As Panama is a country focused mainly on services, tourism plays a very important role in the gear of its national economy. Tourism represents 10% of the gross domestic product (GDP) and contributes US$ 7,000 million dollars in foreign income, according to data from the National Tourism Authority.
After the pandemic, tourism was one of the most affected sectors, the GDP fell by 17.9% and Panama received 70% fewer visitors than in 2019, according to the World Tourism Organization (UNWTO).
For this reason, one of the goals that Panama seeks for the coming years is to promote tourism to its maximum potential to recover from its decline during the years of the pandemic. Consequently, modifications to the Tourism Law (Law 80/2012) have been created to stimulate further development for this sector.
Law 314 of June 20, 2022, seeks to encourage tourism, modifying articles of Law 80 referring to tax benefits and compliance bonds.
Article 9 was modified in the sense that, it will recognize as a tax credit of 60% of the total value of the project declared before the Panama Tourism Authority, excluding the value of the land and the infrastructure of the master plan, plus 5% of the value to be recognized from the infrastructure of the master plan, declared before the Tourism Authority in Panama in order to encourage investment and financing for the development of new tourist public lodging establishments or expansions of existing ones. Previously, Law 80 gave a deductible of up to 50% of income tax expenses, the amounts invested by natural or legal persons in the purchase of bonds, shares and other registered instruments issued by the tourist company. The increase in the percentage in the tax credit creates an incentive for the generation of greater tourism projects in Panama.
The time to grant loans to holders of bonds, shares and other financial instruments issued by the tourism company or real estate investment company registered in the National Tourism Registry was modified from ten to five years. Furthermore, they may not use any other modality of acquisition or payment for a minimum period of five years, instead of ten as was previously established in Law 80. These modifications give the investor greater freedom for the provision of assets in a shorter period of time than the one previously set.
To attract green or environmentally friendly investments, Law 314 includes the following: tourism projects must have their respective environmental impact study to obtain the resolution of recognition of tax credits granted by the General Directorate of Revenues, without the ability to be paid in advance.
Added to article 16, is the paragraph of the compliance bond for those tourist companies and real estate investment companies that are benefited with the bonds, shares, and other financial instruments. These must present the compliance bond for 2% of the total investment up to a maximum of one million balboas (B/1,000,000.00). The deposit must cover the construction period of the tourism project plus one additional year, counted from the date of start of operation of the project.
The modifications within the Law seek to encourage local tourism by giving tax benefits to investors and generating greater security in the projects. The objective is that, with this new panorama, an attraction in the development of tourism is created and, consequently, greater financial income for the national economy.