Tuesday, April 01, 2014

Tax Havens: Myths vs. Facts

The Center for Freedom and Prosperity Foundation has produced videos showing the economic and moral benefits of so-called tax havens. This final video in the three-part series addresses some of the most common myths put forth by politicians from high-tax nations. Using academic research and data from international organizations, the video shows that the most common attacks made against low-tax jurisdictions are empty demagoguery.

Monday, March 03, 2014

Panama’s agriculture sector modernises and looks abroad

Thanks to infrastructure modernisation projects and the ratification of numerous trade deals in recent years, the agriculture sector in Panama is poised for growth. Free trade agreements (FTAs) with the US and several Central and South American countries, as well as an association agreement with the EU, have opened international markets to exports. A government-sponsored overhaul of agriculture transport logistics, including the construction of a “cold chain”, is expected to boost national competitiveness.
In its Strategic Plan 2010-14, the government identified agriculture as one of four areas of the economy that would drive growth, along with logistics, tourism and financial services. This is part due to the sector’s ability to create jobs – it accounted for 17% of employment as of 2011, the most recent data available. Moreover, a number of developments in recent years have set the stage for expansion.

Trade deals

In June 2012 Panama, along with five other Central American countries – Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua – signed an association agreement with the EU. The agreement included trade liberalisation provisions expected to contribute to growth in the fruit, vegetable and nuts market, according to an independent report commissioned by the EU. Europe is Panama’s second-largest trading partner, after the US, and the biggest importer of Panamanian agricultural products.
Panama has also entered into FTAs with the US and the members of the Pacific Alliance: Mexico, Colombia, Chile and Peru. Panama’s FTA with Mexico is expected to be signed in spring 2014. All of these deals have reduced or eliminated agricultural tariffs, expanding the markets to which Panama’s farmers have access.

Enhancing infrastructure

Major infrastructure projects will help the country take advantage of this market expansion. These include the Santa María irrigation system (at a cost of $200m), the La Villa dam ($200m), the Barú irrigation system ($140m), the San Pablo dam ($165m) and the Peralas dam ($105m). Additionally, the Ministry of Public Works has devoted substantial resources to improving roads in rural provinces such as Chiriquí ($60.3m), Veraguas ($42.7m), Los Santos ($41.1m) and Herrera ($40.6m).
The most important infrastructure project for the agricultural sector is the development of a cold chain, a continuous, temperature-controlled supply chain designed to preserve produce from harvest to market. It is an essential component of any modern agricultural industry, and one that has been missing in Panama. The cold chain, which will include refrigerated trucks, post-harvest treatment and storage centres, will initially be used to transport and store types of produce that are sensitive to changes in temperature and humidity, such as peppers, green beans, celery and cilantro.
In 2011 the government awarded a $75m contract to Consorcio Panamá Frío, a joint venture between Outsourcing of Venezuela and Mejores Acabados of Panama, to build four post-harvest centres. These are located in rural, agricultural regions in the towns of Volcán, Cerro Punta, Dolega and El Ejido. As of mid-2013, the government’s investment in the project, including the post-harvest centres, the distribution markets and other elements, totalled $287m.
The cold chain can be expected to significantly boost agricultural output and quality. According to Consorcio Panamá Frío, up to 40% of Panama’s agricultural output is lost to spoilage before it arrives at market. The lack of a modern, temperature-controlled supply chain has also reduced the shelf life and freshness of Panamanian goods. According to the government, the cold chain will guarantee food safety, quality and traceability and will bring Panama’s agriculture logistics and products into line with international standards such as the Codex Alimentarius, ISO 9000 and Food and Agriculture Organisation guidelines, making local goods more attractive to international buyers.
The government expects the cold chain to be fully operational by December 2013 and construction appears to be going to plan. As of mid-2013 distribution markets in David and Panama City had reached or nearly reached the final phases of construction, and Consorcio Panamá Frío had turned over two of the post-harvest centres to the government, meeting its deadlines. With the cold chain operational and markets newly opened to Panama’s produce, 2014 could be a year of significant growth for agriculture sector.
See also http://www.oxfordbusinessgroup.com

Monday, February 03, 2014

Panama's maturing tourism industry

Thanks to strong governmental support, investment and a wealth of natural resources, Panama’s tourism sector has developed rapidly over the past decade. Expansion is expected to continue, with the industry seen as an integral part of the government’s efforts to sustain GDP growth and create 860,000 new or better jobs by 2020.
Tourism’s recent success explains in part why the government has placed such emphasis on the sector. In 2002, Panama received 533,500 visitors, behind Costa Rica (1.1m), Guatemala (869,100), El Salvador (798,200) and Honduras (549,500), according to the Central American Tourism Council. By 2011, Panama had become the second-most-popular tourist destination in the region, with nearly 1.5m tourist arrivals, trailing only Costa Rica’s 2.2m.

International standing

The latest “Travel and Tourism Competitiveness Index” from the World Economic Forum underscores the sector’s development and highlights its competitive advantages. Panama’s global ranking rose from 56 in 2011 to 37 in 2013, coming in at fourth place in the Americas, behind the US, Canada and Barbados. This was largely thanks to strong scores in the categories of business impact of rules on foreign direct investment (fifth), natural resources (11th), air transport infrastructure (16th), policy rules and regulations (18th) and number of UNESCO World Heritage natural sites (18th).
Forecasts from the World Travel and Tourism Council (WTTC) indicate that the next decade should see the industry’s continuing maturity, as Panama looks to diversify its tourism offerings. According to the WTTC, the sector’s contribution to the economy stood at PAB4.68bn ($4.59bn), or 13.1% of GDP, in 2012, although these figures reflect the broader effects from investment and the supply chain, as well as induced income. The WTTC forecasts this figure will grow by 5.8% per year over the next decade, reaching PAB8.41bn ($8.24bn) or 13.4% of projected GDP, by 2023.

Funding growth

Capital expenditure in the sector has been and will likely continue to be a primary growth driver, with significant government investment in infrastructure and tourism development set to complement private sector outlays. The WTTC study predicted an 8.5% increase in capital investments in 2013 to $893.5m. That figure is anticipated to grow at a slightly slower pace of 6% per year up to 2023, by which time it will have nearly doubled to $1.6bn.
Investment has so far been heavily concentrated in the capital, Panama City, where the government is developing a $1.5bn metro and undertaking various initiatives to improve the city’s cultural offerings. Outlays include the $175.6m preservation and renovation of the historic walled city of Casco Viejo, one of the country’s two UNESCO world heritage cultural sites. Despite stimulating private sector investment in boutique hotels and cafes, the project has become controversial due to plans to extend the coastal highway, Cinta Costera, to the historic district, essentially wrapping a large roadway around the district’s sea wall.
Work on the historic district continues, while next door another development is set to add an entirely new dimension to the city, with the $100m Biomuseo, designed by Frank Gehry. The museum will highlight the role the isthmus has played in shaping world geography and climate while celebrating Panama’s biodiversity. There are hopes that the facility, which is scheduled to open in December of this year, will boost the profile of Panama City, just as Gehry’s Guggenheim Museum did for Bilbao, Spain.
With private sector developments taking advantage of Panama’s wealth of beaches and biodiversity, continued improvements to cultural offerings, and steady progress in other segments such as ecotourism, the country is well-positioned to meet growth forecasts for the next decade.

Friday, January 10, 2014

Publication of Law 1 of 2014 reestablishes local-source taxation

The territorial taxation system whereby only local-source income is subject to taxation was reinstated under Law 1 of 1984 upon publication of Official Gazette of Friday, January 10, 2014.   Approval Law 1 came after vocal opposition to previous Law 120 of 2013 from the Panama Bar Association, the Panama Association of Enterpreneurs (APEDE), and other groups of logistics and financial employers - including the pro-bearer share immobilization Panama Banking Association.

Law 1 abrogated Law 120 of 2013 which had been valid for 12 days and reinstated the validity of Article 694 of the Tax Code.  Under Article 694, income from the several activities abroad is considered foreign‑source and, therefore, is not taxable, such as:
•Invoicing from an office in Panama for sale of merchandise that does not enter Panama;
•Managing from Panama transactions that are executed abroad;
•Distributing dividends from non‑taxable income or income from activities conducted abroad;
•Passive income from loans or other financial transactions with foreign borrowers, even if the reimbursement is conducted in Panama;
•Settling of foreign assets under a Panamanian trust;
•Bank deposits of foreigners in Panama; and
•Securities of any kind issued by Panamanian corporations of fully foreign‑source income.

Taxable income is the difference resulting from subtracting deductible expenses from gross income. Deductible expenses are those incurred for the maintenance and production of the income (eg, office expenses and promotion), as well as others authorised by law. The taxpayer must allocate expenses to exempt, taxable, or foreign source income, maintaining separate accounting for each type of income to ensure approval in case of an audit. Taxpayers with both Panama  and foreign source income must prove to taxation authorities that expenses were indeed used for Panama source income in order to allow their deductibility. Under the "rule of proportionality", expenses made for both types of income may be deducted only in the proportion that they maintain to total income.

As in previous years, individuals and entities which have commercial activities in Panama with other Panama taxpayers or applied for Aviso de Operacion business licenses have to file their income tax returns before each March 31.

See also:
Law 1 of 2014 http://www.gacetaoficial.gob.pa/pdfTemp/27450_A/45163.pdf
Panama Administration will continue local-source taxation http://mypanamalawyer.blogspot.com/2014/01/panama-administration-will-continue.html
Panama Cabinet votes to revoke Law 120 of 1973 and reaffirm territorial taxation http://mypanamalawyer.blogspot.com/2014/01/panama-cabinet-votes-to-revoke-law-120.html
Panama Chapter of International Taxation of Low-Tax Transactions amazon_com
Panama taxation news http://mypanamalawyer.blogspot.com/search/label/taxation
Renta 2013 tax return filing freeware https://www.anip.gob.pa/descarga_renta.html


“It is subject to tax, the taxable income that occurs, from any source, within the territory of the Republic of Panama, whatever the place where it is perceptible.” 


"We are a country that has historically substantiated its criterion of income tax by applying the principle of territoriality," said the Minister in Charge of the Ministry of Economy and Finance (MEF), Gladys Cedeño Urrutia, after submitting to the National Assembly of Deputies, the abrogation of articles No. 2 and No. 3 of Act No. 120 of 2013. 

The income will be territorial, as set forth in article No. 694 of the Tax Code. "It is subject to tax, the taxable income that occurs, from any source, within the territory of the Republic of Panama, whatever the place where it is perceptible," reiterated the Minister in Charge, Cedeño. 

This action corrects any errors logged at the time of writing the articles 2 and 3 of the Act 120, and comes to restore the validity of article 694 of the Tax Code. This Law has retroactive effect from December 30th, 2013. 


Sunday, January 05, 2014

Panama Cabinet votes to revoke Law 120 of 1973 and reaffirm territorial taxation

The Legislature must now approve the bill, followed by its publication in the Official Gazette.
The Panama Cabinet approved a bill to revoke Law 120 of 2013 which had eliminated tax benefits to Panama companies and individuals performing transactions which take affect outside of the country.

The Presidency issued 2 press release which we transcribe verbatim.

See also  
Panama Administration will continue local-source taxation http://mypanamalawyer.blogspot.com/2014/01/panama-administration-will-continue.html

Government reiterates compromise with tax territoriality

Thursday, January 02, 2014
The National Government, through Cabinet Council held on January 2nd, 2014, approved a Cabinet Resolution authorizing the Secretary of Economy and Finances to present to the National Assembly a Bill that revokes articles 2 and 3 of Law 120 from 2013 and restitutes article 694 of the Tax Code.  This Law will be of public order and has retroactive effects to December 30th, 2013.
The project will be presented on Monday, January 6th when the National Assembly retakes their regular period of sessions.
With this step the National Government reiterates their historic compromise to keep the principle of territoriality at the source, for purposes of calculating Income Tax applicable to natural and legal people that operate inside the Republic of Panama´s territory.

The Cabinet Council revokes law establishing taxable income outside Panamanian territory

Thursday, January 02, 2014
  • The disposition has retroactive effects since December 30th, 2013.
The Cabinet Council approved a resolution that revokes articles 2 and 3 of Law 120 from December 30th, 2013, establishing that all natural or legal people that received a taxable income outside Panamanian territory would pay taxes.
Through the aforementioned resolution, approved in an Extraordinary Cabinet Session, article 694 of the Tax Code is completely reestablished stating that: “it is object of this tax the taxable income produced, in any way, inside the territory of the Republic of Panama, regardless of the place received”.
This disposition highlights that this Law is of public order and is retroactive to December 30th, 2013 and will take effect once it is enacted.
According to the explanation of motives, this measure was taken “once the National Government is aware that the implementation of the world tax regimen in regards to Income Tax requires more discussion and debate, and that such modification changes completely the tax outlook of the country”.

Source: www.presidencia.gob.pa

Thursday, January 02, 2014

Panama Administration will continue local-source taxation

The Panama Administration accepted its mistake in trying to impose worldwide taxation instead of the local-source taxation system in place under Article 694 of the Tax Code of 1957.

The President Ricardo Martinelli blamed current Revenue Authority (ANIP) administrator Luis Cucalon for the passage of Law 120 of 2013, while Vice-Minister Luis E. Camacho assumed responsibility and current Minister of Economy Frank De Lima (author of restrictions to bearer shares on behalf of the OECD) said more consultations were necessary.   The fact remains that several dozen legislators of the government Cambio Democratico party approved the law in its 3rd reading and failed to predict the onslaught of public opinion opposing this change to the Tax Code.

Article 694 of the Tax Code states that the obligation to pay the income tax will be for the "taxpayers" and defines it as:
"Taxpayer, as the term is used in this Title, is the individual or legal entity, national or foreign, who receives taxable income subject to the tax."

However, Law 120 replaced Paragraph 2 which stated since 1964 that "The income arising from the following activities are not deemed as earned within the territory of the Republic of Panama:
(a) To invoice, from an office established in Panama, the sale of merchandises or products for an amount higher than that for which such merchandises or products have been invoiced against the office established in Panama, provided such merchandises or products only move outside of Panamanian territory.
(b) To manage, from an office established in Panama, transactions that are performed, executed or have effects abroad.
(c) To distribute dividends or participation quotas of entities which do not require an Operations Notice or which do not generate taxable income in Panama, when such dividends or participations are earned from revenues not produced within the territory of the Republic of Panama, including those revenues earned from the activities mentioned in literals a and b of this paragraph."

Even if Law 120 still would have allowed banks and free zone companies not to pay income tax on foreign-source income, thousands of foreign individuals who had relocated as expatriates to Panama would have to pay Panama incme tax on foreign income or pensions.  Double taxation treaties would have provided some tax relief for citizens of a few countries.

The Panama Presidency issued a press release over the holidays.

See also:

Articles 2 and 3 of Law 120 will be revoked

Tuesday, December 31, 2013
The Director of the National Authority of Income (Autoridad Nacional de Ingresos, in Spanish), Luis Cucalón accepted mistakenly including articles 2 and 3 of Law 120 from 2013 to Congress, which deals with territoriality of the incomes received outside Panama by national and legal Panamanians.  “Even though wrong things have been said about the scope of the law, I recognize that I made a mistake thinking Panama was ready to take that step”, he said.
Cucalón requested the President of the Republic to revoke article 2 and 3 of the aforementioned Law.  The request was accepted.
“I have asked the Director of the National Authority of Income to be more careful in the future.  I have accepted his recommendation to present a law that revokes articles 2 and 3 of Law 120 and reestablishes the ones revoked or modified by them, just like I accepted his request to sanction the Law with the incorporation of the articles proposed by him. I did it because I trust completely in Cucalón´s professionalism, hence the position.  The State´s unprecedented revenue are his best job reference”, said the President.

Panama: Expanding insurance uptake

Panama: Expanding insurance uptake
Latin America | 17 May 2013

Home to 3.5m people, Panama has one of the largest and most competitive insurance markets in Central America, with 30 companies vying for annual insurance premiums of around $1bn. Moreover, the sector continues to expand alongside broader economic growth.

According to the Insurance and Reinsurance Superintendent of Panama (SSRP), insurance premiums rose by 8.2% in 2012. Drivers of growth included the automotive segment, which expanded by 8.4% to $199.2m, giving it a 17.5% market share. Health coverage, which increased 14.9%, had the second-highest market share of 15.9% ($181.3m). It was followed by collective life insurance ($135.3m, 11.9% market share) and individual life insurance ($119.8m, 10.5% market share), which grew by 5.6% and 12.4%, respectively. Meanwhile, home fire insurance experienced one of the larger percentage increases, at 19.1% growth ($96.9m, 8.5% market share).

Despite market expansion in recent years, insurance coverage is still considered expensive and unnecessary by many people. While further educating uninsured segments of the population on the benefits of insurance coverage could stimulate growth in some middle- and lower-income communities in the short term, market penetration is expected to continue to rise alongside growth in per capita income and consumer purchasing power.

Nevertheless, even today, Panama is doing well compared to its neighbours, ranking third in Latin America in terms of insurance spending per capita. According to the Association of Insurance Supervisors of Latin America, in 2011 its per capita spending on premiums of $290.61 was topped only by Chile ($524.34) and Brazil ($329.29).

Panama has also attracted some of the biggest global names in insurance, including Mapfre, HSBC Insurance, ACE Group and Generali. The market is highly competitive, with no one firm holding a share greater than 20%, and only three accounting for more than 10% of premiums.

According to the SSRP, in 2012 the five largest providers in terms of revenue were Compañia Internacional de Seguros (17.6%, $200.4m), ASSA Compañia de Seguros (16.3%, $185.9m), Mapfre Panama (13.2%, $150.1m), Assicurazione Generali (8.3%, $94.2m) and Asegudora Ancon (6%, $68.7m).

In April 2012 insurance reform was passed through the approval of Law No 12 of 2012. The legislation addresses multiple aspects of the insurance sector, starting from the top, with a strengthening of the regulator. The SSRP was formerly an extension of the Ministry of Commerce and Industry but is now a fully autonomous agency with the ability to enforce regulations regarding financial viability as well as consumer protection.

Under the new framework, capital requirements for insurance companies have increased to $2.5m. This may make it more difficult for new firms to enter the market, although it will help ensure that investments will come from providers with a long-term commitment to the country, according to the Panama Insurance Association. The new law also provides for consumer protection in the insurance segment for the first time, allowing the SSRP to investigate customer complaints.

With a strengthened, modern regulatory framework, the SSRP is now trying to take the sector beyond Panama’s borders. Indeed, transforming the country into a centre for insurance and reinsurance companies in Central America has now become one of the main objectives of the SSRP. It may have already had some success, with Mapfre reportedly considering a consolidation of its Central American reinsurance operations to Panama.

For full text see http://www.oxfordbus inessgroup.com/
More information is available in http://www.oxfordbusinessgroup.com/product/report/report-panama-2013

Monday, December 16, 2013

Whatever happened to offshorelegal.org and panamalaw.org?

We keep receiving queries from people who purchased companies through offshorelegal.org and Panama Legal.  Those are generic names for websites with great SEO reach.

Each Panama corporation is required to have a resident agent.   Under Panama law:
- The Resident Agent must be a Panama lawyer accredited in http://www.organojudicial.gob.pa/abogado/s4abi.php or law firm,
- The law firm must have the name of its partners under the Code of Ethics.

Generic names like Panama law or similar should raise red flags with a prospective buyer of Panama corporations.   If these resident agents have no permanent office, this can be a problem for the shareholder of the company when KYC is needed from the nominee directors when opening bank accounts.   Bank constantly are required to update information they have on corporate shareholders, so a general power of attorney may not be sufficient to comply with bank requirements.

With offshorelegal.org the trail stops with its dissolution.   Previously it listed several cellphone numbers and a toll free Panama number.   No lawyers or names are described in its archived website but the Public Registry shows 2 lawyers as its members.  Their Panama office at OBP is now occupied by a building company.

Fecha Registro:

Nombre de la Sociedad
Título del DignatarioNombre del Dignatario

As nominees they usually list for their corporations, other corporations.  See also http://www.talkgold.com/forum/r284916-.html
Título del DignatarioNombre del Dignatario

Panamalaw.org does not list any lawyers in its archived website.  It has been linked to a civil partnership called Panama Legal.

Fecha Registro:

Nombre de la Sociedad

The lawyer members are in Torre Delta, the old Bankboston building in Via Espana:

Título del DignatarioNombre del Dignatario

See also http://www.panamaforum.com/legal-issues/30171-http-www-panamalaw-org-legit.html