Novel incentives for maritime financing operations in Panama
In the centenary year since the foundation of the Merchant Marine of the Republic of Panama, a creative and modern piece of legislation has been recently enacted with the intention to launch our country as a regional center for the financing of the maritime industry.
We refer to Law N°50 of June 28th, 2017 (hereinafter “the Law”), whereby a legal incentive system is created for entities engaged in maritime financing and in promoting projects intended for the development of the maritime sector in general.
Which are the activities are protected by this Law?
Any commercial activity, which has as purpose granting credit facilities, structuring stock exchange operations, securing risks, granting guarantees or other collateral regarding any fundable maritime project.
The following activities are also considered maritime financing operations: ship leasing, purchase, chartering, insurance, financial swap, any derivative financial instrument, container building and/or repair, P&I Clubs guarantees, which have as purpose covering risks regarding ships, cargo or freight for international maritime transport and to secure maritime obligations or debts, including the lifting of attachments over assets seized by Panama Maritime Courts of Justice.
Who are eligible to receive the benefits of the Law?
1. Banks with General License, International License or Representation License duly authorized and granted by the Superintendence of Banks of Panama.
2. Companies that perform operations intended to design, structure and develop financial conditions of maritime credit and its securities.
3. Financial companies regulated by Law 42 of 2001 and Financial Leasing companies of maritime credit and its securities.
4. Maritime Financing entities defined by the Law.
5. Joint Ventures of the Panamanian State with individuals.
What shall I do to be able to benefit from these incentives?
The individuals who wish to be benefited from the incentives provided by the Law must obtain an official certification granting them the capacity as qualified entity to exercise the maritime financing operations before the Certifying and Supervising Council of Maritime Financing Entities created by the Law.
Legal Incentives Applicable. The following shall not cause Income Tax:
1. Income arising from the financing for the building and purchase of ships registered under Panama flag.
2. Income of companies that start their operations in the Republic of Panama with the purpose of creating shipyards for the building of commercial ships, yachts, naval ships and other kinds of ships for the transport of goods or passengers and/or companies engaged in fundable maritime projects.
3. Income of revenues arising from interests and commissions accrued by banks and/or maritime financing entities.
4. Income of revenues arising from insurance and reinsurance, which guarantee credits of maritime financing entities.
The tax exemptions and incentives listed above shall have a duration period of twenty (20) years starting from June 28th, 2017, entry into force date of the Law.
Other distinctive features you should know about:
- Import Tax: the import tax and other fees for the introduction into the country of machinery, maritime equipment, rolling stock industry, materials, tools and other elements necessary for the building of ships or exclusive use of the shipyards is established in 3%.
- Special Immigration System: foreigners hired by maritime financing entities or for working in fundable maritime projects must apply and obtain a labor permit and an immigration permit in the capacity of employee of maritime financing entities or fundable maritime projects, which must be processed before the Ministry of Labor and Labor Development and the National Immigration Service, respectively. The persons to which this permit is granted shall be entitled to reside in the country.
The granting of such immigration permit shall entitle its holder the right to a multiple entry and exit permit, which shall be valid for the same period of said immigration permit.
- Special Labor System: any employer duly authorized to develop fundable maritime projects or as a maritime financing entity may have regular foreign personnel not exceeding 10% of all the employees and the specialized foreign personnel, technicians or for those regarding matters concerning administrative management up to 25% of all the employees for the first three years, the fourth year, it shall be up to 20% of all employees, and the fifth year, it shall be up to 15% of all the employees.
The labor permits for foreign personnel who work in maritime financing entities and/or fundable maritime projects shall be issued for a period of one year, renewable up to a maximum period of five years.
By: Joel Medina, Partner.