n the ever-evolving global economic landscape, Latin American countries are actively seeking to attract foreign capital through various tax incentives.
This article explores the investment opportunities available in Panama, Uruguay, and Paraguay for foreign investors.
PANAMA
Tax System
Panama operates under a territorial tax system, meaning that only income generated within the country is subject to taxation. Foreign-sourced income is not taxed, making Panama an attractive destination for international investors.
Key Tax Exemptions
- Property Tax Exemption: New properties can be exempt for up to 20 years.
- Tax-Free Zones: Companies in the Colón Free Zone are exempt from corporate income tax and import/export duties.
- Multinational Headquarters Law (Sistema de Sedes de Empresas Multinacionales – SEM): Exempts taxes on income generated outside Panama. It establishes a 5% tax rate on the net taxable income derived from services provided, allowing the deduction of expenses related to employee remuneration, even if the employee is exempt from income tax. On the other hand, gains or losses from the sale of shares or securities are subject to a 2% capital gains tax.
- Double Taxation Treaties: Panama has agreements with 17 countries, including South Korea, United Arab Emirates, Qatar, Singapore, and Vietnam, to prevent double taxation.
Residence by Investment Program (Golden Visa)
Panama grants residence to the main applicant and their family through different pathways:
- Real estate investment from USD 300,000
- Stock market investment from USD 500,000
- Fixed-term deposits of USD 750,000
- Reforestation investment from USD 100,000 (with an option for permanent residency with a USD 350,000 investment).
Investment Opportunities and Returns
Real estate investments in Panama yield an annual return of 6% to 8%, depending on property type and rental model. Additionally, off-plan property purchases can appreciate by 10% to 15% annually.
URUGUAY
Tax System
Uruguay also follows a territorial tax system, where only domestic income is subject to taxation. However, there are some exceptions, such as foreign-sourced capital gains.
Key Tax Exemptions
- Tax Holiday for New Residents:
- No tax on foreign capital gains for 10 years.
- Option to pay a 7% reduced tax rate instead of the standard 12% on these earnings.
- Investment Promotion Regime:
- Up to 100% exemption from Corporate Income Tax (IRAE) for 15 years for approved projects.
- Free Trade Zones:
- Companies operating in these zones are exempt from corporate income tax and wealth tax, among other administrative benefits.
- VAT and Import Duty Exemptions:
- Applies to real estate and fixed assets for companies under the investment promotion regime.
Requirements for Tax Residency
- Presence in Uruguay for more than 183 days per year.
- Real estate investment of at least USD 550,000 + 60-day stay.
- Business investment of USD 2,400,000, generating at least 15 jobs.
Sectors with High Growth Potential
Uruguay offers attractive tax benefits for sectors such as renewable energy, technology, infrastructure, and service exports.
PARAGUAY
Tax System
Paraguay has one of the lowest tax rates in the region, allowing free capital repatriation and offering special incentives for foreign investors.
Key Tax Exemptions
- Investment Promotion Law (No. 60/90):
- Exempts taxes on capital goods, dividends, and municipal fees for foreign investment projects.
- Maquila Program:
- Maquila is a production and service system designed to promote industrial development, job creation, and export growth, operated on behalf of a foreign parent company, offering attractive opportunities for investors due to its preferential conditions.
- Only 1% tax on Value Added in Paraguay.
- Exemption from VAT and import duties on raw materials and machinery.
- Free Trade Zones:
- 0.5% tax on export value and exemption from Dividend and Profit Tax (IDU).
- Double Taxation Treaties:
- Agreements exist with Chile, Taiwan, Spain, Qatar, and the UAE.
- Guaranteed Tax Stability:
- Under Law No. 5542/15, investors can secure a fixed tax rate for 10 years, extendable to 20 years.
Residence by Investment Program (Golden Visa)
Paraguay offers a flexible residency-by-investment program:
- Temporary Residency (2 years), renewable or convertible to permanent residency.
- Direct Permanent Residency with a minimum investment of USD 70,000 for 10 years, through the Unified System for Business Startups (SUACE).
- With the SUACE program the most popular investment option is Real Estate
Investment Opportunities
Paraguay stands out in agribusiness, manufacturing, renewable energy, and technology, offering lower operating costs than neighboring countries like Argentina and Brazil.
AIM Global: Your Trusted Investment Partner
While these tax incentives are highly attractive, many investors face challenges such as limited market knowledge, regulatory complexities, and language barriers.
With offices in Portugal, Chile and China, AIM Global provides expert advisory services through its team of seasoned professionals in investment and international mobility.
Our mission is to help clients identify the best investment opportunities tailored to their profiles, guiding them through every step of the process and providing continuous support.
