In Panama, sports is a sector that is constantly developing and has the potential for growth, but only if we are willing to invest in the necessary infrastructure to give our athletes the opportunity to succeed. With that goal in mind, on June 5, 2023, Law 383 was enacted, which establishes tax incentives for sports. It alludes to the figure of certificates for the promotion of sports and the dynamics of donations of real estate to sports entities, establishing the parameters on which these incentives are governed.
The Law establishes in its first article that its purpose is to achieve the growth and financial sustainability of the national sports federations and associations duly recognized by the Panamanian Sports Institute and the Panamanian Olympic Committee, in order to improve sports development in Panama.
In the context of the legislation, individual private investment is understood as the disbursement of private funds incurred by each sports entity provided for in Law 16 of 1995 (which reorganized the National Sports Institute) and its regulations (which later renamed the National Sports Institute: Panamanian Sports Institute, PANDEPORTES). The legislation also establishes that the aggregate private investment is the sum of the annual individual private investment made by the sports entities provided for in the aforementioned legislation.
The provisions of this legislation are translated into tax incentives in favor of the promotion of sports as certificates of promotion of sports for the taxpayer by the national sports federations and associations, establishing that:
- They will be up to 1% of their taxable income in a fiscal period, which will be applied as a tax credit on income tax, with the possibility that if it is not used it may be applied to pay any other tax of national order of the taxpayer or even may be assigned or alienated totally or partially to a third party for the payment of any tax of national order.
- The national sports federations and associations will supervise the use given by the sports entities to the resources obtained from the sale of the certificates for the promotion of sports and they in turn will be supervised by the General Directorate of Revenues and the General Comptroller of the Republic.
- The funds received from the sale of the sports promotion certificate as established by law will be used exclusively for the maintenance of sports facilities and expenses associated with the development of the athlete.
It also establishes provisions related to the cases of donations of real estate establishing that:
- Sports entities that receive by way of donation a real estate property shall be obliged to build a facility to carry out sports activities with a minimum investment in improvements of up to thirty thousand balboas and must start the works within twelve months after the donation has been received and finish the construction within a reasonable term according to the work.
- The taxpayer may deduct from the income tax caused and estimated to be paid in one or more consecutive fiscal periods, 100% of the cost of acquisition, construction and maintenance of a real estate donated to any sports entity established in the law and its regulations, once the project has been approved by the Panamanian Sports Institute, prior to the beginning of the works.
- Donations of real estate shall not be encumbered with any kind of lien, right or tax of national order.
- The benefits related to this dynamic shall be applicable during the first fifteen years of the Law's effectiveness.
- In case of non-compliance with the provisions of the Law with respect to the donation of real estate, the sports entities will be responsible and must pay to the National Treasury the corresponding taxes not paid by the donor, with respect to the transfer of the real estate.
Finally, the Law concludes that the Executive Branch will regulate it. Legislative initiatives such as this one play an important role in the development of sports at the national level; it is about providing a favorable environment of mutual benefits for those who have the economic capacity to contribute to sports and the sports entities that depend on these funds to continue operating, to form athletes who have the necessary resources to reach their maximum potential, always motivated by the passion for sports that characterizes our nation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.