Bill 713.

Summary.

The bill establishes a tax incentive framework for investment in tourism activities in the Republic of Panama. Its objectives include investment, formal employment, infrastructure modernization, a broader range of tourism offerings and traceability of tax benefits. It defines mixed use developments, technological innovation, complementary investments, tourism products, projects and services, and sustainability. The Panama Tourism Authority (Autoridad de Turismo de Panamá) would certify tourism products as part of registration in the National Tourism Registry (Registro Nacional de Turismo).

For new public tourism lodging establishments in the Panamanian Caribbean that meet the stated minimum investment and registry requirements, the bill proposes import duty exemptions for construction and equipment, exemptions for vehicles transporting guests, property tax relief, exemptions for charges on specified facilities and income tax relief for the qualifying activity. Initial project financing would also be exempt from the withholding provided for in Law 4 of 1994. Benefits are confined to tourism assets and areas, and several depend on continued commercial operation. New lodging establishments outside the district of Panama would receive corresponding incentives under the periods set out in Article 5. New projects in Panama City could apply if submitted to the registry during the first three months after the framework enters into force.

Existing registered lodging establishments and tourism products could receive import duty relief for remodeling, expansion, modernization or equipment investments, subject to the stated limit on how often it may be granted. The Panama Tourism Authority would adopt, by resolution, a guide to recommended tourism products for each area while remaining able to assess other proposals. Approved and registered products would qualify for import duty relief on project assets and the specified treatment of initial financing. Approved and registered tourism marinas would receive import duty and property tax exemptions for facilities devoted to that activity; facilities used for other purposes would be excluded. Their development would remain subject to permits from the Panama Maritime Authority (Autoridad Maritima de Panamá), the Ministry of Environment (Ministerio de Ambiente), the Ministry of Economy and Finance (Ministerio de Economía y Finanzas), the National Land Administration Authority (Autoridad Nacional de Administración de Tierras) and the relevant municipalities. Foreign tourism yachts meeting the stated stay limit would be exempt from arrival and anchorage charges.

Registered event operators that secure international conferences, meetings or events in Panama with the required participants and overnight stays could seek a partial income tax exemption on profits directly attributable to the event. The Panama Tourism Authority would certify the conditions, after which the taxpayer would request recognition from the Ministry of Economy and Finance. The Authority would periodically verify qualifying projects and could initiate proceedings to suspend or cancel certifications. Every applicant would first register on Panamá Conecta. Evaluation would consider investment, employment, territorial impact, contribution to tourism and the requested tax benefit. The Panama Tourism Authority, Ministry of Economy and Finance and National Customs Authority (Autoridad Nacional de Aduanas) would coordinate oversight. A Tourism Single Window would centralize procedures with the participation of the Ministry of Environment and the Ministry of Commerce and Industries (Ministerio de Comercio e Industrias), under rules issued by the Executive Branch (Órgano Ejecutivo).

Registration and eligibility certification would be decided through a single procedure. Applications would include documents concerning financing, legal existence, the right to use the property, permits and, where applicable, environmental impact approval and feasibility. The maximum decision period would be 60 business days after submission of complete documentation; failure to decide within that period would result in an adverse decision. The resolution would be sent to the Office of the Comptroller General of the Republic (Contraloría General de la República) and other authorities and published in the Official Gazette. New projects would provide a performance bond under the specified rates, cap and exceptions. Land parcels acquired after project registration could receive property tax relief for the remaining benefit period.

Beneficiaries would have to carry out and begin operating projects within the prescribed periods, preserve the tourism use of assets and facilities, provide information, allow inspections and obtain approval for substantial changes. The Ministry of Economy and Finance and the Panama Tourism Authority would oversee compliance. Misuse or false statements could lead to revocation, cancellation of registration, enforcement of the bond and an administrative fine; unpaid taxes would be recoverable through the applicable procedure. Residential and commercial developments, independent restaurants and private marinas are excluded. The bill restricts the carryforward of losses incurred while incentives apply and refers later losses to Article 698-A of the Tax Code (Código Fiscal). It prohibits equivalent benefits for the same investment; the General Directorate of Revenue (Dirección General de Ingresos) would take part in verification. It also provides for periodic evaluation, accelerated depreciation of essential tourism assets and repayment to the National Treasury (Tesoro Nacional) in the stated circumstances. Finally, it proposes an amendment to Article 1057-V of the Tax Code concerning tax rates for lodging.

The bill concerns the public bodies named above and could affect or interest tourism investors, lodging establishments, event operators, marinas, tourism transport providers and lenders.