http://www.ipat.gob.pa/legislacion/index_english.html

Law 8 (of the 14th of June, 1994)
"By which tourism activities are promoted in Panama"

The object of Law 8 is to establish a simple, efficient and rational process for developing and promoting tourism related activities in the Republic of Panama by providing special benefits and incentives to tourism related enterprises.

To qualify for the special incentives that law 8 offers, the business must be accepted by the IPAT (Panamanian Tourism Institute) and registered in the National Tourism Registry.

The law establishes several different types of tourism related enterprises as follows;

Hotel: An establishment totally dedicated to providing lodging and lodging related activities such as restaurant, maid service, as well as having a reception office, public telephone, etc.

Motel: A lodging establishment located in rural areas, or near beaches or highways with the objective of providing lodging to automotive travelers.

Apart-Hotel: A lodging establishment equipped for renting to the public, with daily maid service, and kitchen facilities inside the room or apartment.

Cabins: Groups of individual rooms, primarily for lodging in rural areas, beaches, etc. for ecotourism.

Time-Share: Where one or more co-owners of a property that is designed for public lodging for tourism, each are obligated under the same contract whereby they each acquire rights of use of the property, on behalf of distinct persons, during specific periods of the year.

Touristic Horizontal Property: Buildings where each unit is acquired by a separate owner, while each unit is integrally destined to provide lodging to the public tourists.

Camping Sites: Areas designed to exploit ecotourism, and which are equipped with hygienic services (bathrooms), potable water and first aid equipment.

Theme Parks: Parks dedicated to developing specific themes in defined areas with an easily identifiable image that may be anything from history to fantasy to future.

Family Hostile: A touristic facility operated by an individual or family whose home is directly connected to the rooms for rent, generally characterized as being small establishments that provide a personalized service, offering typical regional dining, and the architecture is normally that of the nature of the general area.

Albergue: A lodging installation located in a tourism related area, dedicated to travelers, where the visitor is self-served in relation to facilities of dining and lodging.

Convention Centers: Installations equipped for conferences, reunions, and technological or cultural or touristic events, with facilities for office personnel, simultaneous translations in various languages, or designed to accommodate various events at the same time.

The law 8, under article 6, also identifies various business "activities", such as promotion and tourism development, which effectively contribute to the increase of tourism to Panama and diversification of tourism offerings, and thus gives opportunities to other enterprises that also may benefit from the incentives of this law.

1. The construction, equipping, re-habilitation and operation of any of the various types of tourism related lodging facilities as defined above.

2. Construction, equipping, re-habilitation, infrastructure, and operation of convention centers, national artisan factories dedicated to tourism sales, recreation parks, zoo's, centers dedicated to tourism, ecotourism, and marinas.

3. Automotive, maritime, and air transportation services within Panama, dedicated primarily to tourism.

4. The construction, equipping and operation of restaurants, discotheques, and night clubs dedicated primarily to tourism activities.

5. The construction, re-habilitation, restoration, remodeling and expansion of property, for commercial or residential use, located within the historic monuments where this type of activity is permitted. The National Direction of Historic Patrimony of the National Institute of Culture is the organization in charge of authorizing and regulating anything concerning these projects, for the preservation of the historic value of these monuments.

6. The operation of travel agencies, as long as they are dedicated exclusively to this activity.

7. Any company within the national territory that is dedicated to motion picture films and international artistic or sporting events that are broadcasted internationally and portray images that may promote tourism to Panama.

8. The investment in the realization, restoration, construction, maintenance or illumination of historic monuments, municipal parks, national parks, or any other public site, under the direction of the IPAT (Panamanian Institute of Tourism) in coordination with the National Institute of Culture (INAC).

Incentives & Benefits

Article 8, of Law 8, establishes the benefits and incentives for all individuals or enterprises that qualify.

1. Lodging Services (as defined above): for the construction, equipping, rehabilitation, and development of lodging services, with minimum investment of US$300,000 in metropolitan areas, and US$50,000 minimum in the rest of the country, excluding the value of the property, with exception of lodging facilities defined as "Albergues" and "Family Hostiles", said minimum investment shall be recognized by the IPAT (Panamanian Tourism Institute) to qualify for the following incentives:

• a. Total Exoneration for a 20 year term, from importation taxes on introduction of materials, furniture, equipment, boats and automotive vehicles with minimum capacity for 8 passengers. Vehicles must be declared as indispensable for the normal development of the tourism activity by the IPAT. The materials exonerated must be used in the construction, and the equipment and furniture must be used for the equipping of the lodging establishment. The present incentive is honored only if said materials are not produced in Panama or are not produced in sufficient amounts to satisfy demand or are not produced with a similar price. Equally, all equipment introduced for the savings of energy or security necessity in the project are exonerated. For ecotourism activities, automotive vehicles with double traction (4x4) and for minimum of 5 passengers, are exonerated from import duties.
• b. Exoneration of Property Tax, for a 20 year term, starting from the date of registration at the National Tourism Registry. Said exoneration shall include all property of the company, so long as these properties are integrally used for the tourism activities.
• c. Exoneration of all taxes or liens on the capitalization of the company.
• d. Exoneration of dock taxes or any fees or taxes for landing pads on docks, airports, or heliports on the property, constructed or rehabilitated by the company. Said installations may be used by the state if necessary, free of charge.
• e. Exoneration of all interest income taxes generated by investors.
• f. For effects of calculations of depreciation on any equipment or property, the amount of 10% per year shall be acceptable, excluding the value of the land.

2. Investments in Historic Monuments: For all investments in historic monument areas that are authorized by the National Cultural Institute, with a minimum of US$100,000, excluding the value of the land, shall benefit from the following incentives:

• a. Exoneration of Property Tax for a period of 10 years on the land, and for a period of 30 years on the improvements.
• b. Exoneration of income taxes of the company, for the first 5 years of commercial activity. For the following 5 years, the company may use as a tax deduction, the losses incurred during the 3 fiscal exercises after the fiscal period when said losses occurred.
• c. One time exoneration of importation of equipment and materials used in the construction, remodeling, and equipping, as long as this merchandise is not produced in Panama or not produced in sufficient quantity or quality, and so long as said merchandise is not destined to be sold to the public.
  

Article 9, of Law 8, references any natural person or enterprise that invests in the restoration or maintenance or illumination of any historic monuments, municipal parks, national parks, or any other public site, as well as in the promotion and tourism development, that in the judgment of the Ministry of the Treasury in coordination with the IPAT (Panamanian Tourism Institute) is considered to qualify, shall be entitled to deduct said expenses from income tax.

Article 10, of Law 8, references the enterprises dedicated exclusively to receptive tourism in Panama, shall benefit from exoneration, every 3 years, on the importation of micro-buses, limousines, omnibuses, boats and the parts and repairs of said equipment, as long as said equipment is declared by the IPAT to be indispensable for the function of said activity. Said equipment may be sold only after the payment of respective import duties.

Article 11, of Law 8, references natural persons or enterprises dedicated to collective transportation in the airports, ports and hotels, are exonerated from importation duties on the automotive vehicles used exclusively for the tourism activity, so long as they are approved by the IPAT.

Article 12, of Law 8, references the enterprises dedicated to the activity of restaurants, discotheques, and night clubs, that are declared to have tourism interest by the IPAT, and the minimum investment in said enterprise is US$120,000 in metropolitan areas, and minimum of US$20,000 in the rest of the country, excluding the value of the property, are entitled to exoneration for 3 years, on import duties for materials, and equipment used in the construction and equipping of the establishment, so long as said merchandise is not produced in Panama or there is not sufficient quantity or quality, and are considered by the IPAT to be indispensable for the development of the activity.

Article 13, of Law 8, references enterprises that are dedicated to motion picture films, with international character, artistic or sporting events, or any other internationally broadcasted production that may include images of Panama that may promote tourism in Panama, shall benefit from the following incentives;

1. Exoneration from income tax, except in the event that the Panamanian tax is considered as a fiscal credit in another country.
2. Exoneration of any national tax that regulates the event.
3. Temporary exoneration of import tax, contribution tax, lien tax, or taxes on any equipment, utilities, parts, materials, or technicians that the communications company introduces for the transmission to other countries and all the material used during the event, which shall be re-exported after the event.
4. Exoneration of income taxes of any athletes, national or foreign artists that participate in the event.

Article 14, of Law 8, references that all imported materials for tourism related publicity, if distributed free of charge, and verified by IPAT, shall be exonerated for import duties. Approvals by IPAT must be submitted within 15 business days.

Article 15, of Law 8, references that said exonerations from income taxes shall be granted to income derived from the following;

1. The exploitation of boats and air-boats with foreign registrations, if in those countries there exists reciprocity in terms of liens of the income obtained in said country for marine boats registered in Panama or airboats of Panamanian registration.
2. The exploitation of boats and airboats of any nationality, by foreigners that are residents or not in the national territory, so long as in that country, they offer an extention equivalent to the juridical persons constituted in accordance with the laws of Panama, or if the people who have referenced their domicile in Panama in virtue of the principle of reciprocity.

Article 16, of Law 8, references that the following fiscal incentives are granted to construction, equipping, infrastructure of access, re-habilitation and operation of convention centers, recreation parks, zoo's, tourism centers, ecotourism, and marinas;

1. Exoneration for 3 years from introduction of materials and equipment utilized in the construction and equipping, so long as the merchandise is not dedicated for sale, and is not produced in Panama, and considered by IPAT to be important for the development of the activity.
2. Depreciation of the equipment for a term of 10 years.
3. Exoneration of property tax over improvements for a term of 20 years.

Article 17, of Law 8, references that the Council of the Cabinet, by request of the IPAT, may declare zones of tourism development of national interest, which are areas that unite conditions specially for tourism attraction, but that lack the basic infrastructure for the development of the tourism activity. Those persons who invest in these tourism zones, and that invest the minimum amounts that said zone requires, shall benefit from the following incentives;

1. Total exoneration for a period of 20 years, from payment of property tax on lands and improvements, that are part of the property, and are used for tourism development.
2. Total exoneration for a period of 15 years, from payment of income tax.
3. Total exoneration for a period of 20 years, from importation, contribution or liens tax, as well as transfer taxes on property (ITBM) that are imposed on the importation of materials, equipment, furniture, accessories, and parts used in the construction, rehabilitation, and equipping of the establishment, so long as said merchandise is not produced in Panama, or not produced in sufficient quantity or quality. It is understood that vehicles with minimum capacity for 8 passengers, airplanes, helicopters, boats, yachts, or sporting equipment, dedicated exclusively to the tourism activity may also be exonerated from import duties.
4. Exoneration for 20 years of taxes, contributions, liens or rights to any class or denomination that fall over the use of the docks, ports, or airports constructed by the company. Said facilities may be used by the state free of charge, in conformity with the corresponding regulations.
5. Exoneration for 20 years from the payment of income taxes on interests received by investors.

Article 18, of Law 8, references enterprises (lodging or restaurants) that do not take advantage of the exonerations referenced, yet the enterprise is dedicated strictly to tourism, as established by the law, outside of the metropolitan areas, shall have the option to receive a Certificate of Tourism Employer (CET), in favor of the company, equivalent to 21.5% of the net salary of the employment generated as of the present law, as long as said net salary does not exceed US$400. In the case of restaurants, this option shall have a term of 3 years.

Article 19, of Law 8, references that the Certifications of Tourism Employers (CET) referenced in this law, shall be issued by the Ministry of the Treasury, in national currency, and shall serve as payment for income tax, dividend tax, complementary, property tax, importation tax, or property transfer tax. These shall be documents that are nominative and transferred by endorsement, and excluded from any type of tax and do not earn interests.

Article 20, of Law 8, references that all companies entitled to Certificates of Tourism Employers (CET), shall comply with all requirements indicated in the present law and may make use of the certificates after 6 months from the date of issue, but not within the same year of issue. The certificates shall be valid for a 3 year period.

Article 21, of Law 8, references that for effects of the CET, foreign employees, or employees with less than 12 months of employment shall not be considered.

Article 22, of Law 8, references that any person or enterprise that qualifies for exonerations on imported vehicles, may use said vehicles for transportation of its own materials, equipment etc. Equally, they may offer transportation service to tourists, with destinations to their own installations, from and to the air and sea ports.

Article 23, of Law 8, references that tourism related enterprises may issue nominative instruments for investors, up to January 1st, 2000, and the investors will qualify for special incentives such as tax deductible up to 50% of the amounts invested in purchases of bonds, shares, or other nominative investment instruments. Said instruments must be registered at the National Securities Commission and must be issued by the enterprise within the first 3 years of registration at the National Tourism Registry.

Article 24, of Law 8, references that all taxes, fees, even if customary, shall be exonerated for tourism related yachts that visit the ports of Panama, as long as their stay does not exceed 90 days. The port authorities shall comply only with the routine labors of registry. It shall not be necessary for the processing of documents by these agencies.

FLOW CHARTS

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NEW LAW REGULATES DEVELOPERS

Law 6 of 2006 is a law intended to prevent fraud in advertising in the construction industry. It took many months for the Ministry of Housing (MIVI) to issue regulations enforcing this law.

On May 16, 2007 MIVI created regulations preventing developers and their promoters from advertising or selling properties before the Master Plan has been approved. Fines totaling 1% of the entire project's value could be levied against the developer.

The law also requires that each municipality, where a project is being proposed, form various committees of professionals and laymen to review and approve the project.

Panama's Consumer Protection Agency is also accepting and investigating complaints against developers and real estate agents regarding false advertising and breach of contracts.



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