The Government of Panama enacted Law No. 54 of July 22nd, 1998, "whereby measures are taken for the Legal Stability of Investments", which offers to the investor, by a period of 10 years, the guarantee of the static use of the effective legal regime at the time of realizing their investment.
We can identify this new Law by the following characteristics:
First, this law returns to reinforce the constitutional principle of “ National” treatment; equality and not-discrimination between domestic and foreign investors.
Second, the Legal Stability Regime is granted to natural or corporations, either national or foreign, which carry out investments in Panama and develop the following activities: tourism, industries, agricultural exports, agroforestation, mining, export, processing zones, commercial and petroleum free zones, telecommunications, construction, port and railroad development, electric generation, irrigation and efficient management of hydric resources and any other activity approved by the Cabinet Council, with the prior recommendation of the Ministry of Commerce and Industries.
According to this Law, any national or foreign person or company who invests previously in some of the described activities, and that satisfy totally with the requirements and obligations established in the law, shall receive the following benefits by a term of ten years:
• Legal stability: In the event of any new legal provisions which can vary the rights hereby acquired Law, these do not affect their constituent regime, unless causes of public utility or social interest mediate;
• Tax stability in the national order, thus will be subject only to the effective regime to the date of its registry before the Ministry of Commerce and Industries;
• Municipal Tax Stability: The applicable municipal taxes at the time of the investment was made will not be subject to modifications during the following five (5) years.
• Customs regimes Stability that are derived from the special laws, when they are granted for situations taxes return, exonerations, temporary admission and other similar; and
• Labor Contract Stability: Any provisions of Panamanian labor contracting legislation and other international agreements adopted by the Republic of Panama will in force for ten years.
The investors interested in obtaining the benefits of this law must know, among others, the following main requirements:
• To make or commit to an investment superior to (US$2,000,000.00).
• To carry out, maintain and develop during the stipulated term and according to an investment plan.
• To give up all diplomatic claim, in respect of companies formed wholly or partly with foreign capital, or where there are foreigners who own or have control over the shares, unless it is a case of refusal justice.
• To comply with all legal and regulations, of tributary and labor order, acquired in accordance with the arranged one in the own law.
It is important to mention that if even a company has been registered and during this period, some tax exemption is derogate or some fiscal disposition is modify, such modification or changes, the investor will continue paying its taxes, in accordance with the exemption or the effective fiscal norm at the time of the registry of the investor, so the changes made do not affect him.
If any of the changes implicate the reduction or the increase of any tax, the registered investor can pay the lowest between the new tax and the previous one. In any case, the amount of the new tax to pay could not be superior to the previous one.
Finally, this law guarantees to investors that the State shall take direct or indirect measures that implies modification of the law that regulate investments, except this measurement is taken base on the following criteria (i) that these measures are taken for reasons of public utility or social interest, according the Constitution; and (II) that such measures are not discriminatory.