|Income Tax - Legal Entities|
The first and most important tax to
take into account is the Income Tax.
It is the object of the tax on income produced in Panamanian territory, regardless of the nationality, domicile or residence of the beneficiary, the place of conclusion of the contracts, the place where it is paid or received and who is the payer of the same.
Foreign natural persons who remain more than one hundred and eighty-three (183) straight or alternating days in the fiscal year in the national territory, and receive or accrue income subject to tax, must determine the same in accordance with the rules established in the Code and pay it by applying the rate indicated in article 70 of said code.
This tax for legal entities from the year will be twenty five percent (25%). However, legal entities whose main activity is the generation and distribution of electric energy; Telecommunications services in general; insurance; reinsurance; financial regulations regulated by Law 42 of July 23, 2001; Cement manufacture; Operation and administration of games of chance; Mining in general; And people who engage in the banking business in Panama will pay the tax on the taxable income caused by the following rates:
From the fiscal period of January 1, 2010, 30%
From the fiscal period of January 1, 2012 27.5%
From the fiscal period of January 1, 2014 25%
Companies in which the State has a greater share
than forty percent (40%) of the shares will pay the
Income Tax at the rate of thirty percent (30%).
It is considered of Panamanian source, and therefore subject to income tax, all revenues generated by civil, commercial, industrial or similar activities and by the exercise of professions, trades and all kinds of services rendered, performed or exercised within the territory of The Republic, in addition to that generated by international transportation activities in the part corresponding to freight, tickets, cargo and other services whose origin or final destination is the Republic of Panama, regardless of the place of incorporation or domicile and any income or income that constitute civil or natural fruits that are obtained within the Republic, either for the use of goods or for the performance of services. Legal entities with taxable income in excess of one million five hundred thousand balboas (B / 1,500,000.00) per year, will pay as Income Tax, at the corresponding rate according to the legal entity in question, in accordance with article 133-A of Executive Decree 170 of 1993 and indicated in the previous paragraphs, Greater sum that results between:
The net taxable income resulting from deducting from the taxable income of the taxpayer the reductions granted through fomentation or production schemes and the carrying of losses legally authorized, that is to say calculated by the traditional method established by the Tax Code
Net taxable income resulting from applying to the total taxable income the fourth point sixty seven percent (4.67%).
Legal entities engaged in agricultural activities will pay by way of income tax the greater amount resulting from:
Net taxable income calculated by the traditional method, or
The net taxable income resulting from applying to the total taxable income, the following annual progressive rate:
2011 - 2%
2012 - 3%
2013 onwards - 3.25%
The total amount of taxable income for the calculation of the alternative method of income tax is understood to be the amount resulting from subtracting exempt and / or taxable income from the total taxpayer's income, and those from foreign sources. For the purposes of this calculation, no further deductions are allowed, except refunds and discounts.
Legal entities whose total taxable income does not exceed one million five hundred thousand balboas (B / 1, 500,000.00) per year, will not be subject to the application of the alternative calculation of income tax.
If by reason of the payment of the Income Tax the legal person and legal persons engaged in the agricultural activity incur losses or their effective income tax rate exceeds the established rates, the latter may request the General Directorate of Revenue not to engage in the application of the alternative calculation of income tax, up to a period of three (3) years.
In the traditional method, all those expenses can be deducted if necessary to produce the income or the conservation of the source; consequently, those expenses, activities or investments whose income is of foreign or exempt source will not be deductible, among others. The Law establishes exhaustively which expenses or expenses are and are not deductible to obtain the net income taxable in the traditional method of the income tax.
Remittances abroad will be taxed based on the tariffs of articles 699 (Legal Entity) and 700 (Natural Person) of the Tax Code and will be applied on 50% of the total remittances. In addition, will be considered exempt from income tax that are not of Panamanian source and are not considered as deductible by the taxpayer for the effects of this tax. The main exemptions from income tax range from international transport activities derived from freight, passenger and cargo services in transit through the territory Of the Republic of Panama, interests, agricultural research activities, indemnification of insurance in general, international leasing. The exemptions are divided according to the economic activity, the person and the amount for the natural persons.
Costs and expenses shall be attributed, as appropriate, as evidenced to the satisfaction of the General Directorate of Revenue, to taxable income, exempt income or foreign source income. However, the deductible costs and expenses may not exceed the proportion resulting from dividing the taxable income with respect to the total income including the exempt and foreign source.
The resulting quotient will multiply by the amount of total costs and expenses. Uncollectible accounts, donations to the State and non-profit educational or charitable institutions, the Notice of Operation Tax and the technical costs of operations directly related to the risk assumed by insurance companies and other expenses are excluded from the foregoing. Established by the Executive Branch through the Ministry of Economy and Finance.
The taxpayer will compute their income, costs and expenses in the fiscal year based on accounting records that use the accrual system based on International Financial Reporting Standards or IFRSs.
The special income tax regime applicable to investment companies registered with the Securities and Exchange Commission and the General Directorate of Revenue, whose shares or participation shares are listed and listed on stock exchanges or other organized markets. Capitals, in which case the income tax of the investment company on the holders of the shares of its shares or participation quotas, at the rates established in articles 699 and 700 of the Tax Code, as applicable, leaving the company Investment required to retain twenty percent (20%) of the amount distributed at the time of each distribution and which the taxpayer may consider as the final Income Tax payable.