Special System of Headquarters of Multinational Companies (SEM)

General information

Panama has a long history of seeking to attract and promote investment, create jobs and encourage technology transfer, with the intention of showing itself as a nerve center in the global economy. In this sense, the National Government in 2007 created Law No. 41 (amended by Law No. 45 of August 2012, Law No. 57 of October 2018 and Resolution December 15, 2018), which seeks to attract companies multinationals to Panamanian territory.

The SEMs (Multinational Company Headquarters) are companies that operate in a franchise model of a foreign company registered in Panama or as a Panamanian company incorporated into a transnational company. Their purpose is to provide specific services to their parent company, affiliate or subsidiary from their location in Panama.

Legal frame

That reforms Law 41 of 2007, which creates the special regime for the establishment and operation of headquarters of multinational companies and the commission of headquarters of multinational companies, and dictates another provision.

Modification – Law 45 (2012)

Executive Decree 28 (2009)

Executive Decree 39 (2009)

Executive Decree 9 (2013)

Executive Decree 291 (2009)

Executive Decree 96 (2009)

Modification – Law No. 57 (2018)

Resolution 15 (2018)

Executive Decree 241 (2020) – Modifies Executive Decree No. 28

Resolution 023-20 (2020)

For more information, consult:

https://logistics.gatech.pa/bundles/docs/Resoluci%C3%B3n%20023-20%20del%2017%20de%20septiembre%20de%202020%20SEM.pdf

Fiscal benefits

The companies that obtain the SEM license will enjoy the status of Legal Stability for investments for 10 years referred to in Law 54 of July 22, 1998 and Executive Decree No. 9 of February 22, 1999.
Companies that hold a Multinational Company Headquarters License will be exempt from payment of dividend and complementary tax and tax on branches.
SEM companies are not required to generate an Operation Notice, so they are exempt from the payment of the Operation Notice Tax.
The gain or loss on the transfer of shares issued by the SEM company are subject to the capital gains regime established in the Law, but at a fixed rate of 2%.
The SEMs will not pay the Transfer Tax on Movable Corporal Assets and the Provision of Services (ITBMS), as long as they correspond to entities of the corresponding business group abroad, and do not generate taxable income within Panama.
Companies with a SEM License do not require the use of fiscal equipment.

Benefits for foreign personnel

They will receive exemption from income tax, if the salary comes from a foreign source.
They will benefit from the tax exemption for the introduction of household items and vehicles for the personal use of permanent workers, although they must comply with the sales tax.
Personnel who have a Temporary Personnel Visa or Permanent Personnel Visa for SEM companies will obtain exemption from income tax, social security contributions and educational insurance.
It is necessary to note that these exemptions do not apply if they are Panamanian employees or foreign employees who have a visa other than the Permanent Employee Visa of a SEM, who must comply with the tax regulations and provisions in force in the Republic of Panama.

Work Incentives

Immigration Benefits

SEM Permanent Personnel visas will be granted to their administrative-executive level workers, for a term of five (5) years extendable for the same term, except for those cases in which the employment contract is for a shorter term. . Holders of this visa will not need work permits.
SEM Permanent Personnel Dependent Visas will be issued to the spouses of the personnel mentioned above, for a minimum of five years under singularity and stability conditions, to children under eighteen years of age and up to twenty-five years of age, while they are completing their studies. on a regular basis and are under the economic dependence of the permanent SEM staff. These Visas will be for the same term as the one granted to SEM Permanent Personnel, which implies that they will be extendable if they are extended.
SEM Temporary Personnel Visas are established for foreign personnel hired for technical or training services to the SEM for a term of no more than three months, although it can be extended for a period of three additional months. This visa does not require a work permit.
Permanent Residence is established for foreign personnel who work or have worked for any Multinational Company Headquarters, after five years have elapsed from the approval of the Permanent Personnel Visa of the Multinational Company Headquarters.

Note:

The Technical Secretariat of the Ministry of Commerce and Industries (MICI) will offer the one-stop service for managing the EMMA (Multinational Company for the Provision of Manufacturing-Related Services) license and visas for foreign workers and their dependents.

Requirements

The capital of the group that owns the SEM must be equal to or greater than US$200 million, or the applicant company must provide services to at least seven (7) affiliates, subsidiaries or associated companies.
The assets of the group that owns the SEM must be equal to or greater than US$200 million, or that the Business Group, its affiliates, subsidiaries or associated companies have a presence in more than 40 countries, operating under the same brand or trade name.
Maintain a minimum of full-time employees and annual operating expenses appropriate to the nature of the business.
All applications must be referred to the SEM Licensing Commission. The requirements for the granting of licenses are specified in Resolution No. 19 of August 31, 2017 and in Law 57 of 2018.
https://www.mici.gob.pa/imagenes/pdf/Resolucion%20No.19-17%20de%2031%20de%20agosto%20de%202017.pdf
In the event that the services to be provided are in financial assistance to entities that carry out the banking, insurance, reinsurance and/or securities business in Panama or abroad, the company must previously notify the corresponding regulatory entity (Superintendency of Banks, Superintendency of Insurance, etc.)
Submit projection and description of annual operating expenses.

Activities

All SEM companies are able to provide the following services to their same business group

Direction and/or administration of operations.
The logistics and/or storage of components or parts required for the manufacture or assembly of the products they manufacture.
Technical assistance to companies of the business group or to customers who have purchased a product or service from the company. Financial management, including treasury services.
Accounting.
Preparation of design and/or construction plans, which constitute part of the business activity of the parent company or any of its subsidiaries.
The electronic processing of any activity, consolidation of the operations of the business group and networks.
Advice, coordination and monitoring of marketing and advertising guidelines for goods or services produced.
The support of operations and research, development of products and services.
Financial assistance service, which includes; financial management, risk analysis, credit analysis, due diligence, custody, documentation filing, document processing center, treasury services.
Any other similar service previously approved by the Executive.

It is extremely important to highlight that all those SEM companies that want to increase or expand their activities to offer services related to manufacturing described in Law EMMA or Law 159 of August 31, 2020 may benefit from this regime, likewise the Technical Secretariat will be in its capacities to take into account all the documentation to procure a freer automation process.