• 1. Freight tax

Freight tax

Corporate tax : 3% of taxable income on all cargoes loaded or discharged (excluding transhipment cargo) at Panamanian ports.

Taxable income is the portion of the freight earned within Panamanian territory, calculated as follows:

The distance cargo transported on board the vessel within Panamanian Territory
____________________________________________

Total distance cargo transported on board the vessel
x Gross Freight

Exemption Agreements

Residents of the following countries may benefit from double taxation agreements which reduce or waive the corporate tax.

Double taxation agreements

Country Reduction Date of entry
into force
Date of effect
Barbados   18/02/2011 01/01/2012
Czech Republic   25/02/2013 01/01/2014
France 2, 3
100% 01/02/2012 01/01/2013
Ireland 100% 19/12/2013 01/01/2013
Israel 2, 3 100% 26/05/2014 01/01/2015
 Italy 100% 01/06/2017 01/01/2018
Korea, Republic of 100% 01/04/2012 01/01/2013
Luxembourg 100% 01/11/2011 01/01/2012
Mexico 100% 30/12/2010 01/01/2011
Netherlands 100% 01/12/2011 01/01/2012
Portugal 100% 10/06/2012 01/01/2013
Qatar

01/01/2012
Singapore 1 100% 19/12/2011 01/01/2012
Spain 2, 3 100% 25/07/2011 01/01/2012
United Arab Emirates


01/01/2014
United Kingdom 1
100% 12/12/2013 01/01/2014
 Vietnam
 100%  01/01/2018  01/01/2018
Limited Treaties (Air and Sea)
Aruba 100% Signed 28/04/1997  
Netherlands 100% 31/12/1997 01/01/1998
Netherlands Antilles 100% Signed 28/04/1997  
United States 100% Signed 30/12/1987  
Uruguay 100% Signed 18/02/1999  
Comprehensive treaty negotiations currently in progress:
Signed but not ratified
Italy   Signed 31/12/2010  
Finalised but not signed
Bahrain      
Belgium      
In the process of negotiation
Austria      
Hungary      
Japan      
Vietnam      

Exemption based on reciprocity

Freight revenues generated by merchant vessels registered (i.e., flagged) in any of the following countries, or freight revenues earned by companies domiciled (4) in any of the following countries are exempt from paying corporation tax.

Panama Fiscal Code: Article 708(e)
Costa Rica Treaty (other than double taxation agreement)
   
  General Director of Incomes Memorandum No.
Bahamas 201-02-056 dated 16/03/1995
Belgium 201-38 dated 21/03/1980
Bermuda 201-07 dated 24/01/1980
Canada 201-001 dated 14/01/1984
Cayman Islands 201-30 dated 12/03/1980
Chile 201-032 dated 26/01/1982
China 5 201-90 dated 02/09/1987
Denmark 201-159 dated 18/11/1980
Greece 203-02-107 dated 23/10/1985
Italy 201-305 dated 26/07/1983
Korea, Republic of 201-05 dated 23/01/1989
Liberia 201-001 dated 14/01/1984
Netherlands 201-71 dated 02/05/1980
Netherlands Antilles 201-138 dated 08/09/1980
Norway 201-55 dated 08/11/1979
Sweden 201-221 dated 02/12/1982
Switzerland 201-01-365 dated 01/09/1987
United Kingdom 201-32 dated 24/01/1984
Virgin Islands (British) 201-527 dated 13/05/1996

Notes

  1. The treaty provides that profits from the operation of ships in international traffic shall include profits from the rental on a bareboat basis of ships, where such rental  is incidental to the operation of ships in international traffic.
  2. Profits from the operation of ships in international traffic shall be taxable only in the Contracting State in which is situated the place of effective management of the company.
  3. If the place of effective management of a shipping enterprise is aboard a ship, is deemed to be situated in the Contracting State in which is situated the home port of the ship or, if no such home harbor, in the Contracting State of which the operator of the ship is a resident. 
  4. Exemption is extended to the country of domicile provided that said country grants reciprocal treatment for income earned by a company incorporated in Panama.  5.Only applies to the province of Taiwan.

Remarks

Sources advise: "The suggested procedure for the Owner or Operator to obtain exemption is to obtain a certified copy of the registration of the Company or Corporation with this document being authenticated by the Panamanian Consulate in that country. This, together with a copy of the charter party, should be forwarded to the local agent in Panama who in turn should enclose a copy with Spanish translation when filing the report with the Panamanian Tax Authorities." 

 

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