Tax Reduction for MSMEs in Panama

The Special Income Tax Regime (ISR) introduced by Law No. 258 establishes a progressive tax system designed specifically for micro, small and medium-sized companies in Panama. This program was designed to stimulate economic growth and facilitate the sustainability of entrepreneurs who face significant challenges in the current economic context.

• Main objective: reduce the tax burden associated with income tax to promote the formalization and growth of MSMEs.
• Comprehensive support: will benefit both legal entities (companies) and natural persons (freelancers or individual entrepreneurs).

In addition, the Ministry of Economy and Finance (MEF) has stressed that this system will be key to creating a more favorable environment for business, offering lower and simplified tax rates.

The new tax regime proposes progressive tax rates that vary according to the level of gross income of MSMEs. These rates are designed so that smaller businesses pay less taxes compared to companies with greater economic capacity:

• 0% to 7%: for gross revenues up to B/. 11,000 per year.
• 7% to 10%: for revenues between B/. 11,001 and B/. 50,000.
• 10% to 15%: for incomes greater than B/. 50,000.

This new scheme not only seeks to alleviate the tax burden, but also to encourage companies to integrate into the formal system, thus accessing multiple benefits such as public funding and training programs.

To qualify as MSMEs and take advantage of the benefits of Act No. 258, individuals or companies must meet certain specific requirements. According to the criteria established in the Ampyme Business Register:

1. Microenterprises: businesses with annual gross revenues up to B/. 150,000
2. Small businesses: annual gross revenues between B/. 150,001 and B/. 1,000,000
3. Medium-sized companies: annual gross revenues between B/. 1,000,001 and B/. 2,500,000

In addition, it is mandatory that these businesses form part of the Ampyme Business Register to demonstrate their classification as MSMEs. This registration is managed by the Ministry of Commerce and Industries and can be carried out online, facilitating the process for entrepreneurs and entrepreneurs.

If you are a natural person who operates as a microentrepreneur or self-employed person, you can also benefit from this tax reform. To access this special ISR regime, you must meet the following criteria:

• To be a tax resident in Panama: your operations must be registered in the country.
• Income within the allowed range: your annual gross income should not exceed the limits established by the type of business.
• Ampyme enrollment: It is an essential requirement to validate your status as a micro or small entrepreneur.

Additionally, it is recommended to have basic financial statements that reflect the income and expenses of your economic activity.

The formalization of micro, small and medium-sized companies is not only the way to enjoy tax benefits, but it also opens doors to other essential resources:

1. Access to finance: Get loans and financial support at preferential rates.
2. Training Program: Access workshops and courses organized by Ampyme and other institutions.
3. Reduction of legal risks: Formalization protects companies from potential legal or commercial conflicts.

With this framework, Panama seeks to improve the local entrepreneurship landscape, encouraging small businesses to achieve sustainable success.