RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/PAN/1
22 January 1999
(99-0235)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Questions from the EUROPEAN COMMUNITY Regarding
the New and Full Notification of PANAMA1
The following communication, dated 15 January 1999, has been received from the Permanent
Delegation of the European Commission.
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Panama submitted on 16 November 1998 its new and full notification of subsidy programmes
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 whichappear to be specific and were not included in the notification.
1. 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 dividends.  In addition, there are reduced income tax rates on earnings from
re-export sales.  Furthermore, firms located in the CFZ are exempt from import duties as well as from
guarantees.
2. 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, rawmaterials, semi-processed goods and other materials such as packaging, fuel and lubricants used in the
manufacturing process.  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.
3. Petroleum Export Zones
The Government of Panama enacted Decree No. 29 (Executive Decree) dated 14 July 1992,
allowing the creation of Petroleum Export Zones (P EZ) in specially-designated areas in Panama.
Decree No. 29 allows any foreign or national comp any to establish operations in a PEZ to produce,
refine and export petroleum products.  Companies ope rating out of these PEZs are exempt of any
municipal or federal taxes.
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1 G/SCM/N/38/PAN