Law 8

Chapter II

Article 6. For the purposes of this Law, promotion and tourist development activities shall be understood as being those that effectively contribute to the increase in foreign visitors to our country and the diversification of tourist offers; likewise, those investments in activities which motivate the increase in visitors. 

1. The construction, equipping, rehabilitation, and operation of hotels, motels, apart-hotels, bed and breakfasts, lodges, family hostels, buildings subject to horizontal property regime which are completely destined to offer public tourist lodging, whether managed by the joint-owners or by a third party, time-shares, cabins, camping sites, and theme parks. 
2. Construction, equipping, access infrastructure, rehabilitation and operation of convention centres, national craft workshops of tourist artefacts, recreational parks, zoos, specialised tourist, ecotourism or marine centres. 
3. Land, maritime and air transport services, in the Republic of Panama, primarily designated to serve tourists. 
4. The constructions, equipping and operation of restaurants, discotheques, and night clubs dedicated to tourist activity. 
5. Construction, rehabilitation, restoration, remodelling and expansion of real estate to commercial or residential use, within General Historic Monuments in which these activities are permitted.  The National Historic Patrimony Department of the National Cultural Institute shall be the organisation in charge of authorising and regulating everything about the projects to be realised, to preserve the historic value of the monuments.  
6. The operation of receiving tourist agencies which are dedicated exclusively to this activity. 
7. Every company within the national territory which undertakes filming activities with full-feature films and international artistic or sporting events, which are directly transmitted overseas, via closed-circuit television or via satellite, which are shown before, during or at the end of the event, images which promote tourism in the Republic of Panama. 
8. Investment in the undertaking, restoration, construction, maintenance or illumination of historic monuments, municipal parks, national parks or any other public place, under the management of the Panamanian Tourism Institute (IPAT) in coordination with the National Culture Institute (INAC). 

Article 7. The right to receive the benefits established by this Law are recognised upon registration of the company in the National Tourism Registry and the issuance of a certificate by the Panamanian Tourist Institute, which shall specify the rights and obligations of the beneficiary. 

Chapter III
Incentives and Benefits

1. Public tourist lodging service: for the constructions, equipping, rehabilitation and effective development of public lodging establishments indicated in subsection 1 of Article 6 of this Law, whose investment shall be at least Three Hundred Thousand Dollars (B/.300,000.00) in the metropolitan area and, in the rest of Panama, a minimum investment of Fifty Thousand Dollars (B/.50,000.00) excluding the value of the land, with the exception of lodges and family hostels (bed and breakfasts) whose minimum investment shall be set by the Panamanian Tourism Institute.  The mentioned areas shall have the following incentives: 
   1. Total exoneration for twenty (20) years, from import duties, tax, liens or duties of any nature or class, which may devolve upon the importation of materials, utilities, furniture, equipment, boats or automotive vehicles with a minimum capacity of eight (8) passengers.  The latter must be declared to be indispensable for the development of the tourist activity by the Panamanian Tourism Institute.  The materials and equipment to be exonerated must be utilised in the construction and equipping of the public lodging establishment. This incentive is granted only where these articles are not produced in the country or cannot be produced in sufficient quantity or quality.  Likewise, these exonerations of all equipment imported for the purpose of saving energy or which are necessary for the security of the project area. In the case of the ecotourism activities indicated in Article 6 of this Law, the import duties exonerated shall be permitted for four-wheel drive automotive vehicles with a minimum capacity of five (5) passengers.  
   2. Exoneration from land tax, for a twenty (20) year period counted from the date of registration in the National Tourist Registry.  This exoneration shall cover all real property of the company, provided that they are completely used in the tourist activities.  
   3. Exoneration of the company of all taxes or assessments of capital. 
   4. Exoneration from the payment of taxes of docking and any rates of landing at docks, airports or heliports constructed on the company's property or converted by the company.  These facilities may be used, without charge, by the State. 
   5. Exemption from the payment of income tax on interest paid to creditors of the investments made in operations for public lodging establishments.   
   6. For the purpose of calculating the depreciation on the real estate, a rate of ten percent (10%) per annum, shall be allowed, excluding the value of the land. 
2. Investments in General Historic Monuments: for the activities contemplated in subsection 5 of Article 6 of this Law, which are located  in the General Historic Monuments in which the National Cultural Institute authorises project construction within its properties, whose minimum investment shall be One Hundred Thousand Dollars (B/.100,000.00), excluding the value of the land, the following incentives shall be granted:

1. Exoneration for a ten (10) year term of land tax, and for a thirty (30) year term taxes on the improvements.  
2. Exoneration of income tax on the profits of the company, for the first five (5) years of the commercial activity.  Upon completing this term and for the following five (5) years, the company may deduct as expenses the losses incurred during the three (3) previous years.   
3. Exoneration, once only, of import duties on the equipment and materials used in the construction, remodelling and equipping, provided that the merchandise is not produced in the country in sufficient quantity and quality and it is not destined for sale to the general public. 

Article 14. All publicity material is exonerated from import duties, provided that they are freely distributed, with prior verification by the Panamanian Tourist Institute.  

The Panamanian Tourism Institute shall have a period of fifteen (15) working days in which to approve or object to the documents referred to in this article. 

1. The operation of boats or airplanes registered overseas, if in those countries there is a reciprocal exemption on income earned by Panamanian registered boats or airplanes;
2. The operation of boats and airplanes of any nationality, by foreigners whether resident or not in the national territory, as long as the country of which they are nationals or in which their company is formed, grants a similar exemption to companies registered in Panama or persons domiciled in Panama in accordance with the principle of reciprocity.  

Article 16. For the construction, equipping, access infrastructure, restoration and operation of convention centres, recreational parks, zoos, specialised ecotourism centres and marinas, the following tax incentives are granted:

1. Exoneration for three (3) years from import duties on the import of materials and equipment to be used in the construction and equipping, provided that the merchandise is not sold, cannot be produced in the country and is considered by the Panamanian Tourism Institute as important for the undertaking of the activity. 
2. Depreciation of the real estate for a period of ten (10) years. 
3. Exoneration from real estate tax on the improvements for a period of twenty (20) years. 

Article 17. The Cabinet Counsel, upon request by the Panamanian Tourism Institute, may establish that those areas which meet the special conditions to attract tourists but which lack basic infrastructure for the development of this activity as "tourist development zones of national interest".  Those persons that invest in tourist development zones and that undertake the minimum investment which the zone requires, shall be granted the following tax incentives: 

1. Total exoneration for a period of twenty (20) years from the payment of land tax on the land and the improvements, for those properties used in the tourist development activities. 
2. Total exoneration for a period of fifteen (15) years from the payment of income tax on the company's income.  
3. Total exoneration for a period of twenty (20) years from import duties, contribution or assessments, as well as chattels transfer tax (ITBM) which may be due upon the import of materials, equipment, furniture, accessories, or spare parts which are used in the construction, rehabilitation and equipping of the establishment, provided that the merchandise is not produced in Panama or is not produced in sufficient quality and quantity.  For the purposes of this Law, vehicles with a minimum capacity of eight (8) passengers, airplanes, helicopters, boats, ships or sports gear, dedicated exclusively to tourist activities shall be considered to be equipment. 
4. Exoneration for twenty (20) years from taxes, contributions, assessments or rights of any sort or type which may apply to the use of docks or airports constructed by the company.  These facilities may be used, gratuitously, by the State and in accordance with the corresponding rules. 
5. Exoneration for twenty (20) years from the payment of income tax which may apply to creditors' interest from investments made in tourist activity operations.    

Article 18. Should a tourist company of public lodging or restaurants, choose not to accept the exonerations which are granted in the previous articles, the company whose only activity is tourism as established in this Law and whose place of business is outside the metropolitan area, may receive a Certificate of Tourism Employment (CET) which shall be equivalent to twenty one and a half percent (21.5%) of the gross monthly salary of the employment generated as of the promulgation of this Law, provided that said gross monthly salary shall not exceed Four Hundred Dollars (B/.400.00).

For those restaurants to which this applies, they shall be valid for a period of three (3) years. 

These instruments shall be registered, transferable by endorsement, and shall be exempt from all class of taxes and shall bear no interest. 

Article 21. For the purposes of the Certificate of Tourism Employment (CET), mentioned in this Law, no consideration shall be given where an employee is a foreigner or where a labour relationship is for less than twelve (12) months.  

Procedures of control shall be established to verify payrolls. 

Article 22. Those natural or legal persons who undertake tourist activities may use their vehicles to transport their own materials, furniture and equipment.  Likewise, they may offer transport services to tourists, to or from their installations to airports and docks. 

Article 23. In order to sponsor the investment and financing of the development of the tourist industry and the construction of hotels outside the metropolitan area, the tourist companies of public lodging, may issue registered instructions of tourist investment until the 1st of January of the year 2000.  The following incentives shall be granted to investors in these instructions, who may be be directly or indirectly related to the tourist company of public lodging, and which may not be the result of the fractioning of a single company into various legal persons, nor be affiliates of subsidiaries of the tourist companies.  

For the purpose of income tax, fifty percent (50%) of the amount investment by natural or legal persons in the purchase of bonds, shares and other registered instruments issued by a tourist company shall be considered deductible expenses.   The Ministry of Exchequer and Treasury shall regulated the application of this article. 

The bonds, shares and other financial instruments must be registered with the National Securities Commission and shall be issued by the companies which are registered in the National Tourism Registry within the first three (3) years of their registration. 

The company which issues said bonds, shares and other registered instruments may not redeem, in any way, said investment for a period of ten (10) years.   The bonds or financial instruments which the tourist company issues must have a lifespan of at least ten (10) years, and may not be prepaid.  Said companies may not acquire their own shares or participation quotas or convertible bonds, nor may they grant loans to holders of such bonds, shares or registered instruments, nor make use in any other way of purchase or payment of such financial instruments in the period of ten (10) years. 

Article 24. Tourism yachts which visit Panamanian ports and whose stay shall not exceed a period of Ninety (90) days shall be exonerated from the payment of any kind of appraisals, taxes and services for arrival or anchorage, even those usually paid by local custom. 

Customs authorities shall only complete their routine inspections and registration.  It shall not be necessary to process documentation in this agency.  The Executive Branch shall regulate this provision.  

Chapter IV

Article 26. In order to request registration in the National Tourism Registry, applicants shall fill out the inscription form which is provided by the Panamanian Tourism Institute, which shall have a cost of Ten Dollars (B/. 10.00), in which they will provide the following information:

1. Name and Last Name, nationality, and personal identification card or passport number of the applicant.  If the applicant is a legal person, the name, the country of incorporation and the details of registration in the Public Registry, as well as the name and details of the Legal Representative.  
2. Domicile of the applicant.
3. Detailed and precise description of the tourist activities to be developed by the company.  In the case of a tourist project with an initial investment of more than Three Hundred Thousand Dollars  (B.300,000.00 ) this should be accompanied by a feasibility study, architectural drawings and such technical studies as the project requires and deserves. 
4. Amount of the investment to be undertaken by the applicant.
5. Number of employees which are projected. 
6. Any additional information which, according to the nature of the proposed tourist activity, the Panamanian Tourist Institute may require, provided that these are necessary to evaluate the merits of the application. 

Article 27. The registration form shall be accompanied by a copy of the applicant's personal identification card or passport, if a natural person; or a copy of the personal identification card or passport of the legal representative, in the case of a legal person, in which case a certificate issued by the Public Registry should also be presented, which shall evidence that the company is registered and in good standing, the names of the directors, officers and legal representative, the social capital of the company and the duration of the company. 

Article 29. Upon receipt of the registration form with all the information and documentation required, the Panamanian Tourism Institute shall proceed, in a period of no more than sixty (60) calendar days, to consider all technical, economic, legal and tourist aspects of the project presented; and if it complies, to register the company in the National Tourism Register and issue a certificate, in which the date of registration of the company in National Tourism Register shall be evidenced, and that, therefore, it is granted the benefits established in this Law. 

For projects related to National Monuments or Historic or General Historic Monuments and rustic protected areas concerning the National Cultural Institute or the National Renewable National Resources Institute [now the National Environmental Authority], a resolution from the respective entity shall be required, which shall be remitted to the Panamanian Tourism Institute, within a period of thirty (30) days as of the date on which the project documents were received.   

Article 30. Every person that receives the benefits of this Law shall:

1. Invest in the proposed tourist activities the amount indicated in the corresponding application and maintain said investment for the corresponding period, in accordance with this Law. 
2. Start construction, remodelling, rehabilitation or restoration of the land destined for the proposed tourist activities within a period of no more than six (6) months, counted from the date of registration in the National Tourism Register, except those cases in which the nature of the tourist activity requires a greater period, which shall be dictated by the Panamanian Tourism Institute. 
3. Begin to provide tourist services within a period which shall not exceed three (3) years, from the date of its registration, except in those cases in which the tourist activity requires a longer period, as dictated by the Panamanian Tourism Institute.  
4. Undertake the tourist activities in accordance with the regulatory rules issued by the Panamanian Tourism Institute. 
5. Maintain a register for the faithful registration of the exempt items, which shall be available to the proper officers of the Ministry of Exchequer and Treasury, the Ministry of Commerce and Industry and the Panamanian Tourism Institute. 
6. Provide a fulfilment bond, to the Panamanian Tourism Institute and the General Comptroller of the Republic, equivalent to one percent (1%) of the investment total.  This bond shall never exceed Three Hundred Thousand Dollars (B/.300,000.00).
7. Hire Panamanian personnel, in the proportion established in the Labour Code, with the exception of experts and specialised technical personnel which are deems necessary, with the prior authorisation of the appropriate national authorities. 
8. Provide technical capacitating to  Panamanian citizens and scholarships for training courses overseas, where it is not possible to obtain the training in national industrial or training centres. 
9. Renounce any diplomatic claims in the event of differences and conflicts with the State and submit the differences to the jurisdiction of the national courts. 



Chapter VI
Sanctions 

Article 31. The breach of the obligations set forth in Article 30 of this Law, shall result in the cancellation of the registration and forfeiture of  the respective guarantee bond, unless it is shown that the breach is due to force majeur or Act of God.  

The cancellation of the registration in the National Tourism Registry shall be ordered via a resolution issued by the Board of Directors of the Panamanian Tourism Institute, which shall be notified to the party.  Nevertheless, those persons that considered they are affected may present a reconsideration recourse before this authority.  The period in which this recourse shall be presented is five (5) working days as of the notification of the resolution cancelling the registration. 

Article 32. The artefacts imported under this Law may not be sold or transferred, without first paying the corresponding taxes and dues, calculated on the value of the goods at the time of the sale or transfer. 

The sale or transfer of imported articles, between companies protected by the provisions of this Law, shall only require the approval of the Ministry of Exchequer and Treasury. 

Except for that provided for in this article, every person that imports articles exonerated by this Law and sells, leases, transfers, disposes or in any other way gives them a use different from that for which they were given the exoneration, shall be sanctioned with a fine for an amount equivalent to three times the value of the import duty which they would have paid if the articles were liquidated at the moment of sale, lease, transfer or disposal. 

Article 33. Those that breach the provisions shown in this Law shall be sanctioned with a fine equivalent to five (5) times the value of the benefit they tried to obtain and the cancellation of any other benefit to which they might have had a right shall be cancelled, without prejudice to any other legal sanctions which may exist. 

Chapter VII
Concessions for Tourist Development

Article 35. Regardless of that provided in the previous article, the concession contracts may be entered into for a period of up to forty (40) years, when in the view of the Board of Directors of the Panamanian Tourism Institute, evidenced by a reasoned resolution, duly ratified by the Commission of Public Estate, Planning and Political Economics of the Legislative Assembly, the project is of such level of investment, economic impact and potential generation of employment that it requires a contractual relationship of longer duration, except those concessions of reverted lands which are under the administration of the Interoceanic Regional Authority, where that authority shall be responsible for granting the respective concessions.  

Article 36. The failure to fulfil the period established for the development of the tourist activity authorised to the concessionary company, shall result in the loss of the concession, resulting in   all improvements passing over to property of the State without any payment for said improvements, without prejudice to any other corresponding legal sanctions.  

Article 37. In order to grant a concession, the following requirements shall be met: 

1. The budget to the assigned to the project, its technical specifications and the corresponding timetable; 
2. The payment of indemnifications, should those be required; 
3. The type of services to be provided and the benefits for the users; 
4. The financial capacity of the offeror and the source of their funds; 
5. The experience of the offeror in similar projects; 
6. The body responsible for granting the concession shall undertake a permanent inspection, in every stage of the project, to ensure that the agreed upon terms are fulfilled. 

Article 38. The concessionary and where applicable, the subcontractors, shall fulfil the project timetable agreed upon until the project is completed.  If they do not complete the project or the project is not undertaken according to the technical specifications, the contract shall be terminated by administrative resolution, as well as the loss of the guarantee Bond which was given and all rights of the concession.  

Chapter VIII
Final Provisions

Article 40. The State shall take into account the indigenous reserves as zones for tourism development and shall promote the folklore of the culture and indigenous and rural traditions as tourist attractions. 

Article 42 (Transitory). The contracts in operation for tourist activities, existing as of the date of promulgation of this Law, shall be valid until their respective term ends.  

Nevertheless, if the company wishes to undertake additional investments, it may accept the incentives covered by this Law, provided that it complies with the requirements hereunder.   

Article 43. This Law repeals Law Decree No. 26 of September 27, 1967, modified by Law No. 81 of December 22, 1976, Cabinet Decree No. 77 of March 18, 1971, Cabinet Decree No. 102 of June 20, 1872 and all the legal and regulatory  provisions which may be contrary hereto. 

Article 44. This Law shall have effect as of its promulgation. 

It is hereby communicated and published

Given in Panama City 
on the 10th of May of 1994 

The President

ARTURO VALLARINO

The General Secretary
RUBÉN AROSEMENA VALDÉS

National Executive Branch

Presidency of the Republic

Panama, Republic of Panama
June 14, 1994

GUILLERMO FORD BOYD
Manager of the Presidency of the Republic 

RICARDO A. FÁBREGA
Ministry of Commerce & Industry