Law No. 122 of December 31, 2019 modifies Law 80 of 2012, which dictates incentive rules for the promotion of tourism activity

The law that modifies Article 9 of Law 80 of November 2012 was enacted with the objective of promoting investment and financing for the development of new projects or new stages and expansions of existing investments in the interior of the country.

This law serves as a catalyst for investment by facilitating the capitalization of projects, thus serving as a fundamental tool to continue the development of the tourism sector in our country.

Through this law, both natural persons and legal entities are entitled to an income tax credit of one hundred percent (100%) for the amounts invested in the acquisition of bonds, shares or other financial instruments issued by tourism companies registered in the National Tourism Registry of Panama (ATP).

These tourism companies may invest in new projects or in expansions of existing tourism projects, both located in the interior of the Republic of Panama.

This incentive shall be available to investors who are not directly or indirectly affiliated with the tourism company that issued the financial instrument until December 31, 2025. It should be emphasized that only the investor who is the first to acquire the shares or financial instruments mentioned above shall be able to obtain this tax credit.

The following are the conditions for using an established tax credit, which may be used for a maximum of ten (10) years:

  1. It may only be used as from the second year of having made the investment in the tourism company;
  2. The maximum value usable per year cannot exceed fifty percent of the Income Tax caused in the corresponding fiscal year;
  3. The amount of the tax credit used annually cannot exceed fifteen percent of the initial amount of the tax credit granted to the investor;
  4. The totality or the unused portion of the tax credit granted may be assigned to a third person, regardless of whether or not the bonds, shares or financial instruments have been transferred.

Bonds, shares and other financial instruments, on the other hand, must meet the following criteria to access the tax credit provided by this law:

  1. They must be registered with the Superintendence of the Stock Market of Panama and be listed in a stock exchange of the Republic of Panama;
  2. They must be issued by companies registered in the National Tourism Registry;
  3. The bonds or financial instruments must have a minimum term of five years, without being able to be paid in advance;
  4. Tourism companies may not acquire their own bonds, shares or other financial instruments.
  5. Loans or other forms of acquisition or payment cannot be granted to the holders of these bonds, shares or financial instruments during the minimum validity of five years.

The Panama Tourism Authority estimates that this incentive shall benefit the tourism industry, which is currently affected by a worldwide pandemic, by attracting new investments and improving the country’s tourism infrastructure.

Finally, the entire procedure for the recognition and application of incentives to investors in tourism companies is duly established by Executive Decree 364 of July 23, 2020.

We, at Quijano & Asociados, are at your disposal to assist you in the whole process of structuring and registration of the Tourism Bonds or any other financial instrument in the Superintendence of Stock Market of Panama and its subsequent listing in the Latin American Stock Exchange.