The Government of Panama recently enacted a fiscal tax reform under Law No.61 of December 26, 2002, implementing measures to reorganize its fiscal administration.

Most of the main features approved apply to local commercial activities, such as new taxes to certain services, selective comsuption tax, reforms to personal income tax, increased annual tax on bank licenses, etc. However, for Yearbook readers the key feature of the reform is Article 1st of Law 61, which contemplates an increase of the annual franchise tax paid by corporations and foundations of private interest and change of the payment date, effective immediately. The changes are summarised below. As the reader will appreciate, notwithstanding these changes, the annual franchise tax of corporations and foundations of private interest remain lower, when compared to most other jurisdictions. Furthermore, it is worth noting that no other measures were introduced, thus reaffirming Panama's position as an international centre par excellence, maintaining confidentiality principles and its cost-effectiveness edge.

Law No.61
December 26, 2002
Whereby measures of reordering and simplification
are applied to the Fiscal System
(Official Gazette No.24,708 of December 27, 2002)
Summary of Article 1st

The annual franchise tax will increase from US$150.00 to US$250.00.

a) Corporations and foundations of private interest registered at the Public Registry after January 1, 2003, will pay the annual tax of US$250.00.

b) Corporations and foundations of private interest at the Public Registry before January 1, 2003, which term date to pay the annual franchise tax is before March 31, 2003, will pay the annual franchise tax of US$150.00 at its legally due date for only this last time.

c) In cases where annual franchise taxes were due before January 1, 2003, and remain unpaid, payment of the tax and their respective surcharges will still be regulated by the legal disposition in force at the moment the tax and surcharge became due.

a) For companies and foundations of private interest registered at the Public Registry between January and June, inclusive, the due date of the annual franchise tax will be JUNE 30th.

b) For companies and foundations of private interest registered at the Public Registry between July to December, inclusive, the due date of the annual franchise tax will be DECEMBER 31st.

(The annual franchise tax was previously due within three months of the anniversary date of registration).