As of 2007, a special regime was created in Panama with the purpose of attracting multinational business groups to establish their regional and global operations center in Panama. This special regime was called Multinational Company Headquarters, or as it is commonly known in Panama, SEM.
What is a SEM? Who can apply for a SEM license? What are its benefits and obligations? There are many questions that arise when a company or business group is asked if they have explored the possibility of establishing themselves in Panama as a SEM.
A SEM is an office that has management control in the region and that, from Panama, provides services to its Head Office, subsidiary or affiliate in other countries. This company may operate as a foreign company in Panama registered in the Panamanian Public Registry or as a Panamanian company owned by the multinational. It is important to emphasize that the essence of the SEM is to provide services to companies of the same business group.
How do I know if my business group qualifies as a SEM? It is simple, the business group must have assets equal to or greater than USD200,000,000.00; or it must provide services to at least seven (7) subsidiaries of the group. Therefore, if the company falls into one of these two categories, we can then check what I need and who I should contact in Panama to process my SEM license.
After corroborating that the company complies with the sine qua non requirements of SEM, what are the benefits you get for being registered to SEM. Some of the most relevant are the following:
A. Tax Incentives
|Fixed rate of 5% income tax||Applicable tax of 25%|
|The service provided to the business group is exempt from VAT||7% VAT|
|Exemption in the payment of dividend and complementary tax and branch tax||10% dividend and branch tax|
|They will not be subject to the use of fiscal equipment. They can use invoices or equivalent supporting documents.||They are subject to the use of fiscal equipment.|
|Does not require Operations Notice (commercial license)||Requires Operations Notice (commercial license)|
B. Additional Incentives:
C. Incentives for Expatriates:
In addition to all the benefits that this special regime grants, Panama as a country, has great advantages for these business groups to establish themselves in Panama.
Panama has a unique geographical position, with more than 85 direct flights to different cities in the world, first class multimodal ports, dollarized economy, constant economic growth, among many other things.
Therefore, if after making this evaluation, the business group considers itself in a position to apply for a SEM license, how would it do so?
All documents of the applicant company and its workers are processed expeditiously through the Technical Secretariat of Headquarters of Multinational Companies, attached to the Ministry of Commerce and Industries of Panama.
Once the Technical Secretariat of SEM evaluates the application and considers that it complies with all the requirements, it will proceed to present it before a multidisciplinary commission integrated by the MINREX, DGI, MICI and MIGRATION, which will approve or not the SEM license.
Quijano & Associates has a specialized team in Multinational Companies Headquarters, and it will be a pleasure to assist you in any enquiries you may have that are related to this regime.