Regional or Headquarters offices are corporations which from Panama carry out operations or services to their main offices or subsidiaries in other countries. "SEM" corporations may operate as a foreign company registered in Panama or as a Panamanian company wholly owned by the "mother" multinational company.
Act No. 41, a SEM Corporation is defined as: "That multinational company that operates from Panama offering the services described in this Act to its headquarters, subsidiaries, affiliates or associated companies, or set its headquarters in Panama, hereinafter Business Group. The Headquarter will always be part of a multinational company with international, regional or important operations in their origin country".
- "SEM" Corporation Benefits
Following are some of the benefits to SEM Corporations
Corporate tax incentives
- Exemptions of Income Taxes (ISR): There will be no income taxes to those SEM Companies by services performed outside the Panamanian territory to its Business Group. However, whether the SEM provides service to its local affiliate, the SEM will have to retain the local income tax.
- Exoneration of Sales and Services Taxes (ITBMS): As export services, as long as those services are provided to business group entities abroad.
- Dividend tax and surtax, and use of Fiscal equipment: The companies holding a SEM license are exempt from dividend taxes and surtaxes. Also these companies are not subject to use fiscal equipment.
Incentives to Executive Employees
- Exemptions of Income Taxes (ISR): There will be no income taxes when executive employees receive salaries from a foreign source, as long as they are holding a Permanent Personal Visa "SEM".
- Exemptions of Taxes for import household goods: There will be no payment taxes to those executive employees that want to import their household goods on their first flight to Panama, as long as they are holding a Permanent Personal Visa "SEM".
- Exemptions to be affiliate to the Panamanian Social Security: Executive employees whom are receiving salaries from a foreign source, as long as they are holding a Permanent or Temporal Personal Visa "SEM", they will not have to be affiliated to the Panamanian Social Security.
- Permanent Personnel Visa: for 5 years renewable for the same time frame. Holders of this type of Visa do not require a Work Permit.
- Permanent Personnel Visa for dependents: This type of Visa will be granted for the same period of time as the "SEM" personal.
- Temporal Personnel Visa: for 3 months renewable for the same time frame. To technical or training personnel. Holders of this type of Visa do not require a Work Permit.
- The "SEM" Corporation can provide services to companies that are not related to the business group of companies. The Law allows that services such as technical assistance (consulting and/or training) may be provided to clients of the "Group".
- Creation of a Central office within the Commerce Ministry in order to improve their administrative efficiency and avoid bureaucratization of procedures relating to SEM License acquisition and visas for their foreign personnel and their dependants.
- The validity period of SEM licenses are indefinite, as long as no infraction is incurred. The Commission could set penalties, even the cancellation of the License.
- Activities Permitted to be a candidate for "SEM" Corporation
The following activities are exclusively permitted to be a SEM Corporation:
- The Government and/or Administration of business operations in a specific or global geographical area of a company of the business group. The following are examples of these services: strategic planning, business development, personnel management or training, operations and/ or logistic planning.
- Logistics and storage of components or parts, required for the manufacturing or assembly of manufactured products.
- Technical assistance to companies of the business group or to clients that have acquired any products or services on behalf of other companies of the same economic group.
- Financial management including treasury or back-office services.
- Company accounting.
- Elaboration of designs and/or construction plans that constitute part of the business activities of the economic group.
- Electronic processing of any activity included in the consolidation of operations of the business group, including network operations.
- Counseling, coordination and follow-up of marketing and advertising guidelines of goods and services produced by the economic group.
- Operations and research support and development of products and services for the business group.
- Any other type of analogous services previously approved by the Cabinet Council through motivated resolution.
- About the Assets of the Business Group and the Social Capital to be candidate of a "SEM" Corporation
- The assets of the Business Group should be equal or greater than TWO HUNDRED MILLION U.S. DOLLARS (US$ 200,000,000.00).
- When the Headquarter Office will be established in Panama, certification should be presented by the Treasurer or the Secretary of the Corporation, stating that the Social Capital is at least TWO MILLION U.S. DOLLARS (US$ 2,000,000.00).
- Requirements to apply for a "SEM" License
The following requirements are necessary in order to be granted a SEM License:
Solicitation FORM (will be provided by our office when the decision of filing for the License is reached) with the following documents attached:
- Social Pact of the Corporation, must indicate as one of its objectives the interests of establishing as a SEM corporation;
- Power of Attorney (text will be provided by our office when the decision of filing for the License is reached);
- A sworn declaration stating the intention of establishing as a SEM in Panama and that the corporation complies with all the requirements to obtain the license. This should be signed by the Legal Representative of the Corporation. (Will be provided by our office when the decision of filing for the License is reached);
- Consolidated Financial Statements of the Business Group, duly certified by Certified Public Accountants. In case these Statements are written in a foreign language or in a currency different from US$, notes and annexes should be presented duly translated to Spanish and converted to US$;
- Banking Reference Letter.
- Certification issued by the Treasurer or the Secretary of the Corporation, indicating shares of the Business Group within the Corporation, in order to proved the ownership of the corporation. This Certification should be duly authenticated by Public Notary.
All Documents coming from abroad should be:
- Duly legalized or apostilled (in case of public documents)
- Translated into Spanish (in case of a different language)
- Converted to US$ (in case of a different currency)
- Some Corporations registered as SEM are the following:
Procter & Gamble (U.S.A.)
LG Consulting (South Korea)
Alico Services (U.S.A.)
Hyundai (South Korea)
Western Union (U.S.A.)
Pan American Life (U.S.A.)
Moffatt & Nichol (U.S.A.)
J.Safra Asset (U.S.A.)
SAB Miller (Africa/U.K.)
Sanofi Aventis (France)
Alfa Laval (Sweden)
Puig B&F Group (Spain)
VF Sourcing (U.S.A.)
Wrigley Latin America (U.S.A.)
Atlas Copco Panama (Sweden)
- Duration of the Process to obtain a "SEM" License
Once all information has been completed, the Firm on behalf of the Corporation will submitted all the required documentation before the Commission of Multinational Corporation Headquarters (Sede de Empresa Multinacional – SEM).
Once the Commission receives the documentation they will review it and take approximately within 15 to 30 working days to respond.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.