19 October 2018 Panama's National Assembly approves bill to amend multinational headquarters regime Panama's National Assembly approved a bill that would amend the multinational headquarters (MHQ) regime. (For more information on the bill, see Tax Alert 2018-1636.) The Minister of Commerce and Industry proposed the bill on August 15, 2018. The bill then went through three separate debates in the National Assembly, as required by the Constitution. The approved bill maintains the proposed provision that would eliminate the income tax exemption under Law 41 of 2007 and establish an income tax rate of 5% on net taxable income derived from the rendering of services. The approved bill also maintains the provision that would grant automatic legal stability to MHQ companies (i.e., such companies would be guaranteed a tax rate for a certain period). During the first and second debates, however, the National Assembly introduced changes to the bill, which were approved in the third debate. The approved bill would include administrative support, data processing and inter-related company loans as activities that could be carried out by MHQ companies. Additionally, the approved bill would require MHQ companies to notify regulators if services are provided to regulated entities, such as banks and insurance companies. Additionally, for companies to obtain an MHQ license, they would have to maintain a minimum number of full-time employees and a minimum amount of annual operational expenses, both of which must be adequate with respect to the type of business carried out by the companies. The approved bill, however, does not provide a specific minimum number or amount. Also, transfer pricing rules would apply to MHQ companies beginning in tax year 2019. The provision that would have established an exemption from the Interests Compensation Special Fund (FECI) tax was removed from the bill.
Document ID: 2018-2091 | |||||||||||||||||
