On 19 October 2018, Panama enacted Law 52, which establishes new rules for call center activity. The law also repeals Article 70 of Law 32 of 2011 and Article 2 of Law 54 of 2001 (modified by Article 67 of Law 32 of 2011), which included the provisions for call center activity for commercial use and call center activity for export.

Law establishing rules for call center activity¹

Law 52 applies to individuals or legal entities with a concession for the provision of call center services for commercial use (the Concession), granted by the National Authority of Public Services (ASEP).

Requirements for income tax exemption

Law 52 exempts from income tax any income generated in a fiscal period and derived from the services covered by the Concession, provided the following requirements are met:

• The taxpayer has a minimum of five full-time employees.
• The taxpayer incurred at least 70% of the total expenses directly from those services.
• The taxpayer complied with the filing of an annual report containing information about the activities carried out, expenses incurred to conduct the activities and audited financial statements, among other information; the report must be filed independently of other reports required by the ASEP.

Other tax provisions

Individuals and legal entities with a Concession are exempt from tax and contributions, except for the following taxes: (i) a 5% dividend tax, regardless of the source; (ii) a 2% complementary tax on net profits when no dividend distribution is made or if the profits distributed are less than 40% of the total profits for that fiscal year; (iii) a 0.5% annual tax on the company’s capital (i.e., operation notice tax, similar to a commercial license); (iv) a selective tax on consumption; and (v) other special taxes, such as property transfer tax, real estate tax, and contributions related to employer – employee relationships, including social security contributions.

The law applies the transfer pricing rules established in the Tax Code to transactions carried out by companies with a Concession and their related parties domiciled in Panama, abroad or under a preferential regime in Panama. This provision applies from fiscal year 2019.

Migratory provisions

The law allows foreigners investing at least US$250,000 in the call center activity to apply for a permanent resident permit as an investor in the call center activity. In addition, the law allows foreigners hired as executive or technical personnel to apply for a temporary resident permit.

Labor provisions

Under Law 52, labor relationships between employers and employees developed as a result of call center activity are subject to the provisions established in the Panamanian Labor Code in Law 1 of 1986 and in the special laws that are not contrary to this law.

Endnote

1. https://www.gacetaoficial.gob.pa/pdfTemp/28637_A/69772.pdf.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Limited Corp., Panama City

• Luis Eduardo Ocando | luis.ocando@pa.ey.com
• Isabel Chiri | isabel.chiri@pa.ey.com

Ernst & Young, S.A., San José

• Rafael Sayagues | rafael.sayagues@ey.com

Ernst & Young, LLP, Latin America Business Center, New York

• Ana Mingramm | ana.mingramm@ey.com
• Enrique Perez Grovas | enrique.perezgrovas@ey.com
• Pablo Wejcman | pablo.wejcman@ey.com

Ernst & Young LLP (United Kingdom), Latin American Business Center, London

• Jose Padilla | jpadilla@uk.ey.com

Ernst & Young Tax Co., Latin America Tax Desk, Japan & Asia Pacific

• Raul Moreno, Tokyo | raul.moreno@jp.ey.com
• Luis Coronado, Singapore | luis.coronado@sg.ey.com

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