. /.RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/PAN/6
30 March 1999
(99-1256)
Committee on Subsidies
and Countervailing MeasuresOriginal:  Spanish
SUBSIDIES
Replies to questions posed by the EUROPEAN COMMUNITIES1
regarding the New and Full Notification of PANAMA2
The following communication, dated 23 March 1999, has been received from the Permanent
Mission of Panama.
_______________
Panama submitted on 16 November 1998 its new and full notification of subsidy
programme to the WTO pursuant to Article XVI:1 GATT 1994 and Article 25 of the WTO
Subsidies Agreement.  In this respect, the Community requests further clarification on a
number of programmes which appear to be specific and were not included in the notification.
Q1. Fiscal incentives for companies located in the Colon Free Trade Zone.  The benefits
consist of complete exemption from taxation on imports and re-exports.  There are no taxes on
the export of capital or the payment of divide nds.  In addition, there are reduced income tax
rates on earnings from re-export sales.  Furthe rmore, firms located in the CFZ are exempt from
import duties as well as from guarantees.
Reply
Q2. Benefits for companies located in Export Processing Zones.
Pursuant to Law 25 (passed on 30 November 1992) companies located in EPZs are
exempt from taxes, duties and other charges related to the importation of machinery,
equipment, raw materials, semi-processed goods and other materials such as packaging, fuel
and lubricants used in the manufacturing proces s.  In addition, an exemption is granted from
income tax on profits arising from exports, and exemption from export sales taxes, as well as
from taxes on capital and assets of the export industry.
Reply
Q3. Petroleum Export Zones
The Government of Panama enacted Decree No. 29 (Executive Decree) dated 14 July
1992, allowing the creation of Petroleum Export Zones (PEZ) in specially-designated areas in
                                                     
1 G/SCM/Q2/1
2 G/SCM/N/38/PANG/SCM/Q2/PAN/6
Page 2
Panama.  Decree No. 29 allows any foreign or national company to establish operations in a
PEZ to produce, refine and export petroleum products.  Companies operating out of these PEZs
are exempt of any municipal or federal taxes.
Reply
__________