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Panama's Law 41 Makes It a Nice Home for Multinational Companies

Por Juan Carlos Martinez

Law 41 of 2007 established a new incentive regime to attract multinational companies to move their headquarters to Panama. To date approximately 36 companies have established their headquarters in Panama partly to take advantage of this law plus all the other benefits that Panama offers. Maersk was the first company to apply for the fiscal benefits awarded to companies under Law 41 of 2007.

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The 36 companies who have their regional headquarters in Panama employ around 1,000 persons and have made an estimated initial investment of 103.9 million dollars according to data from the Ministry of Commerce and Industry.

The first quarter of this year the companies Mars Bars, Otis, Cargotec, Saab Miller, Ericsson, Nestlé, Adidas, Hyosung Corporation and Sanofi-Aventis requested their SEM (Sedes Multinationales) license. Many of these companies, such as Adidas, Ericsson, Nestlé, were already represented in Panama they just requested a change in status and complied with the legal requirements in order to take advantage of the fiscal incentives offered. The government's goal is to get up to 100 multinational companies headquartered in Panama by 2011, a very ambitious goal, however with its newly acquired investment grade status, Panama is an attractive place to do business in. Law 41 while certainly an attractive tool is only part of the integrated package of benefits that Panama offers a multinational corporation versus other countries in Latin America and other places.

Some of the benefits to be considered along with Law 41 are its level of security which is unmatched by other Latin countries. Additionally a sophisticated skyline, a solid banking center, and a dollar based economic system. Panama is also known for being a logistics hub both for cargo and passengers, as well as a first rate port systems, telecommunications connectivity and reliability are just a hand full among others.

Law 41 is patterned after those in Singapore and Switzerland, which are well known multinational headquarters and it places Panama at the forefront of Central and South America. One of the biggest incentives that Law 41 offers is the fact that multinationals headquartered in Panama under a SEM license do not pay any income tax in Panama on income generated outside of Panama.

Other companies that had already been granted their SEM license and have established in the Panama Pacific side are 3M, Cabo Drilling, Aggreko, AES, Caterpillar, Procter & Gamble, LG, Roche, Peugeot, Hyundai, Halliburton, Inelectra, Western Union, Total, Sinopec, Thunderbird, AIA Bermuda Services, Endress Hauser, Albacrome and Volconsa.

Recently the US company Samtec announced that it was establishing its headquarters in Panama. The company produces electrical connectors for the telecom and medical industry. They are planning to set up in the Panama Pacific Special Economic Area (Howard) and expect to be operational by September. Their first year investment is estimated at about $2 million dollars and they will by hiring approximately 150 employees.


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