The purpose of this bill is to have a legal instrument that regulates all matters related to call center services for commercial use (call center activity). In this sense, the bill would include all the tax, migratory and labor benefits for individuals or entities developing the call center activity. The bill also would establish certain new requirements with which taxpayers would have to comply to obtain the benefits granted by the new rules for call center activity.

Panama's Minister of Economy and Finance has proposed to the National Assembly Draft Bill No. 653 (July 16, 2018), which would establish new rules for call center activity. The bill also would repeal Article 70 of Law 32 of 2011 and Article 2 of Law 54 of 2001 (modified by Article 67 of Law 32 of 2011), which included the provisions for call center activity for commercial use and call center activity for export.

Draft bill establishing rules for call center activity¹

The bill would apply to individuals or legal entities with a concession for the provision of call center services for commercial use (hereinafter Concession), granted by the National Authority of Public Services (hereinafter ASEP).

Income tax exemption

The bill would exempt from income tax any income generated in a fiscal period and derived from the services covered by the Concession, provided the following requirements are met:

— The taxpayer has a minimum of five full-time employees.

— The taxpayer incurred at least 70% of the total expenses directly from those services

— The taxpayer complied with the filing of an annual report containing information about the activities carried out, expenses incurred to conduct the activities and audited financial statements, among other information; the report must be filed independently of other reports required by the ASEP.

Other tax provisions

Individuals and legal entities with a Concession would be exempt from other direct and indirect taxes, and contributions except for the following taxes: i) 5% dividend tax, regardless of the source; ii) 2% complementary tax on net profits when no dividend distribution is made; iii) 0.5% annual tax on the company's capital (Operation Notice tax, similar to a commercial license); and iv) a selective tax on consumption and other special taxes, such as: property transfer tax, real estate tax, and contributions related to employer — employee relationships, including social security contributions.

The bill would subject transactions carried out by companies with a Concession and its related parties domiciled in Panama, abroad or under a preferential regime in Panama, to transfer pricing rules. This provision would apply from fiscal year 2018.

All the provisions stated in Articles 4 and 5 of the bill (i.e., income tax exemption subject to new requirements) would apply to individuals and legal entities with a Concession, starting from January 1, 2019.

Migratory provisions

The bill would allow foreigners investing at least USD 250,000 in the call center activity to apply for a permanent resident permit as an investor in the call center activity. In addition, the bill would allow foreigners hired as executive or technical personnel to apply for a temporary resident permit.

Labor provisions

Under the bill, labor relationships between employers and employees developed as a result of call center activity would be subject to the provisions established in the Panamanian Labor Code in Law 1 of 1986 and in the special laws that are not contrary to this bill.

A follow-up Tax Alert will be issued once the National Assembly of Panama approves the final law.

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¹ Source: TRÁMITE LEGISLATIVO