official 
designated by the Ministry; 
 
 (b) the Minister for Finance and the Treasury or an official designated by the Ministry; 
 
 (c) the Minister for Planning and Economic Policy or an official designated by the 
Ministry; 
 
 (d) a Member of the Legislation Committee designated by the Executive; 
 
 (e) a representative of the Panamanian Manufacturers' Association chosen by the 
Executive from a short-list of three submitted by the Association. 
  Each member of the Technical Commission on  Export Incentives shall have an alternate 
appointed in the same way as the principal member. 
 
 Article 11.  The Technical Commission on Export Incentives shall have the following 
functions:  
 (a) To advise the Panamanian Government on  measures to be taken in connection with 
tax incentives for exporters. 
 
 (b) To give opinions on the national value added content of each exportable product for 
the purpose of establishing the amount of Ta x Credit Certificates, in accordance with 
the Regulations to be issued by the Executive. 
  (c) To recommend to the Executive the mech anisms or instruments it considers necessary 
for promoting exports of non-traditional products. 
 G/SCM/Q3/PAN/13 
Page 108  
 
 Article 12.  One half plus one (1) of the members shall constitute a quorum for holding an 
ordinary or extraordinary meeting of the Technical Commission on Export Incentives, provided the 
representative of the Ministry of Trade and Industry is present. 
 
 Decisions of the Technical Commission on Export Incentives shall be taken by an absolute 
majority of its members. 
 
 Article 13.  The Technical Commission on Export Incentives shall hold an ordinary meeting 
once a week and an extraordinary meeting whenever necessary. 
  For the Commission to meet in extraordinary session, its Chairman must convene a meeting at least 72 hours in advance, except in cases of extreme urgency. 
 
 Article 14.  The Technical Commission on Export Incentives shall have an Executive 
Secretariat provided by the Panamanian Foreign Trade Institute, which shall be responsible for 
analysing, assessing and investigating studies and ap plications for Tax Credit Certificates submitted 
by exporting enterprises. It shall also implement the decisions and measures adopted by the Technical 
Commission on Export Incentives. 
 
 The Secretariat shall participate in the meetin gs of the Commission with the right to speak. 
  Article 15.  In order to speed up the procedure fo r obtaining Tax Credit Certificates, the 
Technical Commission on Export Incentives, thr ough the Executive Secretariat, shall maintain a 
detailed register of applications submitte d up to the obtaining of a certificate. 
 
  Natural and legal persons rece iving Tax Credit Certificates shall be entered in this register 
under the heading of Exporters. 
 
 
CHAPTER IV 
Procedure 
 
 Article 16.  To be eligible for the benefits of Law No. 108 of 30 December 1974, an 
interested party must file an ap plication with the Panamanian Fore ign Trade Institute, made out on a 
printed form obtained from the Institute at its own expense and accompanied by the following 
information:  
(a) Audited financial statements and/or income tax return for the latest fiscal period; 
  Natural persons associat ed with the agricultural sector must submit the 
documentation necessary to calculate the national value added, signed by a chartered 
accountant. 
 
(b) a copy of the Social Security Fund records for the previous fiscal period and the 
corresponding year, if the exporter wishes to avail himself of the employment 
incentive under the second set of criteria; 
(c) national certificate of tax payment; 
(d) legally required stamps; 
(e) documents attesting to the national value added components of the product to be 
exported or already exported;  G/SCM/Q3/PAN/13 
 Page 109 
 
 
(f) confirmation of the appropriate power of attorney, where the application is filed 
through a lawyer. 
 Article 17.  For the purpose of checking the data supplied by applicants, the Executive 
Secretariat of the Technical Commission on Expor t Incentives may conduct any investigation or 
inspection it deems necessary at any time and, to  that end, may request the presentation of book-
entries and other documents justifying the items or accounts relevant to the application. 
 
 Article 18.  Once the investigation has been completed,  the Executive Secretariat shall make 
a recommendation to the Technical Commission on Expor t Incentives for approval or denial of a Tax 
Credit Certificate (CAT), as stipulated in the Law and in this Regulation.  
 Article 19.  Once the Technical Commission on Export Incentives has received all the 
supporting documents, it shall have a period of fifteen (15) working days in which to assess the 
application and either approve or withhold th e issuing of a Tax Credit Certificate (CAT). 
  Article 20.  If the national value added is approved by the Technical Commission on Export 
Incentives, the Executive Secretariat shall proceed to draw up a Decision whereby a certificate is to be 
granted subject to presentation of the following documents: 
 
 (a) Sales invoice; 
  (b) export declaration or clearance;  
 (c) bill of lading; 
 
 (ch) certificate issued by the Ministry of Finance and the Treasury confirming that the 
merchandise has been exported. 
  Article 21.  Decisions of the Technical Commission on Export Incentives shall be signed by 
its Chairman and Secretary and contain the following information: 
 (a) Name and particulars of the enterprise; 
  (b) description of the product;  
 (c) reference unit; 
 
 (ch) unit national value added. 
 
 Article 22.  The national value added (VAN) approved by the Technical Commission on 
Export Incentives for a period of one fiscal year may be used for exports in the course of that year and 
for exports over the following two (2) years. 
 
 Article 23.  The Executive Secretariat shall forward the original of the Decision to the 
Directorate-General of Revenue of the Ministry of Finance and the Treasury with a copy to the Office 
of the Comptroller-General of th e Republic for endorsement, in order that the corresponding Tax 
Credit Certificates may be issued. 
 
 Each member of the Technical Commission on Export Incentives and the exporter shall also 
receive a copy of the Decision. 
 G/SCM/Q3/PAN/13 
Page 110  
 
 Once the Decision has been endorsed by
 the Office of the Comptroller-General of the 
Republic, it shall be published in the Industrial Property Bulletin of the Ministry of Trade and 
Industry. 
 Article 24.   Anyone who has filed an applicatio n for a Tax Credit Certificate (CAT) may 
withdraw it at any point during the processing procedure. Notice of withdrawal shall be filed with the 
Executive Secretariat of the Technical Commission on Export Incentives and, once it has been 
received, the application for a Tax Credit Certificate (CAT) shall be considered null and void. 
 Article 25.  Tax Credit Certificates (CAT) issued shall clearly specify the name and the single 
taxpayer registration number (RUC), the date of is sue, the amount, number and date of the Decision. 
 
 Article 26.  The Ministry of Finance and the Treasury shall monitor, by beneficiary, the Tax 
Credit Certificates (CAT) issued and those that have been applied against taxes in the form of current 
accounts. 
 
 Article 27.  At the request of an interested party, the Technical Commission on Export 
Incentives shall make an annual assessment of the national content and the national value added 
(VAN) in order to make th e appropriate adjustments. These adjust ments shall not be retroactive with 
respect to goods already exported. 
 
 Enterprises may request, even before exporta tion, the opinion of the Technical Commission 
concerning the national content or national value added of their product.  
 Article 2.  This Decree shall enter into effect upon promulgation and re peals Decree No. 46 
of 5 May 1975. 
 
 Done at Panama City, on the 8
th day of February one thousand nine hundred and ninety one. 
 
FOR COMMUNICATION AND PUBLICATION 
 
GUILLERMO ENDARA GALIMANY 
President of the Republic 
 
JUAN B. CHEVALIER 
Minister for Trade and Industry  G/SCM/Q3/PAN/13 
 Page 111 
 
 
LEGISLATIVE ASSEMBLY 
 
LAW No. 41 
of 19 January 1993 
 
Provisionally and temporarily suspending the effects of Article 2(g) of Law No. 108 of 
30 December 1974, brought back into force by Law No. 2 of 16 January 1991, 
and introducing other provisions 
 
THE LEGISLATIVE ASSEMBLY 
 
 Whereas Law No. 108 of 30 December 1974, which was brought back into force by Law 
No. 2 of 16 January 1991, introduced Tax Credit Certificates (CAT) as a means of promoting non-
traditional exports of goods wholly  or partly produced or proces sed in the Republic of Panama; 
 
 Whereas Article 2(g) of Law No. 108 of 30 D ecember 1974 made bovine meat, fresh, chilled 
or frozen, ineligible for CATs; 
 
 Whereas the countries of the Caribbean region and the United Mexican States are currently 
applying substantial import tariffs to meat from the Republic of Panama, which is making it 
impossible to export meat to those markets;   Whereas it is necessary to provide incentives for exports of bovine meat, fresh, chilled or 
frozen, in order that the product may be competitiv e on the markets of the Caribbean region and the 
United Mexican States; 
 
HEREBY DECREES: 
 
 Article 1.  The effects of Article 2(g) of Law No. 108 of 30 December 1974, which was 
brought back into force by Law No. 2 of 16 January 1991, are provisionally and temporarily 
suspended. 
 
 Article 2.  "Bovine meat, fresh, chilled or frozen" shall be considered to be a non-traditional 
product for the purposes of Law No. 108 of 30 December 1974. 
 
 For the purpose of calculating the national value added (VAN), the raw materials of the product "bovine meat, fresh, chilled or frozen" shall receive the same  treatment as that granted to 
other non-traditional products of enterprises that avail themselves of the benefits of CATs, in 
accordance with the provisions of Law No. 108 of 30 December 1974 and Executive Decree No. 5 of 
8 February 1991. 
 
 Article 3.  This Law shall remain in force for a peri od of one hundred and twenty (120) days 
from 1 January 1993, as long as the countries of the Caribbean region and the United Mexican States 
continue to apply import tariffs to meat from the Republic of Panama. 
 
 Article 4.  This Law suspends the effects of Article 2(g) of Law No. 108 of 30 December 
1974, which was brought back into force by Law No. 2 of 16 January 1991, amends Article 6 of 
Executive Decree No. 5 of 8 February 1991 and repeals any conflicting provision.  
                                                     
 
1 Published in Official Journal No. 22.210 of 22 January 1993. G/SCM/Q3/PAN/13 
Page 112  
 
 Article 5.  This Law is a public policy measure of social interest, shall enter into force upon 
promulgation and shall have retroactive effect to 1 January 1993. 
 
FOR COMMUNICATION AND PUBLICATION 
 
 Done at Panama City on the 18th day of January  on thousand nine hundred and ninety three.  G/SCM/Q3/PAN/13 
 Page 113 
 
 
LEGISLATIVE ASSEMBLY 
 
LAW No. 121 
of 23 April 1993 
 
Amending Article 3 of Law No. 4 of 19 January 1993 
 
THE LEGISLATIVE ASSEMBLY 
 
HEREBY DECREES 
 
 Article 1.  Article 3 of Law No. 4 of 19 Janu ary 1993 shall read as follows: 
 
 Article 3.   This Law shall remain in force as long as the buyer countries apply import tariffs 
to meat from the Republic of Panama. 
  Article 2.  This Law amends Article 3 of Law No. 4 of 19 January 1993 and shall enter into 
force upon promulgation. 
 
 Done at Panama City, on the 22
nd day of April one thousand nine hundred and ninety three. 
                                                      
1 Published in Official Journal No. 22.271 of 26 April 1993. G/SCM/Q3/PAN/13 
Page 114  
 
MINISTRY OF AGRICULTURAL DEVELOPMENT 
 
EXECUTIVE DECREE No. 80
1 
of 29 July 1994 
 
Adopting certain measures for the application of Law No. 108 of 30 December 1974 
 
THE PRESIDENT OF THE REPUBLIC 
in application of his legal powers,  
 
 Whereas in accordance with Law No. 108 of 30 December 1974 exports of pure-bred live bovine cattle, swine and horses are to be promoted through the issuing of the appropriate Tax Credit 
Certificates (CAT), under the terms of that Law and its Regulations; 
 
 Whereas it is necessary to estab lish criteria for defining the term "pure-bred" referred to in the 
aforementioned Law and Executive Decree No. 46 of 5 May 1975;  
 Whereas the competent bodies have been consulted with a view to obtaining authoritative 
opinions in this respect; 
 
HEREBY DECREES: 
 
 Article 1.  For the purposes of applying Law No. 108 of 30 December 1974 and Decree No. 
46 of 5 May 1975, "pure-bred live bovine cattle, sw ine and horses" shall be taken to mean animals 
certified genetically pure or genetically improved by a legally-constituted national or provincial 
stockbreeding association. 
 
 Article 2.  The certification referred to in the preced ing Article shall comprise all the pedigree 
documentation, where genetically pure animals are concerned, or a ranch certificate for animals that 
are genetically improved. 
 
 Article 3.  In each case, the corresponding stockbreeding association shall certify the herd 
book entry for each animal or the im proved genetics of the ranch's cattle. 
 
 Article 4.  In carrying out its sanitary inspections at the time of shipment, the Ministry of 
Agricultural Development, through the National Animal  Health Directorate, shall also verify that the 
certification corresponds to the animal being exported. 
 
 Article 5.  To avail himself of the benefits of Law No. 108 of 30 December 1974, an exporter 
of pure-bred live bovine cattle, swin e or horses shall attach to the appl ication referred to in Article 14 
of Executive Decree No. 46 of 5 May 1975 the national or provincial stockbreeding association 
certificates mentioned in Article 1 corresponding to  the animals exported, stamped by the National 
Animal Health Directorate of the Mini stry of Agricultural Development. 
 
 Article 6.  This Decree shall enter into force upon promulgation. 
 
FOR REGISTRATION, NOTIFICATION AND IMPLEMENTATION 
 
 Done at Panama City on the 29
th day of July one thousand nine hundred and ninety four. 
                                                      
1 Published in Official Journal 22.606 of 23 August 1994.  G/SCM/Q3/PAN/13 
 Page 115 
 
 
 
MINISTRY OF TRADE AND INDUSTRY 
 
EXECUTIVE DECREE No. 451 
of 1 August 1996 
 
Amending Article 22 of Executive Decree No. 5 of 8 February 1991 
regulating Law No. 108 of 30 December 1974, which was brought 
back into force by Law No. 2 of 16 January 1991 and 
amended by Law No. 28 of 20 June 1995 
 
THE PRESIDENT OF THE REPUBLIC 
in application of his constitutional and legal powers  
 
 Whereas Law No. 108 of 30 December 1974, which was brought back into force by Law 
No. 2 of 16 January 1991 and amended by Law No. 28 of 20 June 1995, introduced Tax Credit Certificates as a means of promoting non-traditional  exports of goods wholly or partly produced or 
processed in Panama; 
 
 Whereas Law No. 28 of 20 June 1995 stipulates that only exports that qualify as non-
traditional and are effected on or before 31 December 2002 may receive a Tax Credit Certificate;   Whereas to facilitate the adoption of the vari ous Tax Credit Certificate (CAT) decisions and, 
ultimately, to speed up the issuing of the Tax Cred it Certificates themselves, it is necessary to amend 
Article 22 of Executive Decree No. 5 of 8 Febr uary 1991 regulating Law No. 108 of 30 December 
1974, which was brought back into force by Law No. 2 of 16 January 1991 and amended by  
Law No. 28 of 20 June 1995; 
 
 Whereas it is Government policy to stream line and simplify admini strative procedures; 
 
HEREBY DECREES: 
 
 Article 1.  Article 22 of Executive Decree No. 5 of 8 February 1991 is amended as follows: 
 
 Article 22.   The national value added (VAN) approved by the Technical Commission on 
Export Incentives, taking the 1993 tax year as the current base, may be used for base year exports and for exports effected up to 31 December 2002. 
 
 The national value added for a product may be revised ex officio or at the request of an 
interested party. 
 
 Article 2.  This Decree shall enter into force upon promulgation. 
 
FOR COMMUNICATION AND PUBLICATION 
  
                                                     
 
1 Published in Official Journal No. 23.097 of 8 August 1996. G/SCM/Q3/PAN/13 
Page 116  
 
MINISTRY OF FINANCE AND THE TREASURY 
 
EXECUTIVE DECREE No. 101
1 
of 1 September 1997 
 
Amending an article of Decree No. 5 of 8 February 1991 
 
THE PRESIDENT OF THE REPUBLIC 
in application of his legal powers 
 
 Whereas Decree Law No. 5 of 2 July 1997, wh ich amends certain articles of the Commercial 
Code with a view to modernizing some of its institutions, amends Law No. 1 of 1984 on trusts and 
introduces other provisions, rep eals Article 2(r) of Law No. 2 of 16 January 1991 relating to Tax 
Credit certificates, which reads: 
 
 "Article 2.  For the purposes of this Law, non-traditional exports shall mean goods wholly or partly produced or processed in Panama, with the following exceptions: 
 
 … 
 
(r) Sales made abroad from the Colón Free Zone   …" 
 
 Whereas, as a consequence, it is necessary to take the measures required to ensure that the 
incentive thereby made available can be controlled and tax evasion in this area of importance for the 
national economy prevented; 
 
 Whereas the best means of achieving this object ive is to amend and amplify Decree No. 5 of 
8 February 1991 regulating Law No. 108 of 30 Decembe r 1974, which was brought back into force by 
Law No. 2 of 16 January 1991 and amended by Law No. 28 of 20 June 1995; 
 
HEREBY DECREES: 
  Article 1.  Article 9 of ARTICLE 1 of Decree No. 5 of 8 February 1991 is amended as 
follows:  
 Article 9.   Natural and legal persons who comply w ith the requirements laid down in Law 
No. 108 of 30 December 1974 and in this Regula tion may apply for a Tax Credit Certificate (CAT) 
equivalent to 20 per cent and 15 per cent respectiv ely of the national value added (VAN) of the goods 
exported. 
 
 The exporter shall have a maximum period of six (6) months after exportation to apply for 
this incentive. 
 
 Applications for a Tax Credit Certificate (CAT) shall be accompanied by a certificate-
declaration provided by a chartered accountant co nfirming that exportation has taken place and 
including the amounts of goods exported, a description of the goods and a statement to the effect that the enterprise is not claiming total exemption from  income tax.  The Directorate-General of Revenue 
shall issue instructions concerning the contents of  the certificate-declara tion.  This certificate-
declaration shall replace inspection of the goods to be exported. 
 
                                                     
 
1 Published in Official Journal 23.372 of 8 September 1997.  G/SCM/Q3/PAN/13 
 Page 117 
 
 
 If the goods are exported abroad via the Colón Free Zone, then, in addition to the 
requirements of the preceding para graph, the chartered accountant shall certify that the products 
exported with entitlement to CAT have been produc ed or processed outside the Colón Free Zone or 
any other tax-free area.  He must also identify any intermediary involved in the export operation 
(handler, freight consolidator, representative, etc.) and declare that he does not benefit from the 
incentive of total exemption from income tax under Law No. 62 of 19 September 1996 and that the 
products exported are wholly or partly proces sed products in accordance with the classification 
referred to in Article 2 of this Decree. 
 
 Paragraph 1.  In accordance with Article 23 of Law No. 28 of 20 June 1995, no enterprise that 
benefits from total exemption from the tax on inco me from profits generated by export activity may 
avail itself of the Tax Credit Certificate (CAT) incentive. 
 
 Paragraph 2.  In accordance with Article 27 of Law No. 28 of 20 June 1995, no enterprise that 
avails itself of the Tax Credit Certificate incentive may benefit from the total exemption from income 
tax, for export activities specified in that Law.  
 This provision shall be waived for persons engaged in agricultural and agro-industrial 
activities involving the exportation of non-traditional products, up to the coming into effect of the Tax 
Credit Certificates. 
  Paragraph 3.  It is understood that in accordance with Article 23 of Law No. 28 of 20 June 1995, enterprises that are included in the Official National Industry Register or have a contract with 
the State based on Cabinet Decree 413 of 1970, or an industry development contract on 22 June 1995 
shall retain the tax benefits afforded by such registration stemming from Law No. 3 of 1986 or the 
said contract, as the case may be, for the residual pe riod of validity of the registration or contract in 
each particular case. 
 
 Article 2.  This Decree shall enter into force upo n publication in the Official Journal. 
 
 Done at Panama City on the 1
st day of September one thousand nine hundred and ninety 
seven. 
 
FOR PUBLICATION AND IMPLEMENTATION 
 
__________