SEM Law Reform

Updated according to Executive Decree No. 241 of September 16, 2020, and Resolution 023-20 of September 17, 2020



Law No. 41 of 2007, amended by Law 45 of August 10th, 2012 and Law 57 of 2018, establishes incentives for the creation in Panama of Multinational Corporations Headquarters (SEM, for its acronym in Spanish), whose main activities are the technical, financial and/or administrative assistance to companies with the same corporate group and the provision of services to companies of the same group.


Under this modality, it is allowed to establish multinational corporations in Panama with the purpose of having a headquarter that provides support to its affiliates in the region. They may operate as a foreign company registered in Panama or as a Panamanian company, owned by a multinational company. By applying under the activities listed below, the SEM company shall be able to enjoy a series of fiscal, migratory, and labor incentives.


The activities allowed under this law are the following:

  • Management and/or administration for operations in a specific or global geographic area of a company of the corporate group. It refers to the services of strategic planning, business development, personnel management and/or training thereof, control of operations and/or logistics.
  • The logistics and/or storage of components or parts, required for the manufacture or assembly of products the company manufactures.
  • Technical assistance to companies of the corporate group or to customers who have purchased a product or service from the company and, therefore, it is obliged to provide them the support service.
  • Technical, financial and/or administrative assistance, as well as other support services, to companies of the same corporate group, including, but not limited to, services of financial management, risk analysis, credit analysis, due diligence, compliance, documentation custody, and filing, data and/or document processing center and corporate treasury services, as well as loans between related companies of the corporate group. It does not include activities that require a license to operate issued by the State through the Superintendency of Banks, the Superintendency of Insurance and Reinsurance, the Superintendency of the Securities Market, or other regulatory entities.
  • Corporate group accounting.
  • The preparation of blueprints that are part of designs and/or constructions, or part of them, which constitute part of the normal course of business activity of the parent company or any of its subsidiaries.
  • Electronic processing of any activity, including consolidations of the corporate group’s operations. This service includes network operations.
  • Advice, coordination, and monitoring of marketing and advertising guidelines for goods or services produced by the corporate group.
  • The support of operations and research and development of products and services of the corporate group.
  • Any other similar service previously approved by the Cabinet Council by a justified resolution provided it is in compliance with the provisions of the Law.


It is important to take into account that the main activity or activities can be performed, in whole or in part, through resources provided by suppliers (outsourcing), as long as the outsourced activity be performed in Panama and the mechanisms to exercise monitoring and supervision of the activity in Panama be maintained.


Services related to manufacturing, EMMA License:

It is important to mention that the multinational companies that are operating in Panama and provide services with manufacturing to related companies or those that have a SEM License, and are willing to increase or expand activities to provide services related to manufacturing described in the EMMA Law or Law 159 of August 31, 2020, may adhere to this system. The Technical Secretariat may take into account all the documentation existing on file to ensure an expedited automation process.


Legal stability of investments:

Companies incorporated under the SEM regime as from 1 January 2019 shall automatically enjoy, as of the moment of their registration, the guarantees established in Article 10 of Law 54 of 1998 on Legal Stability of Investments. That is to say, from the granting of the License they shall enjoy the fiscal, migratory labor and legal benefits for 10 years.


Annual report:

Companies with a SEM License must submit once a year and within six months after the end of their fiscal period, an annual report containing an affidavit with information about the company and the new requirements of substance, which will be signed by the legal representative and a certified public accountant. The form can be downloaded from the website

The Technical Secretariat of the Commission of Multinational Company Headquarters Licenses shall issue an administrative resolution stating whether or not the company complies with the substance requirements for the relevant fiscal period. The company may request reconsider and appeal the resolutions of the Technical Secretariat.

If the company complies, the Technical Secretariat submit the Resolution to the Directorate General of Revenues to apply the 5% income tax rate. If the company does not comply, the Technical Secretariat submit the Resolution to the G Directorate General of Revenues to apply the income tax rate at 25%.


I. Fiscal

Fiscal benefits and obligations of corporations which obtain a SEM License:

  • Companies holding a SEM license must pay the income tax in the Republic of Panama on the net taxable income arising from the services rendered, at a rate of 5%. They shall settle and pay the income tax, through the annual tax income return, and may include within their deductible expenses, the expenses incurred in concept of labor remunerations of all their employees, which shall proceed even when the employee, recipient of the salary, is exempted from the income tax. The amount that the company has actually paid in that concept or analogous abroad may also apply as income tax credit. When applying this credit, the company shall pay at least 2% of the net taxable income generated in the Republic of Panama, as income tax.
  • As of the fiscal year 2019, all legal or natural persons that carry out transactions with related parties that are SEM companies, shall be subject to the Transfer Pricing System in accordance with the provisions of article 762-D of the Tax Code and comply with the filing of Form 930.
  • Transfer tax on Personal Property and Services (ITBMS, for its acronym in Spanish). Due to the fact that these are exporting services, the same shall not cause ITBMS, provided that they be rendered to entities of the Corporate Group abroad, which do not generate taxable income within the Republic of Panama.
  • Exemption of dividend payment, supplementary tax, and tax on branches, regardless that they be from local, foreign or exempted source.
  • They are not subject to the use of tax equipment, nevertheless, they must document their activities through invoices or documents equivalent which allow the Directorate General of Revenues to have proper control, registration, accounting, and supervision of the transactions performed.
  • They shall not have the obligation to obtain a Notice of Operation for the rendering of the services established in the SEM Law.


Substance requirements:

SEM companies must comply with Substance Requirements. This means that in order to enjoy the benefit of the reduced rate of 5% of income tax granted by Law 41 of 2007, for the activities contemplated in Article 4 of the Law, it is necessary to prove that the main Activities performed to generate the income benefited by the tax incentive have been carried out in Panama, that the SEM company has an adequate number of qualified full-time employees and an adequate amount of operating expenses, which are directly related to the Main Activity.

In case of non-compliance with the Substance Requirements, the company must pay income tax at 25% with the corresponding fines, surcharges, and interest.

To prove compliance with the Substance Requirements, the SEM company must keep records, books, and documentation showing the adequate level of employees and operating expenses, according to the main activity for up to five years.


II. Immigration

Incentives for Foreign Executives, holders of SEM visas:

  • Salaries and other labor remunerations, including salary in kind received by persons holding a SEM Permanent Personnel Visa, are exempt from income tax and social security contributions, educational insurance provided that the salaries and labor remunerations are paid, assumed, and recognized as personnel expenses in the accounting of the company with SEM License.
  • Exemption of Importing Tariff for household goods when the employee relocates for the first time to the Republic of Panama. The National Customs Authority has established the amount of twenty-five thousand dollars (US$25,000.00), legal currency of the United States of America as maximum for the application of said exemption. The interested party may bring said household goods within the three (3) months prior to his arrival or up to six (6) months after his entry to the country.


The SEM Law creates new visas specifically for foreign employees hired by the SEM company. The kinds of visas are:

Visas for SEM Permanent Personnel:

These shall be granted to the employees of an administrative-executive level. The same shall have the same validity up to 5 years, renewable for the same term, except for those cases in which the labor contract establishes a shorter term. The holders of this visa shall not require work permits and may renew this visa for an indefinite term.


Visas for Dependents of SEM Permanent Personnel:

For their spouses or common-law couples living for a minimum of five (5) years in conditions of stability and singularity, underage children and children under twenty-five (25) years which are students, as well as the parents of said personnel, who shall remain in Panama under the responsibility of SEM´s personnel. They shall have the same term as that of the SEM´s personnel. The salaries and other labor remunerations, including the salary in kind, shall be considered exempt from income tax, social security, and education insurance contributions, insofar as said salaries and labor remunerations are paid, assumed, and recognized as personnel expense of in the accounting of the SEM company.


Definite Residence for SEM Permanent Personnel:

The foreign personnel that had worked for any SEM company, after the 5-year term of their SEM Permanent Personnel visa had elapsed, may opt for a definite residence. The Permanent Personnel that obtains the definitive residence shall be subject to the payment of the income tax and the social security and education insurance contributions.


Visas for SEM Temporary Personnel:

These visas shall be granted for a period not greater than 3 months for employees that have to come to Panama for any activity related to SEM. Like the visa for SEM Permanent Personnel, it does not need a labor permit.


III. Labor

Companies covered by a SEM License may hire trusted foreign workers to fill senior and mid-level management positions. This is understood as those employees who perform management, inspection, or representation services for the company. Such foreign personnel must comply with the provisions of Article 17 of the Labor Code, with respect to companies whose transactions are developed, consummated, or be effective abroad.

Any foreigner with the status of a dependent of a foreign worker under a visa or residence permit from the Multinational Corporation Headquarter may work in the Republic of Panama, provided that he or she meets the necessary conditions to process a work permit in one of the existing or recognized categories by Panama. These permits must be processed at the Immigration Office of the Multinational Corporations Headquarters or the One-Stop Investment Counter.

Dependents who obtain a work permit and work in Panama shall be subject to the payment of income tax, and social security and educational insurance contributions for wages and other remuneration received.

SEM companies must seek technological exchange, and for such purposes, may hire foreign employees of administrative levels, as well as support or related services personnel with proven academic capacity.



The legal requirements for the obtainment of the SEM License are the following:

  1. Assets of the multinational corporation.
  2. Operation places or headquarters of the multinational corporation.
  3. Activities or Operations carried out by the multinational corporation.
  4. Listing of shares on the local or international stock exchange markets.
  5. A minimum number of full-time employees and annual operating expenses of the multinational company in the Republic of Panama that must be appropriate to the nature of the business carried out by the company.
  6. Any other element or information the Commission may deem necessary to assess as an additional requirement.


The application form must be completed and the following documents must be attached:

  • Charter of Incorporation of the applicant company establishing within its objects the interest of establishing a Multinational Corporation Headquarter. If it is an already existing company in Panama, the same must amend its Charter of Incorporation and comply with the requirement described above.
  • Power of Attorney granted to a qualified attorney.
  • Affidavit subscribed by the representative of the applicant company manifesting its desire of establishing in Panama a Multinational Corporation Headquarter, the specific activities that it shall perform as SEM, and that it complies with all the requirements to opt for a license pursuant to the law. The signature of the legal representative must be duly authenticated before Notary Public.
  • Consolidated Financial Statements of the Corporate Group referred to in the Affidavit, duly certified by Certified Public Accountants. Reference may be made to the location of these financial statements on the stock exchange on which the Corporate Group is registered. In the event that the Consolidated Financial Statements are in a language different from Spanish and/or currency other than the dollar, notes or attachments of the financial statements of the Corporate Group shall be submitted in the Spanish language and with the proper conversion into dollars.
  • Bank Reference Letter.
  • Certification issued by the Treasurer or Secretary of the applicant company, indicating the shareholding interest of the companies of the Corporate Group.
  • In the event that it is willing to carry out an activity regulated by the State, through the Superintendency of Banks of Panama, Insurance and Reinsurance, Securities or other regulatory entities, it shall file, together with the other requirements, a letter from the regulatory entity stating its opinion regarding the services to be rendered by the applicant company as SEM.
  • Organization chart of the applicant company evidencing the relation with the Corporate Group, its affiliates, subsidiaries, or associated companies, to which it shall render services.
  • Corporate Social Responsibility plan.
  • PowerPoint presentation with general information about the Corporate Group (maximum 8 slides).


Substantive Conditions:

The Corporate Group assets must be equal or greater than two hundred million United States dollars (US$200,000,000.00) or that the applicant company must render its services to at least seven (7) affiliates, subsidiaries or associated companies.


In order to evidence the foregoing, the following documents shall be included in the filing as applicable:

i. Consolidated Financial Statements of the Corporate Group to which the applicant company belong, duly audited or certified by an independent Certified Public Accountant and apostilled; or

ii. Affidavit signed by the legal representative of the applicant company of the Corporate Group, identifying the affiliates, subsidiaries, or associated companies to which the services shall be rendered. The legal representative signature shall be duly authenticated before a Notary Public of Panama or apostilled.


In the event of establishing a parent company in Panama, an initial minimum capital, of not less than two million United States dollars (US$2,000,000) is required. For its proper verification, the following must be attached:

i. Cash Flow Report

ii. Certification issued by the treasurer or secretary of the applicant company, the signature duly authenticated by a notary, indicating the shareholding interest of the companies of the Corporate Group in order to prove the ownership of the multinational company.


In case the applicant company is operating in Panama, the following must be submitted:

i. License number or operation notice of the corporation under which the same was operating, as applicable.

ii. Financial statements of the local company.

iii. Copy of the last Income Tax Return.


Note: Furthermore, all the documentation submitted together with the application form shall fulfill the following requirements:

  • All public documents must be duly legalized or apostilled.
  • The original document which is written in a language other than Spanish must be translated by a certified public translator.
  • The corresponding documentation must be based in United States dollars.
  • It shall be understood by general particulars of the applicant and its attorney-in-fact:
  • Full name of the company
  • Address
  • Identification of the registration data of the corporation at the Public Registry of Panama
  • Particulars of the Attorney-in-Fact such as gender, marital status, personal identity certificate, domicile, telephone, facsimile, post office box, e-mail.


As of the entry into force of the SEM Law, our law firm has acquired extensive experience, helping international clients in the obtainment of the SEM Licenses, therefore we are at your disposal for any clarification that you deem appropriate. Contact us at for more information.

View the full text of Executive Decree No. 241 of September 16th, 2020 [In Spanish]
View the full text of Resolution 023-20 of September 17th, 2020 [In Spanish]

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