WORLD TRADE  
ORGANIZATION   
G/SCM/Q3/PAN/19 
12 October 2012 
 (12-5564) 
Committee on Subsidies and 
Countervailing Measures Original: Spanish 
 
 
 
SUBSIDIES 
 
Continuation of Extension under SCM Article 27.4 of the Transition Period for the 
Elimination of Export Subsidies Pursuant to the Procedures Contained in the 
General Council Decision in Document WT/L/691 
 
Replies to the Questions from COLOMBIA1 concerning the 
Updating Notification of PANAMA2 
 
 
 The following communication, dated 11 October 2012, is being circulated at the request of the delegation of Panama.  
_______________ 
  
Question 1 
 
 We thank Panama for its notification, in wh ich it describes the steps its Government has 
taken to dismantle the "Export Processing Zones"  programme.  It mentions that "[t]he changes 
introduced in Law No. 32 of 2011, which repeals Law No. 25 of 30 November 1992, are 
consistent with the provisions of the World Trade Organization (WTO)".  We understand that this new law is aimed at developing free zones.   Could Panama provide information on the key 
elements of the new law and specifically on ho w it is in line with the multilateral rules? 
 
Reply 
  Law 32 of 5 April 2011 promotes the developm ent of free zones and creates a secure and 
transparent environment in order to raise producer  and investor confidence and reduce unemployment 
levels, while at the same time meeting Panama's ob ligations in respect of the time-limits established 
for bringing into conformity programmes comprisi ng export subsidies that are inconsistent with 
multilateral trade rules. 
  The changes are as follows:  
(a) There is an increase in the categories of companies that can establish themselves in 
the free zones. 
(b) Starting on 1 January 2016, companies ope rating under Law 32 of 2011 will have to 
pay the following taxes: 
                                                      
1 G/SCM/Q3/PAN/18. 
2 G/SCM/N/243/PAN. G/SCM/Q3/PAN/19 
Page 2  
 
   Income tax and the Tax on the Transfer of Movable Tangible Property and 
the Provision of Services for local leasing and subleasing operations. 
 A dividend tax of 5 per cent, regardless of the original source, plus a 
supplementary tax of 2 per cent if there is no distribution of profits. 
 
 An annual tax of 1 per cent of the company's capital, with a minimum of 
100 Balboas (B 100) and a maximum of 50,000 Balboas (B 50,000). 
 
 A Selective Consumption Tax on certain goods and services. 
 
 A Special Interest Compensation Fund, except in the case of loans guaranteed 
by bank deposits. 
(c) Goods that are manufactured in the free z ones with foreign inputs and imported into 
the national fiscal territory are subject to customs duties and taxes only on the value 
of the foreign raw materials and components incorporated in the product, taking as a 
basis the tariff on the final product. 
Question 2 
 
 Panama mentions that no estimate of the amo unt of the subsidy is available.  Based on 
the information in Table No. 1 of the notification, would it be possible to produce an estimate of 
the value of the subsidies and their trade eff ects, taking into account the imports of the 
enterprises that use the programme and the average duties and taxes foregone? 
 
Reply 
 
 No estimate of the subsidy under Law 25 of 30 November 1992 currently exists, either in 
terms of the income tax foregone or in terms of import tax exemption for raw materials and 
machinery.  
Question 3 
 
 In relation to the programme of exemptions  granted to enterprises included in the 
Official Industry Register, Panama's notificati on mentions that "[e]nterprises which benefited 
under the programme may only continue to be nefit upon request.  The request must be 
submitted prior to the expiry of the respectiv e registration and the extension may only be 
granted up to, but not beyond, 31 December 2015".  How many enterprises have requested such 
an extension? 
  It goes on to say that Panama enacted Law No. 76 of 2009 on the promotion and development of industry, regulated by the Executi ve Decree of 15 January 2010, with a view to 
encouraging the growth and sustainable development of Panamanian industry through the 
granting of benefits aimed at promoting investment and improving the competitiveness of 
domestic production.   It would be helpful if Panama could provide information on Law No. 76 of 2009, regulated by the Executive Decree of 15 January 2010 - particularly on how it is different from 
Law No. 3 of 1986, what the benefits aimed at promoting investment and the competitiveness of 
domestic industry consist of, and how such benefi ts are consistent with the multilateral rules.   G/SCM/Q3/PAN/19 
 Page 3 
 
 
  What benefits are derived from a CFI, ho w are they are granted and how are they 
administered?  Can an enterprise be eligible for various CFIs?  
 
Reply 
 
 A total of 160 enterprises requested an extens ion of their registration in the Official 
Industry Register (ROIN) up to December 2015.  
 Regarding the difference between Law No. 3 of 1986 (ROIN) and Law No. 76 
of 2009 (CFI), paragraph II.10 of Pa nama's notification of subsidies and 
countervailing measures for the period 201 1 speaks of the adoption of internal 
measures and explains each piece of legislation concerned.  The differences are 
essentially the following: 
- Law No. 3 focused primarily on granting tax benefits in the form of 
preferential import tax rates for inputs, i.e. machinery, equipment, raw materials, and containers and packaging, as well as exemption from income tax on gains and on net profits reinvest ed to expand production capacity or 
produce new articles. 
 
- Law No. 76 of 2009, on the other hand,  introduces measures to promote and 
develop industry, and focuses on promoting competitiveness through recognition of the investments made by  companies engaged in industrial 
manufacturing, agro-industry and processing of marine resources, as well as 
all of the integrated operations of industrial enterprises engaged in the 
procurement and processing of agricultural and forestry raw materials.  In other words, it recognizes investments in the above-mentioned activities, and 
which are directed towards:  research  and development, quality management 
and assurance systems and environmental management, investment or 
reinvestment of profits, training of human resources, and promotion of 
production-related employment.  
 Profits from this programme are channelled into promoting investment and 
competitiveness through Law No. 76 of 2009, vi a the so-called Industrial Promotion 
Certificate (CFI) which is based on the amount  of the investment made, consisting of 
35 per cent of that amount in the case of agro -industrial activities, and 25 per cent in 
the case of other industrial activities.  
 The procedure for obtaining a CFI is as follows: 
- The application form, which can be found on the website of the Ministry of 
Trade and Industry of Panama (MICI) , must be completed and submitted 
with the required documentation.
3 
- Once the requirements have been met, the application is registered and 
transmitted to the Department of Industrial Evaluation of the MICI 
Directorate-General of Industries. 
- A specialist from the Department of Industrial Evaluation examines the file 
and organizes a technical visit to the company to check the data submitted. 
                                                      
3 The CFI application form can be found at the following address:  
http://www.mici.gob.pa/detalle.php?cid =16&sid=46&clid=22&scid=44&id=2410 . G/SCM/Q3/PAN/19 
Page 4  
 
  - If the information supplied is approved, the specialist prepares a technical 
report which is then submitted to th e National Industrial Policy Council 
(CONAPI). 
- CONAPI is responsible for accepting or rejecting a CFI application.  It is 
made up of representatives of the Ministry of Trade and Industry, the 
Ministry of the Economy and Finance, the Ministry of Agricultural 
Development, the National Secretaria t for Science and Technology, the 
National Environmental Authority and th e Office of the Comptroller General 
of the Republic.  The private sector is  represented by the Industry Association 
of Panama (SIP), the Panamanian Association of Exporters (APEX), 
Agricultural Producers of Panama (UNPAP), and the National Business 
Council (CONEP), each entity having a regular member and an alternate. 
- Applications are accepted or rejected by means of a reasoned resolution. 
- If the CFI is approved, the file is transm itted, together with the resolution, to 
the Ministry of the Economy and Finance, which issues the CFI. 
- Once the CFI is issued, it is sent to th e Office of the Comptroller General for 
endorsement. 
 A company may benefit from several CFIs - the Law does not establish any limits in 
that respect. 
__________