MULTINATIONAL CORPORATION HEADQUARTERS (SEM) REGIME
Updated according to Executive Decree No. 241 of September 16, 2020, and Resolution 023-20 of September 17, 2020

Background

Law No. 41 of 2007, amended by Law 45 of August 10^th, 2012 and Law 57 of 2018, establishes incentives for the creation in Panama of Multinational Corporations Headquarters (SEM, for its acronym in Spanish), whose main activities are the technical, financial and/or administrative assistance to companies with the same corporate group and the provision of services to companies of the same group.

Under this modality, it is allowed to establish multinational corporations in Panama with the purpose of having a headquarter that provides support to its affiliates in the region. They may operate as a foreign company registered in Panama or as a Panamanian company, owned by a multinational company. By applying under the activities listed below, the SEM company shall be able to enjoy a series of fiscal, migratory, and labor incentives.

The activities allowed under this law are the following:

• Management and/or administration for operations in a specific or global geographic area of a company of the corporate group. It refers to the services of strategic planning, business development, personnel management and/or training thereof, control of operations and/or logistics.
• The logistics and/or storage of components or parts, required for the manufacture or assembly of products the company manufactures.
• Technical assistance to companies of the corporate group or to customers who have purchased a product or service from the company and, therefore, it is obliged to provide them the support service.
• Technical, financial and/or administrative assistance, as well as other support services, to companies of the same corporate group, including, but not limited to, services of financial management, risk analysis, credit analysis, due diligence, compliance, documentation custody, and filing, data and/or document processing center and corporate treasury services, as well as loans between related companies of the corporate group. It does not include activities that require a license to operate issued by the State through the Superintendency of Banks, the Superintendency of Insurance and Reinsurance, the Superintendency of the Securities Market, or other regulatory entities.
• Corporate group accounting.
• The preparation of blueprints that are part of designs and/or constructions, or part of them, which constitute part of the normal course of business activity of the parent company or any of its subsidiaries.
• Electronic processing of any activity, including consolidations of the corporate group’s operations. This service includes network operations.
• Advice, coordination, and monitoring of marketing and advertising guidelines for goods or services produced by the corporate group.
• The support of operations and research and development of products and services of the corporate group.
• Any other similar service previously approved by the Cabinet Council by a justified resolution provided it is in compliance with the provisions of the Law.

Outsourcing:

It is important to take into account that the main activity or activities can be performed, in whole or in part, through resources provided by suppliers (outsourcing), as long as the outsourced activity be performed in Panama and the mechanisms to exercise monitoring and supervision of the activity in Panama be maintained.

Services related to manufacturing, EMMA License:

It is important to mention that the multinational companies that are operating in Panama and provide services with manufacturing to related companies or those that have a SEM License, and are willing to increase or expand activities to provide services related to manufacturing described in the EMMA Law or Law 159 of August 31, 2020, may adhere to this system. The Technical Secretariat may take into account all the documentation existing on file to ensure an expedited automation process.

Legal stability of investments:

Companies incorporated under the SEM regime as from 1 January 2019 shall automatically enjoy, as of the moment of their registration, the guarantees established in Article 10 of Law 54 of 1998 on Legal Stability of Investments. That is to say, from the granting of the License they shall enjoy the fiscal, migratory labor and legal benefits for 10 years.

Annual report:

Companies with a SEM License must submit once a year and within six months after the end of their fiscal period, an annual report containing an affidavit with information about the company and the new requirements of substance, which will be signed by the legal representative and a certified public accountant. The form can be downloaded from the website www.sem.gob.pa.

The Technical Secretariat of the Commission of Multinational Company Headquarters Licenses shall issue an administrative resolution stating whether or not the company complies with the substance requirements for the relevant fiscal period. The company may request reconsider and appeal the resolutions of the Technical Secretariat.

If the company complies, the Technical Secretariat submit the Resolution to the Directorate General of Revenues to apply the 5% income tax rate. If the company does not comply, the Technical Secretariat submit the Resolution to the G Directorate General of Revenues to apply the income tax rate at 25%.

I. Fiscal

Fiscal benefits and obligations of corporations which obtain a SEM License:

• Companies holding a SEM license must pay the income tax in the Republic of Panama on the net taxable income arising from the services rendered, at a rate of 5%. They shall settle and pay the income tax, through the annual tax income return, and may include within their deductible expenses, the expenses incurred in concept of labor remunerations of all their employees, which shall proceed even when the employee, recipient of the salary, is exempted from the income tax. The amount that the company has actually paid in that concept or analogous abroad may also apply as income tax credit. When applying this credit, the company shall pay at least 2% of the net taxable income generated in the Republic of Panama, as income tax.
• As of the fiscal year 2019, all legal or natural persons that carry out transactions with related parties that are SEM companies, shall be subject to the Transfer Pricing System in accordance with the provisions of article 762-D of the Tax Code and comply with the filing of Form 930.
• Transfer tax on Personal Property and Services (ITBMS, for its acronym in Spanish). Due to the fact that these are exporting services, the same shall not cause ITBMS, provided that they be rendered to entities of the Corporate Group abroad, which do not generate taxable income within the Republic of Panama.
• Exemption of dividend payment, supplementary tax, and tax on branches, regardless that they be from local, foreign or exempted source.
• They are not subject to the use of tax equipment, nevertheless, they must document their activities through invoices or documents equivalent which allow the Directorate General of Revenues to have proper control, registration, accounting, and supervision of the transactions performed.
• They shall not have the obligation to obtain a Notice of Operation for the rendering of the services established in the SEM Law.

Substance requirements:

SEM companies must comply with Substance Requirements. This means that in order to enjoy the benefit of the reduced rate of 5% of income tax granted by Law 41 of 2007, for the activities contemplated in Article 4 of the Law, it is necessary to prove that the main Activities performed to generate the income benefited by the tax incentive have been carried out in Panama, that the SEM company has an adequate number of qualified full-time employees and an adequate amount of operating expenses, which are directly related to the Main Activity.

In case of non-compliance with the Substance Requirements, the company must pay income tax at 25% with the corresponding fines, surcharges, and interest.

To prove compliance with the Substance Requirements, the SEM company must keep records, books, and documentation showing the adequate level of employees and operating expenses, according to the main activity for up to five years.

II. Immigration

Incentives for Foreign Executives, holders of SEM visas:

• Salaries and other labor remunerations, including salary in kind received by persons holding a SEM Permanent Personnel Visa, are exempt from income tax and social security contributions, educational insurance provided that the salaries and labor remunerations are paid, assumed, and recognized as personnel expenses in the accounting of the company with SEM License.
• Exemption of Importing Tariff for household goods when the employee relocates for the first time to the Republic of Panama. The National Customs Authority has established the amount of twenty-five thousand dollars (US$25,000.00), legal currency of the United States of America as maximum for the application of said exemption. The interested party may bring said household goods within the three (3) months prior to his arrival or up to six (6) months after his entry to the country.

The SEM Law creates new visas specifically for foreign employees hired by the SEM company. The kinds of visas are:

Visas for SEM Permanent Personnel:

These shall be granted to the employees of an administrative-executive level. The same shall have the same validity up to 5 years, renewable for the same term, except for those cases in which the labor contract establishes a shorter term. The holders of this visa shall not require work permits and may renew this visa for an indefinite term.

Visas for Dependents of SEM Permanent Personnel:

For their spouses or common-law couples living for a minimum of five (5) years in conditions of stability and singularity, underage children and children under twenty-five (25) years which are students, as well as the parents of said personnel, who shall remain in Panama under the responsibility of SEM´s personnel. They shall have the same term as that of the SEM´s personnel. The salaries and other labor remunerations, including the salary in kind, shall be considered exempt from income tax, social security, and education insurance contributions, insofar as said salaries and labor remunerations are paid, assumed, and recognized as personnel expense of in the accounting of the SEM company.

Definite Residence for SEM Permanent Personnel:

The foreign personnel that had worked for any SEM company, after the 5-year term of their SEM Permanent Personnel visa had elapsed, may opt for a definite residence. The Permanent Personnel that obtains the definitive residence shall be subject to the payment of the income tax and the social security and education insurance contributions.

Visas for SEM Temporary Personnel:

These visas shall be granted for a period not greater than 3 months for employees that have to come to Panama for any activity related to SEM. Like the visa for SEM Permanent Personnel, it does not need a labor permit.

III. Labor

Companies covered by a SEM License may hire trusted foreign workers to fill senior and mid-level management positions. This is understood as those employees who perform management, inspection, or representation services for the company. Such foreign personnel must comply with the provisions of Article 17 of the Labor Code, with respect to companies whose transactions are developed, consummated, or be effective abroad.

Any foreigner with the status of a dependent of a foreign worker under a visa or residence permit from the Multinational Corporation Headquarter may work in the Republic of Panama, provided that he or she meets the necessary conditions to process a work permit in one of the existing or recognized categories by Panama. These permits must be processed at the Immigration Office of the Multinational Corporations Headquarters or the One-Stop Investment Counter.

Dependents who obtain a work permit and work in Panama shall be subject to the payment of income tax, and social security and educational insurance contributions for wages and other remuneration received.

SEM companies must seek technological exchange, and for such purposes, may hire foreign employees of administrative levels, as well as support or related services personnel with proven academic capacity.

Requirements:

The legal requirements for the obtainment of the SEM License are the following:

1. Assets of the multinational corporation.
2. Operation places or headquarters of the multinational corporation.
3. Activities or Operations carried out by the multinational corporation.
4. Listing of shares on the local or international stock exchange markets.
5. A minimum number of full-time employees and annual operating expenses of the multinational company in the Republic of Panama that must be appropriate to the nature of the business carried out by the company.
6. Any other element or information the Commission may deem necessary to assess as an additional requirement.

The application form must be completed and the following documents must be attached:

• Charter of Incorporation of the applicant company establishing within its objects the interest of establishing a Multinational Corporation Headquarter. If it is an already existing company in Panama, the same must amend its Charter of Incorporation and comply with the requirement described above.
• Power of Attorney granted to a qualified attorney.
• Affidavit subscribed by the representative of the applicant company manifesting its desire of establishing in Panama a Multinational Corporation Headquarter, the specific activities that it shall perform as SEM, and that it complies with all the requirements to opt for a license pursuant to the law. The signature of the legal representative must be duly authenticated before Notary Public.
• Consolidated Financial Statements of the Corporate Group referred to in the Affidavit, duly certified by Certified Public Accountants. Reference may be made to the location of these financial statements on the stock exchange on which the Corporate Group is registered. In the event that the Consolidated Financial Statements are in a language different from Spanish and/or currency other than the dollar, notes or attachments of the financial statements of the Corporate Group shall be submitted in the Spanish language and with the proper conversion into dollars.
• Bank Reference Letter.
• Certification issued by the Treasurer or Secretary of the applicant company, indicating the shareholding interest of the companies of the Corporate Group.
• In the event that it is willing to carry out an activity regulated by the State, through the Superintendency of Banks of Panama, Insurance and Reinsurance, Securities or other regulatory entities, it shall file, together with the other requirements, a letter from the regulatory entity stating its opinion regarding the services to be rendered by the applicant company as SEM.
• Organization chart of the applicant company evidencing the relation with the Corporate Group, its affiliates, subsidiaries, or associated companies, to which it shall render services.
• Corporate Social Responsibility plan.
• PowerPoint presentation with general information about the Corporate Group (maximum 8 slides).

Substantive Conditions:

The Corporate Group assets must be equal or greater than two hundred million United States dollars (US$200,000,000.00) or that the applicant company must render its services to at least seven (7) affiliates, subsidiaries or associated companies.

In order to evidence the foregoing, the following documents shall be included in the filing as applicable:

i. Consolidated Financial Statements of the Corporate Group to which the applicant company belong, duly audited or certified by an independent Certified Public Accountant and apostilled; or

ii. Affidavit signed by the legal representative of the applicant company of the Corporate Group, identifying the affiliates, subsidiaries, or associated companies to which the services shall be rendered. The legal representative signature shall be duly authenticated before a Notary Public of Panama or apostilled.

In the event of establishing a parent company in Panama, an initial minimum capital, of not less than two million United States dollars (US$2,000,000) is required. For its proper verification, the following must be attached:

i. Cash Flow Report

ii. Certification issued by the treasurer or secretary of the applicant company, the signature duly authenticated by a notary, indicating the shareholding interest of the companies of the Corporate Group in order to prove the ownership of the multinational company.

In case the applicant company is operating in Panama, the following must be submitted:

i. License number or operation notice of the corporation under which the same was operating, as applicable.

ii. Financial statements of the local company.

iii. Copy of the last Income Tax Return.

Note: Furthermore, all the documentation submitted together with the application form shall fulfill the following requirements:

• All public documents must be duly legalized or apostilled.
• The original document which is written in a language other than Spanish must be translated by a certified public translator.
• The corresponding documentation must be based in United States dollars.
• It shall be understood by general particulars of the applicant and its attorney-in-fact:
• Full name of the company
• Address
• Identification of the registration data of the corporation at the Public Registry of Panama
• Particulars of the Attorney-in-Fact such as gender, marital status, personal identity certificate, domicile, telephone, facsimile, post office box, e-mail.

As of the entry into force of the SEM Law, our law firm has acquired extensive experience, helping international clients in the obtainment of the SEM Licenses, therefore we are at your disposal for any clarification that you deem appropriate. Contact us at igranet@icazalaw.com for more information.

By Mariela I. de la Guardia Oteiza

More than ten years ago, the Republic of Panama enacted and developed the special system for the establishment of Multinational Companies headquarters (SEM, for its acronym in Spanish), through Law 41 of 2007 (SEM Law), which grants a license which allows carrying out activities of management, accounting, logistics, finance, operations support, among other activities, for the benefit of subsidiaries and/or other companies of the multinational group. Through this law, Multinational Companies and their foreign employees can receive immigration, labor, and tax benefits.

Currently, there are 160 multinational companies established in Panama with a SEM license, which have generated more than 7,000 jobs and almost US$1.2 billion in investment.

To become a more competitive and appealing country for direct foreign investment, which is necessary for the economic and social development of the country, and given the success of the SEM system as well as the need for multinational companies to carry out manufacturing activities, Law 159 of August 31, 2020, was enacted. Said law creates the Special System for the Establishment and Operation of Multinational Companies for the Provision of Services Related to Manufacturing, best known as EMMA Law or EMMA license.

Based on the benefits of the SEM Law, the EMMA Law allows multinationals to render the following services to their business group:

1. The manufacture of products, machinery, and equipment.
2. Assembly of products, machinery, and equipment.
3. Maintenance and repair of products, machinery, and equipment.
4. Refurbishment of products, machinery, and equipment.
5. Conditioning of products.
6. Product development, research, or innovation of existing products or processes.
7. Analysis, laboratory, testing, or other manufacturing related.
8. Logistics such as storage, deployment, and distribution center of components or parts.
9. Any other similar service.

This law even allows multinational companies established under the SEM license to apply for the EMMA license without filing a new application. The documents and information would be reviewed to expedite the procedure.

The law provides that the Panamanian labor force must be trained, so technical education centers will be created in

order to have qualified personnel to fill the jobs which will be required by the multinational companies to be established under the EMMA system.

Companies with an EMMA license will be subject to a special tax system, under which (i) they will only have to pay the net taxable income for the services rendered at a rate of 5%; (ii) no Transfer of Movable Personal Property and the Rendering of Services Tax (ITBMS or VAT in other countries) will be caused as long as the services are rendered to persons who do not generate taxable income in Panama; (iii) will be exempted from dividend tax, supplementary tax and tax on branches; (iv) will not be subject to the use of tax equipment and will not be required to obtain a Notice of Operations (equivalent to a business license in other countries).

They are also exempted from any tax, encumbrance, fee, or import duty on any type or class of merchandise, goods, equipment, and other goods for the performance of the service.

The EMMA license grants immigration benefits, such as temporary and permanent visas, to foreign personnel working for the multinational company and its dependents. After five (5) years have elapsed since the approval of the first permanent personnel visa, foreign employees may opt for permanent residence in Panama.

Among the labor benefits, the company with an EMMA license will be able to hire employees to fill senior and middle management positions. It also allows dependents of its foreign employees with temporary or permanent visas to work in Panama.

Furthermore, the EMMA Law grants legal stability of the investments to companies established under this regime, guaranteeing that for 10 years, the company shall enjoy the same tax and legal system as it did at the time of obtaining the EMMA license. That is, in the event of new legal provisions that may vary the acquired rights and tax obligations at the time of obtaining your license, these will not be affected.

If we consider the benefits granted by the EMMA Law, our country provides other intangible benefits as added value which makes it a center to attract investments, such as our privileged geographical position, the connectivity throughout the continent by means of the Hub of the Americas, logistic facilities, the proximity between both oceans and the Panama Canal. We cannot fail to mention the advantages in terms of telecommunications since seven fiber optic cables converge in Panama, and it has a first-class telematic infrastructure. Also, we have a convenient time zone for the most important shopping centers in the continent. Moreover, with the use of the dollar, economic stability is created with much lower inflation rates compared to the currencies of other Latin American countries. In addition to the aforementioned, Panama is a politically stable country, which has enjoyed more than 30 years of alternation in government.

We are confident that the success of the SEM Law will be replicated in the new system of the EMMA Law in order to develop services related to manufacturing in our country.

SPECIAL SYSTEM FOR THE ESTABLISHMENT AND OPERATION OF MULTINATIONAL COMPANIES FOR THE PROVISION OF SERVICES RELATED TO MANUFACTURING

(EMMA, FOR ITS ACRONYM IN SPANISH)

Law 159 of August 31st, 2020

The government of the Republic of Panama has enacted Law 159 of August 31^st, 2020 whereby the Special System for the Establishment and Operation of Multinational Companies for the Provision of Services Related to Manufacturing is created (hereinafter “EMMA” or “EMMA License”). This law was published in the Official Gazette No. 29103-A dated September 1^st, 2020, and the same was created with the purpose of attracting and promoting investments in production processes, generating jobs and the transfer of technology, as well as to position the Republic of Panama in a competitive market within the global economy.

What is EMMA?

It is a license issued by the Ministry of Commerce and Industries for Multinational Companies, whether foreign or national, that from Panama carry out operations aimed at offering the services defined in the law and that we mention below, to their parent company or their subsidiaries or their affiliates or to companies associated to such entities of the same group.

This law shall only be applicable in the Panamanian territory to operations of Multinational Companies for the provision of services related to manufacturing. The EMMA License shall be granted indefinitely.

Services that can be provided by Multinational Companies under EMMA License:

1. Services related to the manufacture of products, machinery, and equipment, rendered to companies of the business group.
2. Services related to the assembly of products, machinery, and equipment, rendered to companies of the business group.
3. Services related to the maintenance and repair of products, machinery, and equipment rendered to companies of the business group.
4. Services related to the remanufacture of products, machinery and equipment rendered to companies of the business group.
5. Services related to the refurbishment of products rendered to companies of the business group.
6. Services related to product development, research or innovation of existing products or processes rendered to the business group.
7. Services related to analysis, laboratory, testing, or other services associated with manufacturing, rendered to companies of the business group.
8. Services related to logistics such as storage, deployment and distribution center of components or parts, required for the rendering of services associated with manufacturing.
9. Any other similar service previously approved by the Cabinet Council by means of a grounded resolution, provided that it complies with the principles set forth in this law.

Requirements that companies must comply with in order to obtain an EMMA license:

1. The assets of the multinational company.
2. The places or the affiliated companies, parent company or operating subsidiaries of the multinational companies.
3. The commercial or industrial activities or operations carried out by the company.
4. The listing of shares on the stock exchange or internationally.
5. The minimum number of full-time employees and the annual operating expenses of the multinational company in the Republic of Panama. In both cases they must be appropriate to the nature of the business carried out by the companies.
6. Any other element or information that the Commission deems appropriate to establish and assess as a relevant and necessary requirement, to promote an adequate use of the system.

Obligations of companies with an EMMA license:

1. To submit to the Technical Secretariat of the Multinational Companies Licensing Commission an annual report containing the statistics concerning their operations within the national territory.
2. The obligation, if any, to immediately inform to the Technical Secretariat of the Multinational Companies Licensing Commission of any change in the status of their operations in the country and of its legal personality.
3. To render services related to manufacturing only to the Business Group to which it belongs, in accordance with the activities allowed by the law.
4. To operate in the Republic of Panama as a foreign company registered in Panama or as a Panamanian company owned by the multinational company, its subsidiaries, or its affiliates.

It is important to mention that a company that directly renders services to clients or to companies which are different or unrelated to its Business Group shall not be considered as a company with an EMMA license.

Additional activities of EMMA companies

If a company with an EMMA license wishes to carry out additional activities in the Republic of Panama under the Multinational Companies System (Law 41 of 2007), it may request an authorization from the Technical Secretariat. The Technical Secretariat must take into account all the documentation and information already in the files of the multinational companies for the rendering of services related to manufacturing, to ensure an expedited authorization process.

Since these are different systems, separate accounting must be kept, in addition to the material requirements applicable to them.

BENEFITS:

When applying under one of the above-mentioned services, the company with an EMMA license shall be able to enjoy a series of tax, immigration, and labor incentives.

I.            Tax:

Companies which obtain an EMMA license shall automatically enjoy the guarantees established in article 10 of Law 54 of 1998 on the Legal Stability of Investments. In other words, the duties and taxes established at the time of the issuance of their license are maintained for 10 years.

• Companies holding an EMMA License must pay income tax in the Republic of Panama on net taxable income derived from services rendered at a rate of 5%. They must liquidate and pay the income tax by means of the annual income tax return, and they may include within their deductible expenses the expenses incurred for labor remuneration of all their employees, which shall proceed even if the employee receiving the salary is exempted from income tax.

• They may also apply as an income tax credit, the amount actually paid for this concept or similar abroad, with respect to the taxable income generated in the Republic of Panama derived from the rendering of services to non-residents, as well as the amounts withheld by taxpayers in the Republic of Panama. When applying this credit, the company must pay, as a minimum 2% of the net taxable income generated in the Republic of Panama.

• Legal or natural persons which carry out transactions with related parties that are EMMA companies shall be subject to the Transfer Pricing system in accordance with the provisions of the Tax Code.

• Since these are export services, they shall not cause Transfer of Movable Personal Property and the Rendering of Services Tax (ITBMS), as long as they are rendered to persons who do not generate taxable income within the Republic of Panama.

• Exemption from the payment of dividends, supplementary tax, and tax on branches, regardless of whether they are local, foreign, or exempted.

• They are not subject to the use of fiscal equipment; however, they are under the obligation to document their activities through invoices or equivalent documents which enable the due control, recording, accounting and auditing of the performed transactions by the General Directorate of Revenues.

• They shall not be required to obtain a Notice of Operation for the provision of the services set forth in the EMMA Law.

• They are exempted from all taxes, encumbrances, duties, or import fees on all types or classes of merchandise, products, equipment and other goods in general including, but not limited to, machinery, materials, packaging, raw materials, consumables, supplies and spare parts which are used or required for the performance of manufacturing-related services.

These may not be sold, leased, pledged, or auctioned off without payment of the corresponding taxes, fees, and duties.

• The products manufactured, processed, assembled or remanufactured by the company established in a special economic area in the national territory, free zone, duty-free zone or an area of control and customs surveillance may be entered into the national tax territory by a company of the Business Group paying the respective tariffs or customs taxes, only on the value of the raw materials, and foreign components incorporated in the product, based on the tariff corresponding to each raw material or component incorporated in the final product.

Tax incentives for Personnel holding a Permanent or Temporary Visa under EMMA:

• Exemption from income tax, social security and education insurance contributions, salaries, and other labor remunerations, to the extent that the salaries and remunerations are paid, assumed, and acknowledged as personnel expenses in the company’s accounting.

• Exemption from the payment of taxes that could be applied to household goods due to imports when the employee moves to the Republic of Panama for the first time. In addition, you may apply to the National Customs Authority for a total duty-free allowance once every two years for the import of a motor vehicle for personal or family use.

II.           Immigration:

The EMMA Law creates new visas specifically for foreign employees who are hired. The types of visas are as follows:

• Multinational Companies Temporary Personnel Visa for the Rendering of Services Related to Manufacturing:

These visas shall be granted to the foreigner who renders services, at an operational or training level, to the Multinational Company, for a two-year renewable period.

It is also granted to dependents and in no case may it exceed the validity granted to the Multinational Companies Temporary Operating Personnel Visa.

Once the Temporary Personnel Visa is granted, a work permit shall be issued in a single formality which grants the right to work in the Republic of Panama, whilst working in the Multinational Company with an EMMA License.

• Multinational Companies Permanent Personnel Visa:

These visas shall be granted to foreign personnel whilst working within the multinational company with an EMMA license. They shall be valid for up to 5 years, and may be extended for an equal period, except in those cases where the employment contract establishes a shorter period.

It is also granted to the dependents and in no case, it shall be longer than the validity granted to the Permanent Staff Visa that covers the application.

The holders of this visa shall not be required to carry out any additional formalities or to obtain any permit from any other state entity to work or live in the Republic of Panama.

• Permanent Residence for Multinational Companies Personnel:

Foreign personnel who have worked for any Multinational Company under the EMMA Law, may, after a period of 5 years had elapsed from the approval of the first EMMA Permanent Personnel Visa, opt for a Permanent Residence.

The foreigner who obtains Permanent Residence shall be subject to the payment of income tax and social security and educational insurance contributions, as applicable.

III.          Labor:

Labor aspects for the personnel hired with an EMMA license:

• The company covered by an EMMA License shall be able to hire foreign employees in a position of trust to hold managerial jobs at high and medium levels, as well as temporary personnel, required for its operation.

• Any foreign person who has the status of a dependent of a foreign employee under a Visa or a Residence Permit may work in the Republic of Panama, provided that he or she meets the necessary conditions to apply for a work permit.

• Dependents who obtain a work permit and work in the Republic of Panama shall be subject to income tax and social security and educational insurance contributions for the salaries and other remunerations received.

• Whoever holds a Permanent Personnel Visa or a Temporary Personnel Visa under EMMA may not engage in work activities other than those performed in the multinational company.

• Any employee who has a permanent or temporary EMMA company personnel visa shall be subject to the rules of the Labor Code, except for those exceptions provided for in this law.

• Companies may sign labor contracts in any manner established by the Labor Code with foreign employees under the terms of this law.
• Companies covered by an EMMA License must ensure the exchange of knowledge and training of Panamanians who wish to apply for jobs in these multinational companies.

License Cancellation and Tax Effects:

The company which carries out in the national territory activities different from those authorized by law shall have its license cancelled and shall be responsible for the unpaid taxes, with the fines, surcharges, interests, and penalties according to the Fiscal Code.

Employees who enter Panama under the protection of the law without actually working in the multinational company shall be sanctioned with a fine of up to five thousand dollars (US$5,000.00).

The company that does not make the communications which are established as obligations of the law or that do not comply with the other provisions may be sanctioned with a fine of up to one hundred thousand balboas ($100,000.00).

Establishment and Legal Stability:

The companies shall automatically enjoy, as of the time of their registration, the guarantees in matters of legal stability of the investments. That is to say, from the granting of the License they shall enjoy for 10 years the fiscal, labor, immigration, and legal benefits.

Law 159 of August 31^st, 2020 shall enter into force on December 1^st, 2020

Mariela de la Guardia Oteiza

marielag@icazalaw.com

Adolfo González-Ruiz

adolfog@icazalaw.com