Measures enacted earlier in 2015 require the withholding of income tax on payments remitted for services provided by nonresidents, whether inside or outside the Panamanian territory, to taxpayers in a “loss position,” to governmental institutions, and to organizations not considered to be income taxpayers. A subsequently issued executive decree (Decreto Ejecutivo No. 263) clarifies these rules.
For instance, the executive decree No. 263 clarifies that individuals and corporations that, because of their international activities, will not be required to withholding tax on payments made for certain goods or services provided abroad. The decree also expands the types of organizations that are not subject to the rules on withholding.
The decree also clarifies what information must be included in an opinion from a “tax specialist” to support the taxpayer’s position that withholding tax is not required in situations of payments of dividends, interest, royalties, professional fees, or payments of a similar nature.
The decree further clarifies that concerning accounts payable to parent companies or affiliates located abroad, capital reductions can be made once the total earnings subject to dividend taxation are distributed and shareholders have cancelled any outstanding accounts payable to the corporation by the time the capital reduction takes place (i.e., paid capital without the retained earnings subject to dividend taxation).
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