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Indian drug exporters can reap benefits of EMMA tax regime introduced by Panama
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Laxmi Yadav, Mumbai
October 27 , 2020
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Indian pharmaceutical exporters can reap benefits of the EMMA tax regime introduced by the Central American country, Panama to attract foreign manufacturing firms.
As part of a plan to boost and reactivate the national economy of Panama after the COVID-19 pandemic, on August 31, 2020, President Laurentino Cortizo signed a new law to create the special regime called EMMA. The Special Regime for the Establishment and Operation of Multinational Companies for the Provision of Services Related to Manufacturing (EMMA) establishes special rules for operation of multilateral firms providing the production services.
This regime is aimed at new companies that want to take advantage of the incentives, or for companies that are currently registered under the headquarters of multinational companies' regime, and who wish to expand their services within the same economic group under a new light manufacturing division. The companies will get a whole range of exemptions. In particular, the tax regime provides for the tax break up to 5% for the next 5 years after company registration in the EMMA tax regime. The employees of organizations will be able to claim a 50% bonus for working on holidays as well a 25% bonus for working overtime.
Said Uday Bhaskar, director general, Pharmexcil, “Incentives under the EMMA scheme, the geographic position of Panama between North and South America, its wide reach with FTAs and the country being a logistics & transport hub provide good opportunities for Indian firms to consider investment there.”
“We have received a communication from the embassy of India, Panama with regard to investment opportunities in the Central American country after creating ‘EMMA’, a special regime for manufacturing firms. Accordingly, we have alerted our member companies about business opportunities thrown up by the EMMA scheme,” said Bhaskar.
India, the largest provider of generic medicines globally has exported pharmaceuticals worth US$ 13.66 million to Panama in FY 2019 as against US$ 13.88 million worth of drugs exported in FY 2018.
The export of Indian pharmaceutical products to Panama has gone up by 54.39% from 2014 to 2018. The pharma export recorded US$ 8.99 million in FY 2014.
The Latin American country which aspires to become a pharmaceutical hub for the region is extremely dependent on imported pharmaceutical products. The imported drugs constitute 90% of the country’s market while locally produced and distributed drugs account for just 8% of the total domestic market. Labelled and processed products contribute merely 2% to the local market.
The amendment in Medicine Law 1 (Medicine Law 1: Regulates Drugs and other Human Health-related products) cleared by the Panamanian National Assembly, can increase the imports of pharmaceutical products in the country. It empowers the ministry of health to purchase medicines under the criteria established by the World Health Organization (WHO), which will allow that when local agents do not participate in the sale, it will be possible to go through international agents.
The Ministry of Health and Social Security Fund which is Panama’s National Healthcare System keep publishing public tenders through an online platform for medical services and medical equipment.
Around 60% import of biological and biotechnological pharmaceutical goes to the Social Security Fund.
Despite having a small population of 43.36 lakh people, there is a huge opportunity for foreign drug companies in Panama due to the rise in demand for chronic disease treatment, said a Latin America and Caribbean countries market expert.
There is no price regulation of pharmaceuticals in Panama. Known as the world's second largest free trade zone, the Colon Free Trade Zone is considered as Panama's duty-free heaven where several products including drugs are imported by multinationals operating in the region. The imported products are later re-exported by them to parts of Panama and other Latin American and Caribbean countries after value addition, he said.
Currently, foreign drug makers have dominated over the counter (OTC) and prescription medicine market in Panama.
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