(a) To invoice, from an office established in Panama, the sale of merchandise or products for a sum which is greater than the sum at which said merchandise or products have been invoiced to the office established in Panama provided that said merchandise or products are only handled outside the country.
A common example for which this rule applies is when a Panamanian corporation is dedicated to the sale of products manufactured in Brazil with destiny to Uruguay. Said products never enter Panamanian territory. However, the invoice is issued by a Panamanian corporation but the income is from a foreign source. Therefore, it is exempted from paying income tax in Panama.
(b) To handle, from an office established in Panama, transactions which are perfected, finalized, or which have effect in other countries.
This item applies to electronic commerce transactions carried out by a Panamanian corporation. This case would be of those Panamanian corporations that receive an income through their web page, provided that said website is located in a server outside of the jurisdiction of Panama and that the client paying through the website is not located in Panama. The income generated will be exempted from paying tax in Panama.
(c) To distribute dividends or participation of shares of legal entities that do not require Notice of Operation* or do not generate taxable income in Panama when such dividends or participations come from revenue which is not generated within the territory of the Republic of Panama, including revenue arising from the activities mentioned in clauses a and b of this paragraph.
When the Panamanian corporation that performs any of the two above examples of activities mentioned in items (a) and (b) of this Article decides to distribute the utilities or dividends product of the activities carried out in Uruguay, Brazil, or any other country except Panama, said distribution of dividends will be 100% excepted of income tax on the dividend.
It also applies to those Panamanian corporations that have commercial or economic activity outside of the jurisdiction of the Republic of Panama and decide to distribute or sell participation quotas. This will be totally exempted from income tax over the dividend in the Republic of Panama.
*The term “Notice of Operation”, formerly known as Commercial License, was introduced by Law 5 of 11th January 2007.