Transfer taxes payable on a share sale and an asset sale

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What transfer taxes are payable on a share sale and an asset sale?

Share sale

Capital gains derived from a share sale are subject to a 10% tax, of which 5% must be withheld by the buyer as an advance and paid to the authorities. The seller can choose to consider this advance as the definitive capital gain tax or request the return of the surplus when it considers that the amount withheld is greater than the tax on the profit obtained at the 10% rate.

Exemptions: There is no tax payable on the transfer of shares if the company has not engaged in commercial activities in Panama.

Asset sale

Transfer of movable goods and services tax (Impuesto de Transferencia de Bienes Muebles y Prestación de Servicios) (ITBMS) of 7% is payable on transfers of moveable chattel assets.

Capital gains tax at 10% is payable on profits made on the sale of real estate property. The seller of the property must pay 3% on the sale price or the registered property value, whichever is higher, as an advance on the income tax payable on seller's capital gains and has the option to consider the 3% tax payment as the definitive income. If the sum withheld exceeds the amount resulting from the application of the 10% rate to the gain obtained from the sale, the seller can file a special tax return to credit the sum retained and claim the excess resulting as a credit in their favour.

Corporate tax is only applicable if the asset sale is part of the company's ordinary business activities. If any of the parties is a national of any of the nations with double-taxation agreement with Panama, it may be possible to reduce the applicable taxes.

Exemptions: Food, medicine, medical services and crude oil are exempt from ITBMS in Panama.

More info on Private mergers and acquisitions in Panama, contact: María de Lourdes Marengo (mmarengo@pmalawyers.com) | Nadya Price (nprice@pmalawyers.com)

PATTON MORENO & ASVAT, the experienced legal guidance you can trust.

- An extract of the Private Mergers & Acquisitions Guide, originally published by Thomson Reuters