Legal regime f incentives t MARITIME FINANCING Law 50 f June 28th, 2017 CONSIDERATIONS FOR THE CREATION OF LAW 50 Why was this law created? In the maritime wrld there are cities that, based n their gegraphic and ecnmic cnditins, are renwned as internatinal maritime financial centers. Examples f these cities wuld be: New Yrk, Lndn, and Singapre. Panama has a privileged gegraphical lcatin in the regin, and glbally; Since 1970, Panama has becme a financial center where multiple banks with lcal and internatinal capital perate. In recent years the rigin f the capital f several f its members has been reginal; Panama has flexible regulatins in terms f capital mvements; Panama handles the U.S. dllar, the preferred currency fr financing syndicated prjects; Panama has the largest merchant marine fleet in the wrld, with clse t 8200 ships registered under the Panamanian flag; and Tgether with the expanded Canal, its prts, auxiliary maritime services, and free znes, Panama is a glbal imprtant maritime lgistical hub with the ptential fr cnstant grwth, and f attracting financial entities that wish t develp the pprtunities these may prvide. AUTHOR Belisari Prras bprras@pmalawyers.cm
WHO WILL BE ABLE TO OFFER, STRUCTURE AND GRANT MARITIME FINANCING UNDER THIS NEW LAW? Article 3 f Law 50 establishes that thse allwed t perfrm this type f financial activity peratins will be: 1. The banks f general, internatinal r representative license; 2. The cmpanies that carry ut peratins destined t design, structure and develp the financial cnditins fr maritime credit and their guarantees and btain the crrespnding authrizatin and recgnitin; 3. The financial cmpanies regulated by Law 42 f 2001; 4. The financial leasing cmpanies regulated by Law 7 f 1990; 5. Maritime financing entities; and 6. Cnsrtiums r "Jint Ventures" between the State f Panamanian and private entities. WHO WILL BE THE REGULATORS OF THESE ACTIVITIES? Chapter VIII, articles 18 t 20 f Law 50, establish that the peratins f this new activity will be gverned by a gvernmental entity called the Certificatin and Supervisry Bard f Maritime Financing Entities. It is prvided that the cuncil will be cmpsed f representative members frm: The Panama Canal Authrity (ACP) The Panamanian Maritime Authrity (AMP) The Ministry f Ecnmy and Finance (MEF) The Ministry f Cmmerce and Industry (MICI) The Labr Ministry (MITRADEL) The Natinal Migratin Service (SNM); and The Financial Crdinatin Cuncil Each representative member will be appinted fr a perid f 5 years that will cncur with the presidential term, and may be re-elected fr additinal perids. REGARDING THE PROJECTS AND THEIR PROCEDURES T btain the benefits established in Law 50, persns r entities wishing t engage in the maritime financing business must btain a certificatin as a maritime financing entity thrugh the crrespnding authrities. Likewise, maritime prjects that wish t adhere t the benefits established in Law 50, must btain a certificatin frm the relevant authrities, which recgnize said prjects as a Fundable Maritime Prject, as the case may be.
Article 2 f Law 50 defines the fllwing as Financeable Maritime Prjects: a) Ship building; b) Cnstructin f shipyards and the adaptatin f ther businesses, wrkshps r yards fr the cnstructin f ships; c) Cnstructin and repair f cntainers that are used fr freign trade; and d) Cnstructin f Sea Wind Farms. The prcedures fr certificatins will be carried ut thrugh a Maritime One-Stp Department, which will be cnsidered a department f the Directrate General f Prperty f the Public Registry f Ships f the Panama Maritime Authrity. Law 50 establishes that public entities that will have shared functins with the Panama Maritime Authrity fr the develpment f the afrementined Maritime One-Stp Department, must sign inter-institutinal agreements t specify functins and appint fficials, within 90 calendar days fllwing the enactment f Law 50, and that such agreements will be further apprved by Executive Decree. TYPES OF INCENTIVES a) TAX INCENTIVES Law 50 grants certain tax incentives thrugh refrms made t articles f the Tax Cde f the Republic f Panama and thrugh special laws f the Republic f Panama such as Law 7 f 1990 f Leasing. These mdificatins are set frth in Chapter IX f Additinal Prvisins f which we can mentin amng thers, the fllwing: Paragraph e) f article 708 is mdified t the effect that, in additin t incme frm internatinal maritime trade frm dmestic merchant ships registered in Panama, incme frm financing fr the cnstructin and purchase f ships that are part f the Natinal Merchant Navy and that are duly registered, will als nt be subjected t incme tax. Likewise a paragraph is added t article 708 that establishes an incme tax exemptin fr: The incme f cmpanies that establish their peratins in the Republic f Panama, with the purpse f creating cnstructin yards fr cmmercial ships, yachts, military ships and ther types f ships fr transprt f merchandise r passengers and / r cmpanies dedicated t financeable maritime prjects; Earnings frm incme arising frm interests and cmmissins earned by ships and/r maritime financing entities stemming frm granting a naval mrtgage; and
Earning frm incme arising frm insurance and re-insurance that guarantee credits fr maritime financing entities that are duly certified and/r financeable maritime prjects. Mrever, as part f these tax incentives, Law 50 sets frth the fllwing: It s article 24 mdifies article 23 f Law 7 f 1990, which regulates the leasing cntract, establishing that lease cntracts that stem frm leasing f duly registered merchant ships fr internatinal maritime trade, shall nt be subject t incme tax in the Republic f Panama; and Article 6 establishes imprt tax and ther fees at 3% fr intrducing int the cuntry, machinery, marine equipment, rlling industries, materials, tls, and ther necessary elements fr ship cnstructin r the exclusive use f shipyards. Lastly, article 28 f Law 50 establishes that exemptins and tax incentives granted and established in paragraph e) and in the last paragraph f article 708 f the Tax Cde, and in article 23 f Law 7 f 1990, shall have a duratin perid f 20 years frm the mment the law enters int effect. b) MIGRATORY AND WORK INCENTIVES Chapters IV and V f Law 50 regulate migratry and labr incentives. Amng thers, the fllwing is established: The creatin f a migratry permit and a wrk permit fr freign wrkers fr maritime financing entities r financeable maritime prjects; The migratry permit will include the permit fr multiple entries and exits frm the cuntry; Migratry permits will be granted within the ranges f 10%, 15%, 20%, 25%, and t wrkers f trust, as well as in cmpanies that emply less than ten peple, fr a maximum f up t five years; and Wrk permits shall be granted fr a perid f ne extendable year fr a perid f up t five years. CONCLUSIONS The new law has been created in rder t take advantage f the gegraphic, lgistical and ecnmic advantages f the Republic f Panama, with the intentin f supprting ur financial center and creating a new ple fr ecnmic develpment fr the cuntry; The new law, based n the incentives it prvides, and the expedited and centralized prcedures it allws thrugh a ne-stp department, seeks t attract investments fr the maritime and lgistics sectr thrugh financial and banking entities bth lcal and freign; and
The law s ultimate gal is t turn Panama int an internatinal maritime finance center, fcusing first in the shrt term n the reginal market, t then mve in the medium term t the glbal market.