Panama’s tourism industry is entering a pivotal legislative moment. With the enrollment window under Law 80 of 2012 closed since December 2025, a new incentives bill has been presented to the National Assembly — and according to veteran hotelier Raúl Arias de Para, writing in La Prensa, the proposal is both an advance in some respects and a step backward in others, particularly for small and medium-sized lodging businesses in the country’s interior.
What Happened
The proposed law replaces the framework of Law 80 of 2012, under which new tourism lodging investments outside Panama City could qualify for incentives starting at B/.250,000, with a reduced minimum of B/.100,000 in indigenous areas. The new bill raises that threshold to B/.500,000 and expressly excludes the value of the land from the calculation.
Remodeling investments, which qualified from B/.100,000 under Law 80, would now require a minimum of B/.1 million for modernization, expansion, technological renewal or equipment replacement in existing establishments.
Tax benefit periods would also shrink for most of the country. Law 80 generally granted five years of import tax exemptions on construction materials, ten years for furniture and equipment, and fifteen years for property tax and income tax. The new bill reduces these to three, five, and ten years respectively for new lodging outside Panama City district. Panama City projects could still qualify if registered with the National Tourism Registry within the first three months of the law taking effect. The fifteen-year treatment is reserved exclusively for projects located in the “Panamanian Caribbean.”
Background
Panama has spent years defining where and how it wants to develop tourism. The Sustainable Tourism Development Master Plan 2020-2025 established a strategy of priority tourism poles or destinations, an effort updated by the currently effective Sustainable Tourism Master Plan 2025-2030.
That earlier plan identified destinations such as Bocas del Toro in the western Caribbean and Portobelo-Santa Isabel on Colón’s Costa Arriba as priorities. The new bill, however, grants superior tax treatment to a much broader and poorly defined category — the “Panamanian Caribbean” — without clearly delimiting what territory the expression covers, which communities are meant to benefit, or what productive linkages are intended.
Arias de Para argues the higher thresholds effectively change the profile of who can benefit. For a hotel investment of tens of millions of balboas, B/.500,000 is a small fraction of project cost. For a five-to-ten-room lodge or family hotel, it can be a considerable barrier — one worsened by excluding land value, which in many rural projects represents a significant share of the capital committed before a single room is built. He suggests allowing cadastral or independently appraised land value up to a maximum percentage of eligible investment.
He also points to the concept of “leakages” in tourism economics: revenue from large hotels can exit the country through imports, franchise royalties, management fees, and repatriated profits, while small nationally owned hotels tend to purchase more services locally, hire within their communities, and keep a greater share of spending circulating in the domestic economy.
What This Means for Panama
Several specific issues will shape the debate in the National Assembly. One is the treatment of tax losses: small hotels rarely achieve profitability in their first years, meaning income tax exemptions hold little practical value for them. The bill stipulates that losses generated during the exemption period are extinguished and cannot be carried forward — a provision Arias de Para argues should instead allow verified losses to be applied, with prudent limits, in the first two or three years after the exemption ends.
Another open question is geographic equity. Provinces such as Veraguas, Coclé, Chiriquí and Darién with equal tourism potential, poverty, infrastructure deficits and job-creation capacity, he argues, should be able to aspire to the same treatment as Caribbean projects — with development need, rather than simply coastline, determining incentive intensity.
The columnist also calls for broadening incentives beyond tax exemptions to address costs that weigh on operators from day one, regardless of profitability: more competitive electricity rates for certified tourism establishments, financing and guarantees for SMEs, specialized training, better infrastructure and digital connectivity, and a labor regime recognizing the 24/7, seasonal nature of hotel operations.
Despite the critiques, the proposal confirms the current government’s support for the tourism industry — a decision the author says deserves recognition. The challenge now is translating that support into a regime accessible to the full tourism ecosystem: the large hotel and the small lodge alike, from fifty-million-balboa investors to families risking their life savings on ten rooms in the interior.
This story was originally reported by La Prensa.