25. Other Taxes
Franchise Tax. National and foreign companies registered in the Public Register as a corporation (sociedad anonima) must pay an annual franchise tax of US$150. The tax is due within three months after the anniversary date of the articles of incorporation, and is deductible for income tax purposes.
Land and Property Taxes. Taxes on property are levied by local
authorities. The taxpayer is the owner, and the rates are based on the cadastral value of the property, payable in quarterly installments.
Exemptions include new properties (for a ten-year period) and properties with a cadastral value of less than U.S.$20,000 (effective January 1, 1996).
Property Value
Over Not Over Tax
US$ 0 US$10,000 0%
10,000 20,000 1.40
20,000 50,000 1.75
50,000 70,000 1.95
75,000 2.10
License Tax. A 1% license tax is paid annually by all corporations and individuals engaged in a trade or business, except those exempted by specific
laws (e.g., certain leasing activities, educational institutions, and professional activities). The tax is based on the individual or corporation annual net worth, and varies from a minimum of US$10 up to US$20,000. Payables to a home-office are considered net worth.
Banking Operations Tax. Banks are taxed depending on the type of license granted. Tax is nominal and payable within the first three months of each year. Taxes are as follows:
General license banks US$25,000
International license banks 15,000
Exchange houses 660
Insurance Operations Tax. Insurance companies are charged with an operation tax based on the total assets as of December 31 of each year. Taxes are as follows:
Assets
US$5 million or less US$10,000
US$5 million to US$9,999,999 20,000
US$10 million and more 25,000
Finance Companies Tax. Finance companies (involved in consumer loans operations) are taxed at 2.5% based on the paid-in capital as of December 31 of each year. Tax will not exceed US$12,500. and is payable during the first three months of the following year. Shipping Agencies Tax. Shipping agencies are taxed at 6% on the total services rendered and billed to ships in Panamanian territory. Tax excludes reimbursable expenses and local shipping. Payment is due within the first 15 days of each month.
Tax on Services. A 5% tax is charged on the following services: cable TV or similar microwave services (remote controls), securities handling and delivery, and security boxes.
COMPUTATION OF TAXABLE INCOME
26. Capital Gains The taxable gain is the difference between the cost of the asset and the proceeds of the sale. In the case of real estate, taxable gain is the difference between the sales price and basic cost (acquisition cost or assessed value or net book value of properties used for commercial purposes); less expenses incurred (such as realtor commissions and
legal and notarial fees); less an allowance of 10% of the basic cost multiplied by the number of full years the property has been owned. This 10% allowance cannot exceed the profit on the sale. For tax purposes, when more than one transaction occurs during the same fiscal year, losses can be used to offset gains to determine the taxable gain on real estate.
27. Depreciation and Depletion
Depreciation is based on the estimated useful life of the asset. Beginning in 1994, the useful life of an asset cannot be less than three years for movable assets (e.g., furniture, equipment) and thirty years for buildings. Depreciation may be computed, at the election of the taxpayer, using the following methods:
q Straight-line method;
q Declining balance method; applying a fixed percentage over the declining balance;
q Sum of the year digits.
Exploration costs paid or incurred are deductible for
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