New legislation improves mining incentives in Panama

New legislation aimed at harmonizing tax incentives is expected to benefit Panama’s nascent mining industry.

The Universalization of Incentives Law, recently signed by President Ernesto Perez Balladares, introduces a tax credit for all infrastructure costs incurred by a mining company.

The tax credit can be applied against 25% of corporate income tax payable in any year.

In addition, the corporate tax rate will be reduced to 30% from 34%. With the application of the current 20% tax discount for mining operations, the new rate will result in an effective 24% rate of corporate income tax, provided all authorizations required to place certain projects into commercial production are obtained by 1988.

The Balladares government has specifically targeted mining as one of the key sectors to be developed in order to diversify the country’s economy.

The law is expected to be the first of a series of legislative enactments designed to make Panama’s mining industry more competitive.

Several North American-based companies are exploring in Panama for deposits of precious and base metals. A few gold mines are already in operation, and a number of copper projects are undergoing feasibility studies.