On December 26, 2018, Panama published Law 69, establishing a method to calculate income subject to a tax exemption or preferential treatment with respect to the assignment or exploitation of intangible assets. This Law restores the validity of article 762-L of the Tax Code.
When income derived from the assignment or exploitation of intangible assets is subject to a tax exemption or preferential treatment, this exemption or preferential tax treatment shall apply only to qualified taxpayers and qualified intangible assets. A qualified taxpayer is a natural or legal person, who is entitled to a tax exemption or preferential treatment for the assignment or exploitation of an intangible asset. Qualified intangible assets include patents, utility models, and industrial models or drawings protected by a registry and software protected by copyright, subject to a process of registration and approval. Marks, image right and any other intangible assets used for marketing are excluded.
Qualified expenditures include expenses or costs incurred by a qualified taxpayer on R&D in Panama, provided they lead to the creation or improvement of a qualified intangible asset. A qualified service is the contracting of services with unrelated or related parties, provided that the services are provided in Panama and are linked to the creation or improvement of a qualified intangible asset. This does not include payments for interest, capital contribution, or real estate expenses.
Income subject to exemption or preferential tax treatment is calculated by dividing qualified expenses (increased by a specific percentage not to exceed 30%) by total expenses, and multiplying this result by the net income derived from the assignment or exploitation of a qualified intangible asset. Qualified taxpayers are required to maintain records, which determine the connection between income derived from the assignment or exploitation of a qualified intangible asset, qualified expenses, and total expenses corresponding to the intangible asset.
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