By means of Law No. 223 of June 8, 2021 ("Law 223"), new tax incentives were established in Panama for entities specialized in the operation of recycling plants and for those engaged in the plastics industry which, due to Law No. 187 of 2020 (which regulates the reduction and progressive replacement of single-use plastics), reconvert their activity and replace their plastic products with plastic-free biodegradable materials.
The operators of industrial recycling plants will have the right to exemptions, for five years, on Income Tax, Dividend Tax and Import tax on equipment and machinery required for manufacture, although they will remain obliged to file Income Tax declarations annually. On the other hand, companies which have reconverted their activity, will be entitled to an Import Tax exemption on equipment and machinery, as well as a 15% discount on their Income Tax, also for five years.
The process for requesting the application of the abovementioned benefits shall be regulated by the Executive Body, which shall exclude from such benefits those entities which are simply dedicated to collecting recyclable materials for export and those which have replaced plastic in their operations with synthetic biodegradable plastic, among other oil derivatives.