Panama establishes legal framework on microelectronics and semiconductors
Through Executive Decree No. 7 of April 30, 2024, the Republic of Panama established the legal framework to develop, promote and create the conditions for scientific research activities, technological development, production and distribution of microelectronics and semiconductors, to achieve sustainable and inclusive economic development, through a National Strategy for the Development of the Semiconductor and Microelectronics industry, whose objectives are:
1. Insert the Republic of Panama into the global microelectronics and semiconductors’ chain.
2. Create advanced capabilities in scientific research, technological development, design, production, and large-scale distribution for semiconductor technologies.
3. Address the skills shortage by attracting, mobilizing, and generating qualified human talent to strengthen the semiconductor sector, including through the upskilling of workers and the insertion of foreign human talent.
4. Expand the industrial ecosystem of the Republic of Panama, through the vertical and horizontal integration of the microelectronics and semiconductor market by promoting technological entrepreneurship and business development in the country in scientific research, technological development, production and distribution in the microelectronics and semiconductor sector.
5. Strengthen the technological capabilities of the Republic of Panama in the design and production of next generation chips, through the integration of scientific research, technological development, innovation, and advanced packaging activities.
6. Ensure cooperation and transfer of knowledge, both national and international, between the different agents linked to scientific research, technological development and production in microelectronics and semiconductors, through interdisciplinary, multidisciplinary, and inter-institutional collaboration.
7. Establish the necessary mechanisms that guarantee the quality standards and advanced metrology necessary for the microelectronics and semiconductor industry carried out in the Republic of Panama.
8. Facilitate and expedite the investment process for companies in the microelectronics sector interested in establishing or expanding their operations in the Republic of Panama, thus optimizing the interaction between the business and government sectors, increasing administrative efficiency, and promoting economic growth and technological innovation in the country.
The decree establishes the creation of an Innovation Commission in Microelectronics and Semiconductors (CIMS), as the promoting and inter-institutional and inter-sector coordination body for the execution of the strategy and the strategic action plan, as well as its subsequent powers and functions.
On the other hand, it creates:
- The Technical Advisory Council for Microelectronics and Semiconductors, as the technical-scientific body in charge of advising the National Commission for Innovation in Microelectronics and Semiconductors, which will be made up of seven (7) national or foreign people, scientists, or specialists with recognized experience in the industry or academia related to microelectronics and semiconductors.
- The position of National Commissioner of the Microelectronics and Semiconductors Industry of Panama, who will be attached to SENACYT and will be appointed by the President of the Republic on a topic proposed by the Commission for Innovation in Microelectronics and Semiconductors (the decree also indicates the requirements that must be met by the professional who is proposed to occupy said position), in addition to the functions that must be performed.
The Commission for Innovation in Microelectronics and Semiconductors (CIMS) and the Commissioner must present the recommendations and priorities regarding the Strategy and the Strategic Action Plan to the Ministry of Economy and Finance, so that they are incorporated into the state budget.
The decree establishes that after 180 days from its issuance, the Commission and the Presidency of the Republic have the duty to integrate a bill that contains – among other things:
- A tax incentive that allows companies linked to the semiconductor and microelectronics chain to credit 30% of the total amount they invest in research and development in the previous fiscal year as payment of income tax.
- A tax incentive in which companies can make deductible from income tax, the financial contributions they use to provide specialized training to human talent of Panamanian nationality and the donations they make in favor of activities related to STEM training and innovation.
- A legal framework of immigration incentives to attract specialized human talent to Panama, which includes specialized work permits for highly qualified professionals in areas related to semiconductors and microelectronics, as well as residency programs for investors and entrepreneurs who wish to establish companies related to semiconductors in Panama.
- The creation of a National Fund for the Semiconductor and Microelectronics Industry of Panama administered by SENACYT and supervised by the Comptroller General of the Republic, as a mechanism to subsidize the financing of activities aimed at developing, promoting and creating the conditions for the promotion of activities in the semiconductor and microelectronics sector of Panama.
Additionally, it is established that the Central Government can make contributions to this fund, donations from private entities and/or international organizations, with tax deductibility; and that the resources allocated to the fund be used only in the actions defined in the Strategic Action Plan at a rate of 25% to promote technological entrepreneurship linked to the Semiconductors and Microelectronics value chain, 25% to promote scientific research and technological development in the semiconductor and microelectronics sector, 25% to promote the training of human talent in the semiconductor and microelectronics sector, and the remaining 25% for activities defined by the fund administrator.
An important point that seeks to stimulate the presence of multinational companies in Panama, gives those in the semiconductor and microelectronics sector the option of sticking to any of the following options:
1. Special Regime for the establishment and Operation of Multinational Companies for the Provision of Services Related to Manufacturing established in Law 159 of August 31, 2020, and its subsequent modifications.
2. Special Regime for the establishment and Operation of Headquarters of Multinational Companies established in Law 41 of August 24, 2007, and its subsequent modifications.
3. The benefits granted to free zones and special economic zones regulated in the different laws.
Additionally, the creation of a single window is ordered to simplify the investment process in the microelectronics sector within the Secretariat of Multinational Corporations Headquarters and the Special Regime for the establishment and operation of Multinational Companies for the provision of services related to the Manufacturing.
You may access Official Gazette No. 30021-C (in Spanish) by clicking the following link:
