Panama Parliament Considers Changes to Small and Medium Business Income Tax Rates

Panama Parliament Considers Changes to Small and Medium Business Income Tax Rates

The bill includes draft law No. U-20. Article 1 of this draft law amends Article 699-A of the Tax Code to provide for reduced corporate tax rates for small and medium-sized enterprises. Such businesses must meet the following criteria:

• Registered in the register of enterprises;
• Gross annual income does not exceed 500,000 PAB ($ 500,000);
• SMEs are directly or indirectly owned by individuals.

The law contains provisions prohibiting access to preferential rates for businesses that only fictitiously fulfill the above conditions.

Under the new article 700-A of the tax code, the following rates will apply for individuals qualifying as SMEs:

• Net taxable income up to PAB11,000: 0 percent;
• PAB11,000 to PAB 36,000 revenue: 7.5 percent;
• Income from 36,000 to 90,000 PAB: 10 percent;
• Return from PAB90,000 to PAB150,000: 12.5 percent
• PAB150,000 to PAB350,000 Income: 17.5 percent and
• PAB350,000 to PAB500,000 Income: 22.5 percent.
• Law No. U-20 will enter into force on the day of its entry into force.

Bill 358, introduced on July 27, was approved in the first reading on August 13, 2020. According to information published on the website of the National Assembly, the bill was to be the subject of a second discussion on August 18, 2020.

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