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Advantages that Panama offers for investors in tourism projects ⛳

Marveling at the intersection of two great continents and two vast oceans, Panama is a small country rich in history, culture, wildlife, tropical beaches and everything else you want for a vacation. Those are just a few of the many reasons why most investors love to venture into this fascinating country.

Panamá is a paradise

Not just for the mere reason of its rich culture and pristine beaches, this paradise is unlike any other due to its tax incentives. This jewel of Latin America is considered the home of the most successful foreign direct investment (FDI) in Central America.

Advantages of Panama over other Central American countries

The World Investment Report of the United Nations Conference on Trade and Development (UNCTAD) for 2020 highlights Panama as a country that has the largest amount of FDI among Central American countries. The report confirms an FDI inflow amounting to around $4.8 billion and a total FDI stock of almost $66 billion for 2019. With these large numbers, Panama is sending a strong message to national and international developers.

In addition, the following are other important reasons why Panama is enjoying a greater advantage over its neighboring countries. First, this country is a dollarized economy, it has a globally connected maritime and air logistics network and it has both first-class communication services and financial solutions platforms. Second, coupled with an investment grade credit rating, Panama is seeing admirable progress over the century.

These advances put Panama in better shape for public and private investment along with the rise of major infrastructure projects. With these improvements, Panama City has boosted the supply of restaurants and hotels, a sector that only represents 4% of the Gross Domestic Product (GDP) in 2019. For the same year, tourism is only 14% of the total GDP. . However, he brought more than 3 million people to the country.

Panama tax incentives for tourism investments

All the high figures mentioned for Panama have been possible thanks to changes in tax incentives for tourism investments. The highlights of this amendment are:

• The tax credit can now be used every year initially after the second year of creation of the investment. The maximum amount of such tax relief may be up to 50% of the calculated income tax with a prohibition not to exceed 15% of the amount of the initial tax credit. This benefit can potentially consume up to the entire tax credit for a maximum period of 10 years from when it was granted.

• Investors indirectly linked to tourism companies will receive tax incentives until December 31, 2025.

• Companies registered in the National Tourism Registry can issue financial instruments such as bonds, shares, etc. Also included are companies duly registered as real estate investment companies in the Superintendence of Securities, the National Registry of Tourism and any stock exchange in Panama.

• The validity of these financial instruments must cover a minimum period of five years, not settled in advance, nor acquired by any related tourism company.

• The expired registration of hotels or companies between January 1, 2014 and December 31, 2019, will have the possibility of using the National Tourism Registry. In this way, you will keep the incentives established in your records until December 31, 2025. For companies with expired registration after 2019, they will be valid until the last day of December 2025.

The advantages of Panama tax incentives in a nutshell

The main advantage will be the significant reduction in the risk of losing the investor's capital if the tax credits are used or transferred to third parties. In this way, the potential return on investment can also improve, as investors will receive the return on capital sooner than expected.

One more advantage of these incentives is the lower uncertainty of investment projects due to the influx of tourists. Reducing investment risk through tax credit grants will allow investors a broader window of opportunity to stabilize their investments without shaking up their return on capital.

Last but certainly not least, tourism will potentially create inclusive social development in areas with infrastructure projects, only if these investments are carefully planned and carried out while protecting natural resources, the main source of tourist attraction.

Panama's tax incentives open a door to various opportunities not only for the improvement of tourism but also for the development of advanced infrastructure projects. Mitigating possible financial risks for developers.

In the future, we will see a country with a diversified and sustainable economy creating a positive impact in its communities.

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