Sunday, December 23, 2007

Laundering Queries Focus on Corporate Secrecy Haven

Forget about Panama for dirty money. Delaware has appeared as a new haven for Eastern Europeans ...

Laundering Queries Focus on Delaware
September 30, 2004; Page A4
WILMINGTON, Del. -- Delaware's corporate-secrecy laws may be making it a haven for foreign criminal groups, prompting prosecutors in Eastern Europe and Russia to flood the Justice Department with requests for help in probes of Delaware shell companies.

In the past four years, law-enforcement agencies in Russia, Hungary and a dozen other nations have made more than 100 formal requests to the Justice Department to go before the U.S. District Court in Delaware to obtain subpoenas to learn more about the companies. In many cases, foreign prosecutors say in their requests that they believe the companies are controlled by or connected to Eastern European criminals who use them to move money into and out of the U.S.

The cases also have connections to U.S. and foreign banks, and are generating concern among top U.S. regulators and law-enforcement officials that crime groups were able to penetrate the U.S. economy despite warning signs such as a $7-billion money-laundering probe at the Bank of New York in 1999.

The Delaware cases involve a handful of banks that have catered to the region including the Bank of New York, ABN Amro Holding NV, and Bankers Trust, all of which kept correspondent accounts in New York for small Eastern European banks. Correspondent accounts allow foreign banks to conduct dollar-denominated transactions and move funds into the U.S. without setting up a U.S. branch, simply by paying fees to a host bank that has a U.S. banking license. These accounts allow banks to move money around the world without having branches everywhere.

Both the Bank of New York and ABN Amro, of the Netherlands, are the subjects of law-enforcement inquiries related to their ties to companies suspected of fraud and money-laundering in Eastern Europe.

In addition, ABN Amro is the subject of a previously undisclosed fraud suit in New York State Supreme Court over its ties to a bank in Cyprus that the Treasury Department has blacklisted for money-laundering.

That case appears to have played a role in generating a Justice Department money-laundering investigation concerning ABN Amro, documents related to the case show. In February of this year, one letter states, a lawyer with the influential Washington firm Patton Boggs met with the deputy chief of the Justice Department's money-laundering section on behalf of a group of Hong Kong investors claiming they had been defrauded by ABN Amro and provided the prosecutor with numerous documents. A Justice Department spokesman couldn't be reached last night."We are aware of a legal matter to which you refer...and we have filed a motion to dismiss the matter," an ABN Amro spokesman said.

A spokeswoman for the Bank of New York couldn't be reached.

Delaware law allows for creation of limited-liability corporations and other entities without identifying beneficial owners or directors -- one of many company-friendly laws that make the state a favored corporate-headquarters venue. These laws have led to a thriving industry that helps fuel Delaware's economy by bringing business to the state, even though the process now often is done over the Internet.

When the Soviet Union collapsed, officials say organized-crime groups that emerged gravitated to Delaware, prompting warnings from watchdogs such as the U.S. Government Accountability Office that Russian firms could use the state for money-laundering. A vast archive of correspondence from prosecutors in Eastern Europe in U.S. District Court here now indicates criminal groups, corrupt politicians and money-laundering banks in newly liberated Eastern Europe in fact may have become some of the state's best customers.

The GAO, the investigative arm of Congress and then called the General Accounting Office, warned of potential problems in Delaware in an October 2000 report, "Suspicious Banking Activities: Possible Money Laundering by U.S. Corporations Formed by Russian Entities," which found that thousands of companies had been set up in Delaware on behalf of company brokers in Russia. "It is relatively easy for foreign individuals or entities to hide their identities while forming shell corporations that can be used for the purpose of laundering money," the report warned.

Delaware officials say the problem isn't their fault and there is little they can do about it. "The reality is they are using U.S. entities for this purpose, [but] there's nothing particularly unique about Delaware as related to these small privately held shell companies," said Delaware Assistant Secretary of State Rick Geisenberger. Many other states have the same laws, he said. "They're choosing to incorporate in Delaware for the cachet of the fact that Coca-Cola and McDonalds and lots of large multinationals incorporate here. So in many ways, we are sort of victims of our own renown."

The emergence of Delaware as a nexus for money-laundering, tax evasion and financial fraud is a potentially huge embarrassment to the U.S. in the war against transnational financial crime. While launching stinging rhetorical and legal attacks on foreign jurisdictions, U.S. officials long have overlooked Delaware, which also caters to American companies that use the state to reduce state taxes.

Four of the Delaware fraud cases involve Bankers Trust, a unit of Deutsche Bank since June 1999. Last month, a federal judge in Wilmington approved a request by the Justice Department to issue subpoenas to Bankers Trust on behalf of Ukrainian prosecutors seeking to investigate a tax-fraud case. In a nine-page letter, the Ukrainian tax police in Kiev described a complex mechanism to evade value-added taxes on aluminum exports. The deal involved a firm in Rehoboth Beach, Del., called Primeway LLC, which allegedly was a client of Bankers Trust, and a Latvian institution called Parex Bank that is the target of numerous fraud probes in Eastern Europe.

A spokeswoman for Deutsche Bank declined to comment.

Delaware corporate records show Primeway was registered as a Delaware business called Consumer Corporate Agents Corp. Primeway never disclosed any of its officers and directors in state filings, and no longer is registered after failing to pay incorporation taxes for three years. Prosecutors say that shortly before it went out of business, Primeway signed millions of dollars in fictitious contracts with a firm in Ukraine, allowing that company to claim millions of dollars in tax rebates from the Ukrainian government, in a classic organized-crime operation.

ABN Amro is the subject of a lawsuit in New York state court filed June 7 claiming it abetted a $16-million fraud against a group of Hong Kong investors called International Strategies Group Ltd. The architect of the fraud was allegedly First Merchant Bank OSH, based in the rump Turkish Republic of Northern Cyprus, a lawless region that lacks diplomatic relations with the U.S. and almost the rest of the world. The suit contends ABN Amro's office in New York was warned in writing by various banks, regulatory authorities and its own head office in Amsterdam about possible money-laundering by First Merchant in 1999 but failed to cut its ties to the bank immediately.

Write to Glenn R. Simpson at glenn.simpson

To form your own Delaware company click here

Sunday, December 16, 2007

South of the Border,The Market's Still Hot

South of the Border,The Market's Still Hot
Americans Find Second-Home Boom Endures; Wildlife in the Neighborhood
December 14, 2007; Page W12
The housing slump has sent many Americans shopping south of the border.
Existing-home prices in the U.S. dropped 4.5% in the third quarter from a year ago, according to S&P/Case-Shiller. But they are still climbing in much of Latin America and the Caribbean.

Interactive map:
2 Waterfront homes are cheaper in Latin America, but closing costs are different than the United States.

Buyers are being enticed by the kind of double-digit appreciation that has all but disappeared in the States. In addition, a growing number of new developments are targeting Americans looking for good deals and a lower cost of living.
Since 2003, annual home-price appreciation has been running at 20% in the Dominican Republic, and could reach 50% in the near future, according to Boomerang Unlimited, a Napa, Calif., real-estate investment advisory firm. In San Pedro, Belize, the average price of a 2,200-square-foot home was $697,500 in September, up 18.6% from a year ago, according to a study by Coldwell Banker; the price of a similar property in San Jose, Costa Rica, was up 20.7%, to $389,900, the study said.
Prices remain low compared with those in the U.S., particularly for waterfront properties. Because Americans generally buy and sell properties throughout the region in dollars, not the local currency, home prices don't fluctuate with the various exchange rates, as is the case in Europe. What's more, the dollar generally buys much more house in these countries than it does in the U.S., because labor and land are less expensive.
Still, the rapid appreciation is drawing growing numbers of bargain hunters, making good deals scarcer and causing some customers to look beyond the usual vacation hot spots. In the Dominican Republic, Century 21 broker Dean Brown says that 80% of his buyers this year have been Americans, compared with half last year. Softec, a real-estate consulting firm, says in the past three years, investments in vacation homes in Mexico, primarily by buyers from the U.S. and Canada, have shot up by 60%.
Americans' appetite for investment opportunities is helping to spur a building boom in some areas. In Panama, 170 residential-building projects are under way, mostly marketed to Americans, and 100 more are in the pipeline, according to Panama Legal, a law firm based in Panama City. Among them, a 1,500-acre resort and marina by Naples, Fla.-based developer Todd Gates. The project, on Isla del Rey, one of the Pearl Islands near Panama City, is slated to open in 2009 and will have condos, villas and single-family homes ranging from $275,000 to $1.4 million. "It's like Florida was in the '50s," Mr. Gates says.
Some buyers are buying sight unseen. Shams Deitrick, a Walnut Creek, Calif., financial adviser, recently bought a furnished, two-bedroom "ocean view villa" for $375,000 in Canto del Mar, a new 35-unit development in the southern Costa Rica town of Dominica; the project has already sold out. "All I saw was the Web site, which showed a sloth 30 feet from the unit, and monkeys everywhere," Mr. Deitrick says.
He snapped up the home on the advice of a gym buddy, who said his own Costa Rican properties have quadrupled in value over the past four years. Although Mr. Deitrick isn't looking forward to the daylong flight to Dominica when he visits for the first time in February, he says he's glad he bought the property: "It just doesn't make sense to buy in the U.S. right now."
Preston Thompson, a retired Clearwater, Fla., hospital administrator, hopes to make some money in the Dominican Republic as a "serial renovator," moving into homes, fixing them up, and selling them. In July, he bought a 2,100-square-foot house for $265,000 on the beach in Cabarete, quickly added $50,000 worth of improvements, and put it back on the market for $489,000. If the property sells, he and his wife plan to repeat the process.
Getting the house ready to sell hasn't been as easy as he anticipated, however. Subcontractors were hard to find -- only one firm in Cabarete (population about 15,000) could do granite countertops, for example -- and the quality of their workmanship was "hit or miss," Mr. Thompson says. Worse, neither he nor his wife speaks Spanish, which made communicating with the workers difficult. He's also concerned that Americans may be turned off by local health-care facilities, which he says are very modest. For all of its current popularity, he says, the Dominican Republic is essentially still a developing country. "You have to put up with inconveniences," he says.
Earlier this year, Geoff Folsom, a Thousand Oaks, Calif., businessman, bought a 4,500-square-foot oceanfront penthouse, with its own private swimming pool, in Trump's Ocean Resort in Playas de Tijuana, Mexico, a 30-minute drive from San Diego, Calif. He paid $3 million for the property, about half the cost of similar resort units he looked at in the States. Property taxes and maintenance costs are lower than in the U.S., too.
There are trade-offs, he says. The mostly undeveloped area outside the development's gates has few restaurants and hotels, and Mr. Thompson is concerned about recent news reports of armed robberies on nearby roads. Still, he anticipates that, as the area develops, appreciation rates will exceed anything he could get in the U.S. "You get so much better value south of the border," he says.
There are additional downsides to buying in this part of the world. The weather can be violent and unpredictable: Last month Hurricane Noel slammed the Caribbean, causing floods and mudslides, and leaving 147 dead. And insurance to protect against natural disasters, including earthquakes, may be impossible to obtain.
In addition, many foreign real-estate brokers are unlicensed and don't necessarily adhere to the business standards that Americans expect. Some, for example, encourage sellers to raise their asking price after American buyers have made a full-priced offer, even if no other bidders are involved.
Plus, not every place is a boom town. Seasoned real-estate brokers say that to be successful, developments need at least some amenities and should be within an hour's drive of an international airport.
Cuxlin Ha, an 80-unit riverfront retirement community in Punta Gorda, Belize, near the Guatemalan border, is about 300 miles from the closest international airport, although a small "air taxi" airport is eight miles away. On the development's Web site, house hunters are warned that "this is not an area that promotes exciting night life and wild times (unless you're a jaguar or a howler monkey)." Buyers apparently have taken the hint: Although a three-bedroom, fully-furnished 1,350-square-foot home sells for only $100,000, only two buyers have stepped up since the project opened two years ago. "People want a more touristy area," says Bob Prehall, the Roseburg, Ore., broker who's selling the project.
But if a place does draw tourists, Americans are willing to travel long distances to buy there. Shaun de Jesus, a San Francisco derivatives sales manager, bought a three-bedroom condo in Punta del Este, Uruguay, three years ago for $120,000, then got a distress-sale deal on a two-bedroom condo in the same town for $90,000 six months later. On the southeast coast of Uruguay, about 90 miles east of Montevideo, the beach town -- which has its own international airport -- has a year-round population of 7,300 that swells with vacationers in the hot months of December and January.
Since he bought the properties, Mr. de Jesus received an offer of $150,000 on the first unit, and $170,000 on the second. But he's not selling. Even though he gets down to visit only two times a year, he says he is pleased with the units' low maintenance costs and the high rents they pull in when he's not around. In fact, he's now looking for another good deal. "If something comes up, I'll jump on it," he says.

Thursday, December 06, 2007

Useful Tips on Buying Property in Panama

Your tax dollars at work: The US Embassy publishes a guide with common-sense information for those buying land in Panama. Unfortunately, many do not follow these tips and loose money when they leave common-sense at home.

Panama Information - Purchasing Property

Useful Tips on Buying Property in Panama

February 2006
INTRODUCTION AND SUMMARY. The following is general information on purchasing real estate in Panama. It is not to be construed as legal advice. The different categories of land make it imperative to engage professionals for more detailed information. Real estate laws on the mainland can be quite different than those on islands, coastal areas, and areas near national borders.

Before handing over any money, make sure you consult with a professional and do a proper due diligence investigation over the property to ensure you aren't buying a big problem! It is important to understand the rules and process your property transaction correctly.

Panama has three different types of property;

Titled Property

Titled property is not unlike "fee-simple" titles in the USA. The Panamanian Public Registry has jurisdiction over the registration of titled properties throughout the country. Titled property is verifiable through the Public Registry system and is guaranteed by the constitution of the Republic of Panama. Titled property can also be mortgaged. The bank will register a lien against the title as collateral on the loan. Titled properties are subject to annual property taxes when the registered value is over US$30,000 unless the buyer has obtained an exemption for the construction of a new dwelling. This is a pro-rated tax exoneration based on the value of the dwelling. Buying titled property normally requires the following procedure:

1. Promise to Purchase Contract: A small down payment is made at the signing of the promise to purchase contract. The down payment secures the property and establishes time for the title search and to coordinate payment arrangements for the closing. Registering this contract at the Public Registry ensures the property cannot be sold to another party during the escrow period.

2. Title Search: A proper title search includes: a) verification that the seller in fact has title to the property and it is free and clear of encumbrances, liens, or other issues that could affect the free disposition or transfer of the title; b) a review of the official survey map, and a professional surveyor to physically verify the map points on the property (to avoid future boundary conflicts); c) verification of utility debts (water and sewage d) verification of payment of property taxes and/or of the tax exemption.

3. Buy-Sell Contract: This contract is registered at the Public Registry and the final balance is paid to the seller, or an escrow agent. Payment is made when the title is transferred to the buyers' name. Payment can be issued by a bank, contingent on receiving from the seller proper title to the property. The buyer can open a bank account (or get a mortgage) and then formally request that the bank issue payment as soon as it is presented with the registered public deed transferring title to the buyer. Real estate agents normally get paid only when the sale closes.

4. Title Transfer: The buyer officially owns the property when the title is transferred to the buyers' name. The transfer occurs when the buy-sell contract is signed by each party and registered at the Public Registry. If the title is in the name of a corporation, there is no transfer of title, only a transfer of shares of the corporation. The buyer can keep the same officers in the corporation or appoint new members. Buyers of corporate titled properties through the purchase of the corporation itself, should ensure the annual corporation tax (Tasa Unica) is up to date. A change of corporate officers cannot be officially recorded at the Public Registry if the tasa Unica is in arrears.

Possession Rights Property

Possession Rights Property is not unlike "squatters rights" common in North America many years ago. This property is government owned but is "occupied" or "used" by a Panamanian individual (or Panamanian organization) for some time. Possession rights are generally certified by either municipal mayors, sheriffs, or other government organizations such as the Agricultural Reform Department (Reforma Agraria). Possession rights do not incur property taxes, although registered improvements on possession rights property may incur taxes at a municipal and/or national level. Most Possession Rights properties can become titled through a procedure of purchasing the land from the government, however, the law prohibits titling of possession rights properties in some areas such as certain coastal areas, national parks, or islands. In these cases, as an alternative, the "possessor" of the property can apply for an administrative concession over the land to guarantee the pacific use of it.

Acquiring possession rights over a property normally requires the following procedure:

1. Promise to Purchase Contract: A small down payment is made at the signing of the promise to purchase contract to secure the property, establish time for the title search and to coordinate payment arrangements for the closing. Contracts related to the purchase of Rights of Possession cannot be registered at the Public Registry, but can be authenticated by a public notary.

2. Due Diligence: The due diligence procedures on possession rights property is more complex since there is no central database of information on possession rights properties. Buyers of possession rights should take extra care in their purchase. The following due diligence investigation can be done on possession rights property:

a. Verification of Certification of Rights of Possession: A valid Certification of Rights of Possession is issued by a competent government authority, and contains the possessors' name, correct description of the property in terms of location, size (area), limits, boundaries and neighbors (to the north, south, east, and west).

b. Verification of Survey: A stamped, signed survey by a professional licensed surveyor or topographer, identifying the possessors' name, location and reflecting the same information in accordance with the Certification of Rights of Possession is recommended.

c. Inspection: An inspection will evaluate the physical occupation, no opposition by third persons, and good faith. A physical inspection to identify and mark the points of the property as well as confirmation of these points with the neighbors to ensure that there are no future boundary conflicts should be done by your surveyor. Also, the property should be maintained and fenced to clearly delineate the boundaries.

d. Permitting Verification: If the buyers' intentions are to build a certain type of structure or project on the possession rights property (for example, a marina, port, hotel, airstrip, etc.), it is necessary to verify any national or municipal regulations that may prohibit those activities in the area.

3. Buy-Sell Contract: The final balance is paid to the seller, or an escrow agent, once the possession rights certification is transferred or changed to the buyers’ name. Contracts relating with the purchase of Rights of Possession cannot be registered at the Public Registry, but can be authenticated by a public notary.

4. Possession Rights Certification Transfer: Possession rights for the property are officially transferred to the buyer when the Certification of Rights of Possession is transferred to the buyers' name. Transfer to the buyer’s name occurs when the buy-sell contract is signed by each party. If the possession rights are in a corporations' name, there is no transfer of certification, only a transfer of shares of the corporation. The buyer can keep the same officers in the corporation or appoint new members. Buyers of corporate possession rights properties through the purchase of the corporation itself, should ensure the annual corporation tax (Tasa Unica) is up to date. A change of corporate officers cannot be officially recorded at the Public Registry if the tasa Unica is in arrears.

Concession Property

Concession property is not unlike “land lease” arrangements, common in Mexico or Hawaii. Concession Property is government owned property, where the government has granted a concession to an individual or organization for a specific purpose, such as a real estate development, hotel, or marina. Concessions in Panama are generally granted for a maximum of 20 year (renewable) periods. Some concessions are granted for up to 40 years (renewable) in specially designated areas such as the Amador Causeway or where there are commercial and condominium developments currently being sold (Naos Harbor, for example).

Concession Property is often located on islands, in special coastal or other protected areas where titles are not permitted by law. Real estate developments over concession property often offer investors time share or fractional ownership arrangements. Unlike Possession Rights property, Concession property is guaranteed by the government through a specific contractual agreement.


[Moderator says: I have my doubts about this. Yes, title is only transferred through a public deed in Spanish registered in the Public Registry. However, a contract signed by both parties in English can help a defrauded buyer get payback from a solvent seller when submitted before a court along with a translation into Spanish.]

Contracts signed are legally binding documents, and you should ensure that you have read and understood them completely before signing.

All judicial processes in Panama are conducted in Spanish. For any real estate transaction in Panama, a contract written solely in English carries no legal weight, and is generally not recognized. All contracts for property must be in Spanish on a formal public deed, and signed before a public notary, in order to be legally enforceable and where applicable, be filed at the Public Registry.

GET PROFESSIONAL HELP. Buying real estate in a foreign country should not be guesswork. As when purchasing real estate in the U.S., common sense should be the guiding factor. Again, engaging a reputable attorney and licensed real estate broker is recommended. While a good real estate agent can help you through the steps of buying, he cannot provide you with legal advice; an attorney does that. Even some Panama City-based real estate lawyers might not be fully familiar with such intricacies as land law in certain areas, e.g., Bocas del Toro.

[Moderator says: Real estate agents get their fees from the Seller, so when you are a buyer having drinks with a friendly agent, keep in mind his interest is to have the deal go through, not to protect your interest. Ask bluntly your agent and lawyer who are they representing and get their response in writing.]

Clauses in real estate contracts confirmed as abusive

After the 8th Circuit Judge rendered an initial May 31, 2007, decision in the Duque vs Neto S.A. case in favor of the buyer of a condo (see Tough times for sellers of Panama City skycrapers?), the Third Superior Tribunal confirmed the decision on appeal.

The Tribunal only considered as non-abusive a clause which allows the developer to charge 1% of the price until the registration of the sale, which leaves as abusive clauses:
  • A 5% unilateral increase in the purchase price if the seller deems that building materials have increased in price,
  • The seller to withhold all previous downpayments if it unilaterally considers that the buyer is in default of agreement obligations,
  • The seller to unilaterally decide not to build and simply return all downpayments without interest and with the seller waiving all claims for said action,
  • All disputes to be subject to arbitration excluding the consumer protection courts.

The defendants Neto, S.A., are entitled to file a cassation action before the Supreme Court. Although precedent is not fully binding on other judges and this case does not declare void clauses in other contracts, it provides powerful arguments to those buyers suing developers with contracts that have similar clauses.

This consumer protection case serves only those buyers - foreign or locals - who have a single home in Panama. Those who are buying several properties for resale are not protected by the concept of abusive clauses. Needless to say, the expense of having a contract in Spanish translated into the buyer's language goes a long way towards avoiding running into an abusive clause.

Why do I have to give Panama banks so much information?

Panama banks are required by law to apply "Know-Your-Customer" (KYC) policies in order to have information in their files which would allow Panama authorities to know who the ultimate beneficiary owner (UBO) is, in case of a criminal investigation for violation of Panama laws. If your bank is not asking for this information, it is because they have no intention of sticking around for long and your money may actually be at risk of vanishing.

Regulated banks are demanding the following:

1) Personal interview with the accountholders (and/or Copy with Apostille of the passport of the accountholders)
2) ORIGINAL letters of reference from TWO (2) banks of EACH of the foreign director/ Council members and the foreign client,
3) Last statement of account from the two banks.

Banks reserve themselves the right to request further documents and even to reject the bank account application.

In addition, so that all Panama transfers are not subject to unjustified scrutiny by US banks, Panama banks must comply with Qualified Intermediary provisions enacted by the IRS.


AGREEMENT 8 (2006)
The Superintendency of Banks is responsible for looking after the maintenance of the soundness and efficiency of the banking system as well download pdf

AGREEMENT 12 (2005)
Of December 14, 2005 - Prevention of the misuse of Banking and Trust Services download pdf

Of December 14, 2005 - Guide with examples of Suspicious Operations download pdf

AGREEMENT 5 (2003)
Of June 12, 2003 - Basic guidelines relating to the exercise of electronic banking services. download pdf

AGREEMENT 4 (2001)
Of September 5 of 2001 - DEFINITION OF CORPORATE GOVERNANCE. For the effects of this Agreement, Corporate Governance will be understood as the group of rules that govern with transparency the relationship and behavior between the Senior Management of the Bank, its Board of Directors, its shareholders, its depositors and any other stakeholder, which produces the strategic objectives of the enterprise, the means, resources and procedures to attain these objectives, as well as the system for the verification of the monitoring of responsibilities and controls corresponding to each level of the Bank�s structure.
download pdf
RESOLUTION JD No. 032-2005
Of December 21, 2005 - Whereby the scope is set for the concept of Due Diligence contained in Article 3 of Agreement 12-2005 download pdf


List of Approved KYC Rules and Rules Awaiting Approval

Revenue Procedure 2000-12 states that the IRS will not enter into a qualified intermediary (QI) withholding agreement that provides for the use of documentary evidence obtained under a country's know-your-customer rules if it has not received the know-your-customer practices and procedures for opening accounts and responses to 18 specific questions listed in the revenue procedure.

This document lists those countries that have submitted know-your-customer rules. Two lists are provided -- a list of countries whose know-your-customer rules have been approved by the IRS and a list of countries whose know-your-customer rules have been submitted but not yet approved.

The qualified intermediary agreement contains an attachment that lists the specific types of know-your-customer documentary evidence for each country that is sufficient for purposes of the qualified intermediary agreement. The IRS is working together with the organizations that have submitted acceptable know-your-customer rules to develop standardized attachments. The attachments can be seen here as soon as they are available. For more information, see Rev. Proc. 2000-12 and Announcement 2000-48 .

If a country is on the approved list, entities and branches located in that country may submit their QI applications even if the IRS has not yet agreed to a specific attachment for that particular country. Once a specific attachment has been developed for a particular country, the IRS will associate the attachment with the qualified intermediary agreement it sends for signature. A qualified intermediary may suggest amendments to the attachment, but departures from the standardized attachment may delay processing of an application.

1. QI is subject to the following laws and regulations of Panama governing the requirements of QI to obtain documentation confirming the identity of QI�s account holders.
(i) Law No. 42 of October 2, 2000.
(ii) Decree Law No. 9 of 1998.
(iii) Agreement No. 9-2000 of October 23, 2000.
(iv) Decree Law No. 1 of July 8, 1999.
(v) Interbank Agreement No. 34 of the Panama Banking Association.
(vi) Panama Banking Association�s Guide for the Prevention of the Wrongful Use of Bank Services.
2. QI represents that the laws identified above are enforced by the following enforcement bodies and QI shall provide the IRS with an English translation of any reports or other documentation issued by these enforcement bodies that are relevant to QI�s functions as a qualified intermediary.
Item 1(i): Superintendency of Banks, National Securities Commission, and Financial Analysis Unit.
Item 1(ii), (iii): Superintendency of Banks.
Item 1(iv): National Securities Commission.
Item 1(v), (vi): Board of Directors, Panama Banking Association.
3. QI represents that the following penalties apply to failure to obtain, maintain, and evaluate documentation obtained under the laws and regulations identified in item 1 above.
Fines from US$5,000 to US$1,000,000, private admonition, public admonition, removal of officers, annulment of banking license, intervention in bank�s administration with compulsory reorganization or liquidation, expulsion from Panama Banking Association.
4. QI shall use the following specific documentary evidence (and also any specific documentation added by an amendment to this item 4 as agreed to by the IRS) to comply with section 5 of this Agreement, provided that the following specific documentary evidence satisfies the requirements of the laws and regulations identified in item 1 above. In the case of a foreign person, QI may, instead, use a Form W-8 in accordance with section 5 of this Agreement. Either QI, or a banking or securities association in Panama, may request an amendment of this item 4.
(i) For natural persons:
(a) Passport,
(b) National identity card,
(c) Driving license that bears a photograph.
(ii) For legal persons:
Copy of certificate of incorporation, memorandum of association and by laws, trust deed or certified copy of extracts from the trust deed.
5. QI shall follow the procedures set forth below (and also any procedures added by an amendment to this item 5 as agreed to by the IRS) to confirm the identity of account holders that do not open accounts in person or who provide new documentation for existing accounts other than in person. In the case of a foreign person, QI may, instead, use a Form W-8 in accordance with section 5 of this Agreement. Either QI, or a banking or securities association in Panama, may request an amendment to this item
(i) QI shall not open an account by any means other than by establishing in person the identity of a customer through the account holder�s own identity documents, except as permitted in (ii), (iii) and (iv) below.
(ii) QI may obtain by mail or otherwise a copy that is an exact reproduction of the specific documentary evidence listed in item 4 above from another person that is subject to know-your-customer rules that have been approved by the IRS for purposes of qualified intermediary agreements, provided that the laws and regulations listed in item 1 permit QI to rely on the other person to identify the account holder.
(iii) QI may obtain a photocopy of the specific documentary evidence listed in item 4 by mail or otherwise remotely from the account holder or a person acting on behalf of the account holder, provided that the photocopy has been certified as a true and correct copy by a person whose authority to make such certification appears on the photocopy, and provided that the laws and regulations listed in item 1 permit QI to rely on the certified photocopy to identify the account holder.
(iv) (iv) (a) QI may obtain by mail or otherwise a copy that is an exact reproduction of the specific documentary evidence listed in Item 4 from an affiliate of QI or a correspondent bank of QI, provided that the affiliate or correspondent bank has established in person the identity of the account holder and the laws and regulations listed in Item 1 permit QI to rely on documentation provided by that affiliate or correspondent bank to identify the account holder.
(b) For accounts opened prior to January 1, 2001, if QI was not required under its know-your-customer rules to maintain originals or copies of documentation, QI may rely on its account information if it has complied with all other aspects of its know-your-customer rules regarding establishment of an account holder�s identity, it has a record that the documentation required under the know-your-customer rules was actually examined by an employee of QI, or an employee of an affiliate of QI or a correspondent bank of QI, in accordance with the know-your-customer rules, and it has no information in its possession that would require QI to treat the documentation as invalid under the rules of section 5.10(B) of this Agreement.

Wednesday, November 28, 2007

In Cerro Azul - Panama, a Home in the Mountains

Tito Herrera for The New York Times
The ground floor of the three-bedroom, three-bath house features tile floors, hardwood doors, wide windows and a stone fireplace.

Tito Herrera for The New York Times
Rachelle and Ben Smith have owned this home in Cerro Azul, near Panama City, since March 2006. It was one of the original residences built in the 500-home development and is about 2,600 feet up a mountain.

In Panama, a Home in the Mountains


December 2, 2007

The terrace of Rachelle and Ben Smith's home is one of the few places on earth with views of both the Pacific and Atlantic oceans. On clear days, they sit there and watch the ships line up to enter the Panama Canal.

The area is also something of a bird paradise. Ornithologists regularly lead tours through the valleys, hoping for glimpses of the toucans, migratory birds and rare hummingbirds that regularly visit the treetops in the Smiths' backyard.

"The rope across there is for the monkeys," Mr. Smith said, pointing to ropes strung through the tall pines around the house, near platforms covered with sliced bananas and bird feed.

The couple paid $150,000 in March 2006 for their three-bedroom, three-bath home. The house is situated on two acres of land, and it is a little more than an hour's drive from Panama City.

In 2003, after Mr. Smith ­ who goes by "Smitty" ­ sold his plumbing business in Jacksonville, Fla., the couple spent three years living on a 38-foot sailboat called the Seawolf. But two years ago, while they were visiting relatives in the United States, their boat was destroyed by Hurricane Wilma.

Their initial search for a new home focused on the Caribbean and Costa Rica. But then they met Marie Farrell, a Panama native and an agent with ReMax in the Jacksonville area.

Fast-growing Panama is generally considered an easy place for foreigners to buy property, compared with other countries. English is commonly spoken, the United States dollar is the accepted currency, there are no restrictions on owning land in most areas and the government offers a long list of friendly discounts for pensionados, expatriates who have settled in Panama.

For the Smiths, Panama had an extra appeal ­ no hurricanes. "We were sick and tired of running from hurricanes," said Mrs. Smith, 52.

Mrs. Farrell first showed the couple properties in beach resort areas, where a four-bedroom condo with 230 square meters (2,475 square feet) of living space sells for about $375,000. But then Mrs. Smith mentioned their love of birds. "That was it," Ms. Farrell said. "I knew they wanted the mountains."

Mountain property in Panama is much less expensive than the coast and offers lush tropical landscapes, albeit without the sandy beaches. A new three-bedroom house with 225 square meters (2,400 square feet) of living space in Boquete, an area in the north popular with expatriates, sells for around $265,000.

Cerro Azul, the community where the Smiths bought their home, was first developed a generation ago as a retreat for wealthy Panamanians, Mrs. Farrell said. Most of the land in the area is owned by the Melo family, which made its fortune in Panama's poultry industry.

Today the narrow two-lane road that goes up the mountain is still lined with well-tended chicken ranches. Children on the side of the road sell bundles of nance, the little yellow fruit common in the local valleys.

Near the top of the mountain, where the elevation is 2,600 feet, there is a gate and security guard at the entrance to the development; it is another 15 minutes on a narrow winding road to the Smiths' house.

Although there are 500 homes on the property, there are only 50 full-time residents ­ mostly Americans and Canadians ­ plus a country club, a pool, tennis and basketball courts and a small restaurant. Many of the houses are empty or run-down; wealthy Panama City residents these days prefer the cool mountain air of the fast-growing resort areas in the north.

The Smiths' house was one of the original "Melo homes," owned by the family, and was clearly well maintained over the years. Beyond the $13,000 that they spent on a garage and the terrace, including a concrete barbecue, they have done little work on the 2,200-square-foot house, which they bought furnished.

The ground floor has tile floors, hardwood doors, wide windows and a stone fireplace. The second story has the feel of a cozy loft, with dark wood floors and a small veranda with panoramic views off the main bedroom, where Mrs. Smith has put her favorite rocking chair.

"The shower sold Smitty on the house," Mrs. Smith said, showing off the master bathroom's wide window and its views to the Pacific and Panama City. "The very first thing we did was get a 40-gallon propane hot water heater."

Shipping their possessions ­ including a car and assorted dogs and cats ­ to Panama proved to be easy. But it took months of bureaucratic hurdles to gain admittance for their parrot, Morgan, due to concerns about avian flu. "No one knew the law," said Ms. Farrell, who ended up as the Smiths' lead bird negotiator.

Since moving in, Mr. Smith, 60, has taken the lead in the garden. He put in 40 coffee plants and assorted pineapple, orange, banana and palm trees, as well as the begonias that line the circular driveway. He starts out every day with what he calls a perimeter check. "We have several types of ants that would take over if we let them," he said.

A few nights earlier they had spotted a black panther ambling across the back lawn. Snakes of various sizes and shapes, as well as tarantulas and scorpions, are common. At night they can hear the howler monkeys in the valley.

Although both spoke little Spanish when they arrived, they have found it easy to live in Panama, where many of the locals speak at least a bit of English. They say they rarely go into Panama City, preferring the markets in nearby towns and the small open-air family restaurants in the area, where they can feast on plates of rice and beans for $3. And "it's 32 cents for a beer," Mr. Smith added.

They spend their days working on projects, hiking, and teaching their Australian shepherd puppies how to play with a Frisbee. Several hammocks are strategically positioned around the gardens.

With a collection of 200 DVDs, satellite TV and high-speed Internet, Mrs. Smith says they never feel isolated, although their cellphone reception is poor. Visits from their 7 children and 13 grandchildren help.

And there are always the birds. As the seasons change, there are always new varieties passing through, including migratory orioles from North America, and the hummingbird feeders are swarming with unusual breeds. "If you put a hibiscus flower in your ear," Mr. Smith said, "they'll come right up to you."

Full text in

Saturday, November 17, 2007

Legal fees for probate cases

> 1) Regarding wills in Panama, I recently heard that a lawyer who
> administers a will for someone can legally receive a percentage of the
estate - 15 percent of an estate valued at less than $50,000 and 10
> percent of an estate with a value of more than $50,000. GASP!!! Is
> this true? (I am also told that a holographic will - without a lawyer
> - is legal in Panama, but that's the subject for another discussion.)
Legally he can ONLY IF no other fee arrangement has been previously made.
That is the rate set in the 2001 Schedule of Fees in for 4. PROCESO DE SUCESIÓN TESTAMENTARIA O INTESTADA (probate litigation). Unfortunately, nobody has bothered to translate this document into English.
However, hourly fees from US$50 or up may be PREVIOUSLY arranged IN WRITING as listed in CONSULTAS Y CONCEPTOS SOLICITADAS A ABOGADOS O FIRMAS DE ABOGADOS., as well as other rates.
Lawyers also can recommend asset protection arrangements such as foundations and trusts which, when properly made, can help you avoid the cost of probate. Well-drafted documents are specially important when transferring real estate and bank accounts to the next generation, since government or bank officials may have to act according to the documents as they are written.

Panama green card has another color

Unlike the US where a single application results in a work permit and a visa, Panama requires two separate applications for a work permit (issued by the Directorate of Employment of the Labor Ministry) and a visa (issued by the Directorate of Immigration of the Government Ministry).

The number of work permits is of 6, which requirements are listed in the Labor Ministry website. As a general rule, a foreign worker can apply for a permit if the company which sponsors him/her would have no more than 1 foreign worker for every 10 Panamanian workers if the application was approved. The ratio is raised to 1 foreign worker for every 15 workers if the foreign worker has a technician permit.

Foreign spouses of Panamanians are exempt from this requirement.

Every year the permit must be renewed and proof of the immigration visa renewal must be included.

Friday, November 16, 2007

Tropical probate drama tests Panama's judicial system

Friday, Nov. 02, 2007

Postcard: Panama By Tim Padgett

Kids play and hang out during school hours in La Caseta in the barrio of Curundu in Panama City, Panama, on October 24, 2007.
Ivan Kaskinsky / WPN for TIME

These are heady days for tiny Panama. It is undertaking a massive expansion of the Panama Canal, luring billions of dollars in maritime and high-tech investment that could make it the Hong Kong of the Americas. But here's the other side: in the past few months, scores of toddlers have died of malnutrition in villages around the country. More than half of Panamanian children under 5 are at risk of suffering the same fate. That's why, say friends of Wilson (Chuck) Lucom, who died last year at 88, the eccentric U.S. millionaire left as much as $50 million in his will for poor children's charities in Panama. It's the largest private gift ever made here. The will doesn't single out which relief organizations will be recipients. But, as the director of a charity that may benefit says, it could have a "tremendous impact on our ability to save these children."
That is, if the kids ever see the money. Lucom's widow Hilda, 83, the frail matriarch of Panama's prominent Arias family (a clan that has produced two of Panama's Presidents), with the support of her children is battling to get the will declared invalid. They say the will's U.S. executor, Florida tax attorney Richard Lehman, concocted the charity donation so he could split the money with other Lucom cronies.
Read the full text in,9171,1680177,00.html

More on the story.. Litigios y disputas by Tomás A. Cabal

La muerte del empresario norteamericano Wilson C. Lucom ha desatado una serie de juicios y litigios sobre el destino de la enorme fortuna que dejó al momento de morir. De acuerdo a documentos aportados por los abogados de Lucom World Peace Limited (Fiduciaria de Fundación Wilson C. Lucom Trust Fund), han tenido que interponer una demanda en los tribunales de Panamá y los Estados Unidos contra la viuda del conocido empresario para asegurar que se cumpla con su testamento. De por medio están depósitos bancarios que suman millones de dólares, apartamentos, residencias y la Hacienda Santa Mónica que por muchos años fue propiedad de la familia Arias...

EN PRO DE LA NIÑEZ. Testamento by Richard Koster

... Pero vamos a hablar de algo bueno, y de alguien que apreciaba Panamá y que tenía conciencia social. Se trata del señor Wilson Lucom, un norteamericano que vino aquí hace unos 10 ó 15 años y quedó víctima del embrujo que Panamá tiene.
Lucom nació pobre y se hizo multimillonario. Se casó dos veces, pero nunca tuvo hijos. Al venir a Panamá compró la Hacienda Santa Mónica de los herederos de Gilberto Arias Guardia. Hizo amistades coclesanas y llegó a conocer rincones como Tobaré y La Pintada. Le preocupaba la falta de oportunidad para jóvenes en el campo y el juegovivo de la política criolla. Se preocupaba por Panamá. Murió el año pasado a los 88 y dejó gran parte de su fortuna, es decir, muchos millones, a "los niños con necesidades en Panamá"...

Panamanian Arias oligarchs after the Lucom millions
By Julie Kay

...But in the years before his death last June at age 88, Lucom embraced a new cause — helping impoverished children in Panama. His will left a big chunk of his estate, valued at $30 million to $50 million, to charities that help abandoned children and children with AIDS.
Even though Lucom’s will generously provided for his widow, Hilda “Toni” Arias Lucom, 83, a member of one of Panama’s most powerful families, she and several of her children and relatives are seeking to block the money from going to the charities. They want to invalidate the will and make Hilda the sole beneficiary.
They also seek to remove Lucom’s longtime tax lawyer, solo Palm Beach attorney Richard S. Lehman, as executor. Chuck Lucom had no biological children of his own or surviving close blood relatives.
Lucom’s will set off a nasty international legal battle in Palm Beach County — where Lucom had millions in bank accounts — and in Panama. The case raises questions about whether wealthy Americans who retire to Panama or other Latin American countries can count on having their wills and other legal documents enforced in foreign courts....

Thursday, November 08, 2007

Immigrant Visa and Residence Permit granted to foreigners married to a Panamanian citizen

Immigrant Visa and Residence Permit granted to aliens married to a Panamanian citizen.
Visa Code VI-2

Who may apply to this visa?

This visa is granted to those foreigners that are married to a Panamanian citizen and live normally together, stably and continuously with their spouse. The interested party must prove to the National Directorate of Immigration and Naturalization, that it is a real marriage and not one of “convenience” neither a “false” marriage arranged in order to obtain the migratory status. The person that by means of a false marriage tries to obtain a migratory status can be subject of penal actions, furthermore, the request will be denied or the granted permit will be revoked, and the immediate departure of the country by the foreigner will be requested. In addition, it is informed that the omission or act of providing false information in the Sworn Background Declaration can have legal implications, and the verification of this issue is a reason for denying the visa requested as well as the resident permit.

Processing time frame: 2 to 4 months until it is granted, depending on the date and the results of the marriage interview, and other necessary admissible evidence.



At the presentation of the documents, a three months temporary carnet is issued and at the time of the approval of the request a provisional one year permanent carnet is issued. The costs of the carnets will be paid by the interest party as well as the B/10.00 fiscal stamp for those foreigners’ citizens that require visa.

Power of Attorney and requests through a lawyer [Power of Attorney must include the general information of the interested party company (exact address, name, nationality, name and parent’s nationality, telephone numbers and e-mail address. The general information related to the lawyer must be specified (office’s address, telephone’s numbers, fax’s number and e-mail address). The general information of the attached checks (check number, bank name, date and amount) listing and identification of the attached documents and expounded the real and legal facts of the request. The Power of Attorney must be personally presented before the National Directorate of Immigration and Naturalization officer or with an authenticated note before a Public Notary. The power of attorney, as well as the request must have a B/4.00 per page legal stamp or postage (Four Balboas per page)

Certified or cashier’s check in the amount of B/ 100.00 in favour of “Tesoro Nacional” (National Treasury).

Good Health Medical Certificate [: issued within the three (3) months prior to the presentation date (it must have date, signature and seal with the doctor’s name, including the code and registration number of the physician.]

Penal and police record issued by the previous country of residence of the petitioner within the last two years, ( if the interested party has been in Panama for the last two or more years on a consecutive time, this document will not be necessary).

Passport issued by country of origin [... with a minimum of six months validity time]

Complete copy of passport

Two (2) carnet size photos [...updated (no hats or veils and front face)

Marriage certificate issued by the Civil Registry [... this must be issued within the previous six months before the date of presentation of the document and must include the proper fiscal stamps. If the marriage occurred abroad it must be properly registered at the Civil Register of Panama]

Birth certificate of the Panamanian spouse issued by the Civil Registry [... this must be issued within the previous six months before the date of presentation of the document and must bear the proper fiscal stamps.]

Birth certificate of children [...Panamanians, if there are, with their proper fiscal stamp.]

Present personal identification card of the spouse [...Panamanian, authenticated by Civil Register . . .]

Letter of responsibility from the spouse [...Panamanian, signed, where he/her is obligated to cover all the foreigner expenses and of the repatriation, if needed . . .]

For the male, resolution issued by the Ministry of Labour and Labour Development (MITRADEL) where it authorizes the interested party to work in the national territory with a status of married to a Panamanian. In case of not having it at the time of the presentation of the permit of residency request at Immigration, certifications stating that the negotiation of this permission is in process at MITRADEL can be presented, or a simple copy of the Power of Attorney and a request issued by the lawyer addressed to MITRADEL. In this case, the work permit remains pending in order to continue the visa procedure. If the work permit is denied the visa permit also will be denied. [...if the foreigner is retired or a pensioner and proves such condition with the correspondent certification, the labour permit is not required . . .]

For the female, a document that proves her source of income is sufficient to fund her expenses within the territory of Panama, such as payroll check vouchers, social security vouchers from her husband or another source that proves how she can fund her expenses. [.if she works to support herself, she must presents her labour permit or copy of the request presented to MITRADEL.]

Marital interview [. . . the day of the request presentation before the Legal Department, you will be informed about the date in which you must appear with your spouse for an interview. In the case of not showing up at the given date, another interview won’t be granted. ]

Legal Base:
Articles 14, 25, and 35 of the Law-Decree No.16 June 30 of 1960, Law-Decree No.13 of September 20 of 1965, 6th Law of March 5 of 1980 and Executive Decree No.52 of February 19 of 2003.

In case that the request includes dependents (if the foreigner has dependent children or parents, that are within the familiar nucleus) the requirements for Immigrant’s Visa within the Resident’s Dependent Status must be included, proving the relationship and that the resident has the proper economic solvency as stated on the Executive Decree No. 52 of February of 2003 (a B/ 500.00 monthly income plus B/75.00 per each dependent). It Should be considered that the petitioner included as a dependent of a resident, will not be qualified for a work permit.

In the case in which the spouses or one of them is abroad and belongs to a nationality that for any migratory policy reason is requested to comply with the Authorized or Consulted Visa, the petitioner must comply with Article 11 of Executive Decree 52 of February 19 of 2003, which requires a minimum of six months living together after the marriage celebration and with other applicable dispositions related to restricted visas.

Opening hours to the public:
Monday through Friday 7:30 am – 1:30 p.m.

29th Street and Cuba Avenue
Central Phone Numbers: (507) 507-1800

Copyright © 2007. National Directorate of Immigration and Naturalization. All rights reserved.

Tuesday, November 06, 2007

When in doubt, get an Apostille

Panama Immigration clearly says it:
A) All documents issued abroad, should be submitted duly apostilled or authenticated by the Embassy or Consulate of Panama in the country that issued it and by the Ministry of Foreign Relations of Panama. B) All documents issued abroad in language besides Spanish, must be translated by a certified interpreter recognized by the Minister of Justice.

The Apostille is demanded in Panama for foreign Police Records (even if you are an angel and have never been convicted), Birth certificates, Marriage certificates, Social Security letters, and lately even letters of reference from banks.

U.S. State Department explains:
Documents issued in one country which need to be used in another country must be "authenticated" or "legalized" before they can be recognized as valid in the foreign country. This is a process in which various seals are placed on the document. Such documents range from powers of attorney, affidavits, birth, death and marriages records, incorporation papers, deeds, patent applications, home studies and other legal papers. The number and type of authentication certificates you will need to obtain depend on the nature of the document and whether or not the foreign country is a party to the multilateral treaty on "legalization" of documents. (A) If your document is intended for use in a country which is a party to a treaty called the Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents ("Hague Legalization Convention") (countries listed below), obtaining a special "apostille" certificate is generally all that is required.

US federal documents (such as a Social Security letter) may be authenticated only by the US State Department. However, other documents which a have a notary signature are authenticated by the Department of State of each individual state. The same may apply in federal nations like Canada, Australia and Germany.*

You can get the Apostille by yourself using a self-addressed stamped envelope and paying by check, or a privately-owned notary service.

Once you are in Panama, the Embassy of your country cannot issue an Apostille for your document. This has to be done BEFORE you arrive to Panama.

For more information, see:
US State Department Authentication of Federal documents
US State Department List of State Authentication Authorities*
Wikipedia Guide to Apostille

If you want to just forget about the whole Apostille thing, you can take your chances with the list of Panama consuls in Call them up first to figure out if it is better to deliver the document yourself in person, or if they can handle return postage. If they lose your document, there is no authority you can complain to!

*If there is a country you would like us to cover, email us and we will post the link to its Apostille instructions.

Wednesday, October 31, 2007

You can sue a builder after 1 year

Many contracts drafted in Spanish by Panamanian builders - and gladly accepted by many real estate agents claiming to act in best agent of the foreign buyer - have a clause which says:
THE APARTMENT shall include the following warranties FOR REPARATIONS: one (1) year from the date of the certificate of occupancy, except in cases of negligence due to THE PROMMISORY BUYER’s use or abuse.

The term may vary to read 1 year from the date of signing of the promise agreement or registration of the final deed.

When faced with claims for tiles popping up from the expansion of poorly dried floors, leaks into penthouses during heavy rains, plywood kitchen furniture bulging because of water dripping from substandard plumbing, many builders point to said clause to tell the buyer to go somewhere else.

Enter the old 1917 Civil Code, which in Article 1343 states:
"The contractor of a building which was damaged for construction defects ("vicios de la construcción"), is liable for the damages and injuries if the defect ("ruina") occurred within a term of 10 years, counted from the date when the construction ended; the same liability, and for the same time, will have the architect who directs it, if he knows that the defect is due to the soil or the management.
"If the cause was the breach of the contractor to the contract conditions, the action for indemnization may last 15 years."

An essay RESPONSABILIDAD CIVIL POR DEFECTOS EN LA INDUSTRIA DE LA CONSTRUCCIÓN by Dr. Pedro Barsallo points out how the Spanish Supreme Tribunal has been holding that the developer must also be liable for thos contractor liability, under Article 1591 of the Spanish Civil Code, which has the same text as Article 1343. This is specially important in Panama, where a buyer may sign a promise to purchase agreement with one corporation (for example: LANDHOLDING, S.A.), at the offices of a developer (PROMOTOR DEVELOPMENTS, S.A.), which in turns hires another company to be the contractor and get construction permits (BUILDER ENGINEER, S.A.) and another corporation is subcontracted to do windows and/or kitchens (INCOMPETENT SUBCONTRACTORS, S.A.), usually all with the same directors and most likely the same shareholders.

The Panama Supreme Court has been quoting the essay in several decision against builders, such as :
ROBERT TOLEDANO et al v PROVENCO, S. A., VENTAS Y PROYECTOS, S. A., PROYECTOS Y EDIFICACIONES, S. A. and CIELO RASO, DIVISIONES Y AISLAMIENTO, S. A. (July 3, 2001): PROVENCO, S. A. and PROYECTOS Y EDIFICACIONES, S. A. were found liable for US$33,222K in damages, out of US$60K claimed for losses during 14 months of repairs at the Mar Plaza condo in Marbella.
PRODUCTOS DEL MAR Y DEL CAMPO, S. A. and PASTAS FRESCAS, S.A. vs BASTIDAS, S.A. and CONSTRUCTORA VILLARREAL, S.A. (January 30, 2003): CONSTRUCTORA VILLARREAL, S.A., was found liable for US$40K in damages caused to neighboring complainants while working in the land of BASTIDAS, S.A.

Monday, October 29, 2007

Reforestation visa requirements

After many expats were left in a Kafkian limbo with the abrogation of Reforestation visas, they made a comeback under a special version of the US$40K Micro-Business Investor visa and now somewhat - official rules are in force.

However, 3 renewals of the first 1-year visa are still necessary to apply for a permanent residence (or 4 renewals if you want to be straightforward). This is something the Immigration English site does not clarify, but is published in the Spanish version of the e-government site and in our blog comments. Only when the investment exceeds US$80K can permanent residency be applied for at the end of the 1st immigrant visa. The investment must be made directly, and not by buying stock in a reforestation company.

Immigrant visa and Residence permit granting a Forest Investor of a Micro Business. VIFOR. 1

Who may apply to this immigrant visa?

Foreigners may apply to this immigrant visa and the corresponding permission of residence, who invest in direct form in the activities of reforestation as natural persons or through a legal person when the investment is no less than 40.000.00 (Forty Thousand “Balboas”).

The foreign applicant must prove to the National Directorate of Immigration and Naturalization the source of founds that he has effectively invested in the plantation of forest species for commercial, environmental, tourist aims or others. When the Immigrant visa has been approved, the foreigner receives a permission of residency for one year and when the same is expiring, the petitioner can request for a definitive permanency.

Only a single foreigner and its employees by company will be admitted and the attempt of violation or the violation of this requirement will bring as a consequence the refusal of the request and the obligation to leave the country.


  • All foreign citizens, that approaches the Directorate of Immigration to perform any procedure, must be previously registered in the Migratory Movement’s Section, whereto has to fulfil the following requirements:
    1. Present two (2) carnet size photos
    2. Present a copy of the page of the passport that containing the general information about him or (her) and copy of the page that shows the seal of the last entry to our country.
    3. Payment of the registration fee.
    4. Complete the register form of the Sworn Statement

  • In the case that the request includes dependents, the requirements for the Immigrant’s Visa as a Resident Dependent must be included.
  • All documents issued abroad, must be properly annotated or authenticated by the Republic of Panama Embassy or Consulate at the country that issued them, and by the Ministry of Foreign Affairs of Panama.
  • All documents issued abroad that are not written in the Spanish Language, must be translated by an Official Public Translator certified by the Ministry of Government and Justice.
  • All foreign residents, temporary visitors or alien citizens present in the country with an application being processed that wishes to go abroad and re-enter the country, requires from the National Directorate of Immigration and Naturalization a MULTIPLE INCOMING VISA BEFORE LEAVING THE COUNTRY. The omission of this procedure will incur a One Hundred Balboa fine (B/100.00).
  • One month before the termination of the one year Residence Permit that is granted with the Immigrant Visa, the petitioner may apply for the Permanent Residence, with the right to apply for a Panamanian Cedula (I.D. Card)
  • All those nationalities that require a Consulted Visa must present with any request, a VALID VISA CERTIFICATION TO PROCESS A RESIDENCE, issued by the Consulted Visa Department of the National Directorate of Immigration and Naturalization.
  • The Sworn Declaration must be made in the form supplied by the Directorate of Immigration and Naturalization. This form must be signed by the interested party and be completed in full. To furnish false information carries penal and legal responsibilities and the refusal of the requested visa or its cancellation if already granted. Under age foreigners don’t have to complete this form, but parents or tutors must provide the requested information, although not under the gravity of oath.

The documentation must be COMPLETE at the time of presentation, and in the expressed following order. Small documents such as, birth certificates, health certificates, receipts, etc, must be added to a legal size paper and both faces of the abovementioned documents must be clearly seen, in order to be properly received.



At the time of the document presentation, a temporary valid carnet for three months is issued and when the petition is approved a temporary resident carnet for one year is issued. At due time of the previous mentioned carnet, two successive extends can be requested, and if they are approved then a carnet for a validity of two years is issued. The costs of the carnets will be paid by the interested party as well as a B/10.00 fiscal stamp for those foreigners citizens that require visa.

Power of attorney and petition by means of a lawyer [ ... The power of attorney must be presented personally before a Public Notary or at the Receipt of documents for immigrants Section at the Directorate of Migration. It must include the general information of the foreign petitioner (full name, nationality, passport exact address, telephone numbers) as well as the parents full name, nationality and exact address. Also, all the general information of the lawyer must be given (office’s address, fax number, telephone number, e mail address) Within the request, in addition to the complete general information of the principal and the empowered, the complete information of attached check must be stated (check number, drawing bank’s name, date and amount), all the attached supporting documents must be listed, and quote the legal bases that support the request and explain the type of commercial activity that the company will develop. The power of attorney, as well as the request must have a stamp or seal for B/. 4.00 per page. ]

Certified or cashier’s check in the amount of B/. 100.00 in favour of the “Tesoro Nacional” (National Treasury).

Certified or cashier’s check in the amount of B/. 500.00 in favour of the “Ministerio de Gobierno y Justicia” (Ministry of Government and Justice) as a repatriation’s deposit [applicable to persons older than 12 years]

Medical Certificate of Good Health [: issued within the three (3) months prior to the presentation date (it must have date, signature and seal with the doctor’s name, including the code and registration number of the physician. ]

Penal and police record issued by the previous country of residence of the petitioner within the last two years, ( if the interested party has been in Panama for the last two or more years on a consecutive time, this document will not be necessary).

Passport issued by country origin [ .. with a minimum of six months validity time]

Complete copy of passport.

Two (2) carnet size photos [..updated (no hats or veils and front face)

Public Registry Certification: [: in which the legal representation, authorized share capital and the way the shares are divided is shown (shares must be nominative), the physical address and dignitaries and directors names must appear, to which the petitioner must belong. At the same time, the legal representative name and empowered, if any, has to be included.

Certification of the Secretary or Treasurer of the company, whereby the title of the shares issued in favour of the foreign applicant are credited and stating that the shares are released and properly paid (the shares must be of a minimum value of B/.40,000.00). The certification must be signed before Public Notary and it does not have to be subscribed by the interested party.

Certification of a Certified Public Accountant (CPA), where the total direct invested amount in the forestal activity by the petitioner is detailed, certifying that the investor owns the capital. The C.P.A. must attach copy of his or her identification card and the C.P.A.´s carnet.

Copy of the share certificate or certificates issued to the forestal investor.

Authenticated copy by the Ministry of Economy and Finance [.. of the Income tax form along with its payment receipts. If a yearly fiscal period has not concluded since the starting of operations of the company, instead of the income tax form, a copy of the Taxpayer Registry (Registro Unico) along with the original receipt must be supplied to be compared. ]

Authenticated photocopy [.. of the National Authority of Environment’s resolution where the legal entity or the foreigner was approved to be registered in the Forest Registry. ]

Proof of the investment made [... in a direct form in reforestation activities, by a minimum of B/. 40,000.00 (forty thousand B/ 80.000.00 “Balboas”) which can be demonstrated with documents such as: certificate of the Public Registry issued in the name of the interested party, in which the inscription of the property that will be destined to the reforestation is registered, authenticated photocopy of the checks that were made as investment in reforestation, with paid seal of the Bank and the corresponding invoice, customs liquidations of machinery to be used in the reforestation project or another document that certainly proves the investment made in reforestation ]

Complete the form of Sworn Declaration of Personal Background

Legal Basis:

Articles 23rd. and 26th of the Law-Decree 16 of June 30 of 1960.

National Directorate of Migration and Naturalization’s Resolution Nº 039 of April 27th. of 2006. Official Newspaper No. 2555. (Gaceta Oficial)


If the petition includes dependants, the investment should be an additional B/4,000.00 per dependant and must comply with the conditions of Resident’s Dependent Visa.