Thursday, December 30, 2010

Panama as Regional Business Hub

Because of the geographical position of Panama, located in the center of the American Continent, with access through land, sea and air, with a tropical year round climate, free of natural disasters. With an open service economy, capable human resources, dollarized economy, the international finance center, world class logistics platform and economic political and social stability, make Panama the ideal site for making businesses in the region.


Panama is a country with a service vocation, that possesses a privileged geographical location, that has allowed us to become one of the most important logistic centers of the Western Hemisphere for the storing and distribution of world cargo, a bridge for the mobilization of passengers to the entire American Continent and facilitator of efficient and modern communication services. As a commerce promoter, both nationally and internationally, Panama enjoys political, social and economic stability.

Panama has gone from being a bridge to becoming a logistic platform by air, sea and land, with the Panama Canal as main axis, transporting over 300 million of CPSUAB (Container, Bulk, etc.) presently serving more than 14,000 ships through 144 maritime routes and complementing with a system of container terminals in the Pacific and the Caribbean, that serve as cargo transship and redistribution, that recorded an annual movement of containerized cargo of 4.25 million TEU's, added to the inter-oceanic railroad that has a capacity 330,000 containers per year from one coast to anther. Panama also has the Colón Free Zone, the most important one in the Western hemisphere, with an annual trade exchange of over 19 thousand million dollars through its approximately 3,000 companies established in the Colón Free Zone. The development of the Panamá Pacífico Special Economic Area, in the former Howard Air Station, will serve as a space destined to the production of goods and high technology services.

We offer an efficient air service through the Tocumen International Airport, presently undergoing a remodeling process for offering a comfortable and safe atmosphere to all the travelers that visit our country and an expeditious and efficient attention to the transiting passengers, who do not go through customs or migration checks. From the airport the Copa Airline operates its Hub that offers more than 46 destinations to 25 countries in America and excellent connections, some of them with three daily flights to the most important cities of Latin America. In addition we account for with an excellent internal offer of direct flights to the principal cities of the interior of the country.

Panama has become the preferred center for the installation of five submarine optical fiber cables, turning into the ideal place for telecommunication companies and data centers since we have the advantage of offering great connectivity with North and South America, Europe, Asia and the Caribbean, advantages that companies have learned to use effectively, such as MCI, Cable & Wireless and Movistar that offer cellular telephony services and first quality internet to the international market.

Our prestigious International banking Center, with over 93 internationally renowned banks, reflected for the first Quarter of 2010, assets in the order of US$ 65,000 millions.

Our medical and health services are well known internationally and they have the two best private hospitals of the Central American region; equipped with the most recent medical technology, and they are affiliated to world famous hospitals such as the Baptist Hospital in Miami, Florida and the Johns Hopkins Medical Center in Baltimore, Maryland.

Our tropical climate and varied tourist offer sets us among those preferred for the travelers that can find in our country picturesque indigenous and colonial communities, white sand beaches and coral reefs with indescribable beauty, mountains with fresh climates and tropical jungles with an exuberant vegetation, habitat of innumerable flora and fauna species. And with our excellent highway network and short distances the country can be toured in only six hours.

For these reasons, Panama has been chosen by important multinational companies such as Samsung Electronics, Inc., DHL, DELL, Hutchinson Port Holding Group, HSBC, BICSA, SCOTIABANK, Assicurazioni Generali, American Life Insurance Company and many more, as main offices for their regional operations. In addition, some of the most recognized International Organisms such as UNICEF, UNDP, OAS, the Spanish Agency for International Cooperation (AECI, initials in Spanish), and the BLADEX [Latin American Export Bank] among others, have chosen Panama for establishing their operations.

Panama offers goods and services at reasonable prices as compared to its nearest neighbors, with Free Trade Treaties (TLC, for initials in Spanish) with Taiwan, El Salvador, Singapore and Chile. Furthermore, we are going through the final negotiations of a TLC with the United States and Central America and we are preparing our entrance in the G-3.

$2.6 billion in loan guarantees vs. 13,000 jobs

Right after the U.S.-Panama Tax Information Exchange Agreement was signed by Vice-President Juan Carlos Varela, he attended the signing of an agreement for the US $2.6 billion purchase by COPA airline (NYSE: CPA) of 32 Boeing (NYSE: BA) airplanes, with financing guaranteed by the U.S. Export-Import Bank .

The same day that 13,000 jobs of the Panama financial center are put in jeopardy, a Panamanian multinational secures financing guaranteed by the U.S. taxpayer. Quid pro quo?

Copa and Boeing sign largest ever Panama-US business deal

Wednesday, 01 December 2010 17:35

Panama's principle airline Copa, and the Boeing aircraft company signed a $2.6 billion dollars agreement for the purchase of 32 aircraft onTuesday (November 30).

It was the largest ever business transaction between the U.S. and Panama

The ceremony took place at the U.S. Department of Commerce, soon after the signing of a tax disclosure agreement between the two countries.
Panamanian vice president and foreign minister, Juan Carlos Varela represented the government at the ceremony along with the chief executives of both companies: Pedro Heilbron of Copa Airlines, and Jim Albaugh of Boeing.

The 32 aircraft will be delivered between 2015 and 2018, and are part of the planned growth of the company, said Heilbron.

Copa Holding's president, Stanley Motta, and Vice President of Finance, Victor Vial, shared details of the funding for the deal, which was supported by a group of international banks such as Citibank, JP Morgan Chase, BNP Paribas, and Bank Exim.

Motta said the loan was agreed at very low rates for the guarantees provided by the Exim Bank.

Largest Ever Ex-Im Bank Transaction To This Country

The Export-Import Bank of the United States is providing a $113 million long-term guarantee to support the $132 million export by The Boeing Co., Seattle, WA, of four B737-700 aircraft plus two spare engines made by CFM International, Inc., Cincinnati, OH, to Compania Panamena de Aviacion, S.A. (COPA), Panama City. Each Boeing aircraft is also equipped with two CFM engines.

"This is the largest transaction ever authorized by Ex-Im Bank for a company in Panama," said Ex-Im Bank Chairman James A. Harmon. "We are delighted to finance US exports that support economic growth in this important Central American market while sustaining US jobs at thousands of Boeing subsuppliers at home."

Ex-Im Bank has supported Panamanian customers for over 50 years. This latest transaction is more than double the previous record-setter, a $60 million financing of a gas turbine export in fiscal 1994.
Justificar a ambos lados
Full text in

Tuesday, December 28, 2010

History of Real Estate Agents

December 28 in Panama is Innocents' Day which is similar to April's Fools Day and remembered with hoaxes. For the next time you are looking at properties in Panama with a real estate agent, here is a joke to share from Kelly'

6 MILLION BC: God searches for a planet to establish life. Encounters real estate agent from "Lucifer's Planets & Gardens" who says "I've got a great deal on a fixer-upper just 90 million miles from the Sun."
5.9 MILLION BC: God buys the Earth and, after the closing, discovers it is a mass of molten goo. Angry, God confronts the agent and banishes him to spend eternity wearing polyester suits.
4 MILLION BC: God creates the ocean and the seas. By accident, a pool of pond scum transforms itself into the National Association of Realtors.
3.5 MILLION BC: God creates Florida.
3.49 MILLION BC: Thousands of real estate agents crawl out of the ocean to scout good condo locations. Market immediately crashes when agents realize that "snow birds" won't be invented for another 2 million years.
3 MILLION BC: A meteor crashes into Earth. The resulting crater creates a giant black hole filled with green ooze. The Multiple Listing Service is born.
2.45 MILLION BC: God makes Adam and Eve. However, delays in constructing Garden of Eden force Adam and Eve to live in an apartment eight months.
244 MILLION BC: Shopping for a move-up garden, Eve visits an Open Garden and encounters a fork-tongued real estate agent who tells her, "Garden, why would you want another one of those? I've got an entire apple orchard you can have real cheap."
243 MILLION BC: Adam and Eve become the first humans to truly understand what it means to buy from a real estate agent.
550 BC: Jealous of rising property values, real estate brokers in Greece devise a way to attack Troy by using a Trojan Horse.
42 BC: Cleopatra decides to build the Pyramids. Real estate agent and builder try to convince her that Squares would be much cheaper.
30 BC: Rome touted as "the hottest housing market in Europe" Thousands of buyers flock in to make deals with real estate agents.
29 BC: Rome real estate crashes. Julius Caesar calls a meeting of his advisors to see what can be done. Chief real estate broker Brutus suggests Caesar tours Rome to inspire consumer confidence. "Just lead the way," Brutus says, "I'll be right behind you."
500 AD: Middle ages bring major real estate slowdown. Agents are forced to take second jobs as undertakers. Scandal breaks out when agents are discovered to be removing gold fillings from dead people.
1308 AD: Real estate agent list a tower in Pisa, Italy as a "one of a kind property. Solid building guaranteed not to lean."
1492 AD: Christopher Columbus lands in America. However, he mistakenly believes he's in India, thanks to a bogus land survey provided by a Spanish real estate broker.
1620 AD: Pilgrims land on Plymouth Rock. First colonial real estate agent promises Pilgrims that Massachusetts is "always sunny and warm. Never drops below 70 I swear."
1621 AD: Giant blizzard nearly wipes out Pilgrims. Real estate agent is banished to New Jersey.
1626 AD: Manhattan bought for 100 beads and trinkets from the Indians. The Indians' real estate agent takes 6 beads as a commission.

l803 AD: Napoleon shocks and angers French real estate agents when he sells Louisiana to United States without an agent. At 515 million, sets record for largest "FSBO" (for sale by owner) sale in history.
1867 AD: United States purchases Alaska from Russia for 2 an acre, after Russian Czar is given advice by real estate agent that Alaska is "utterly useless" land with no value at all.

Saturday, December 04, 2010

Why Tax Information Exchange Agreements Are 'Toothless'

Despite the ominous messages being communicated to the public, taxpayers have little to fear from the tax information exchange agreements (TIEAs) to which most tax havens have rushed to commit.

July 16, 2009
by Kristofer Neslund, CPA/DBA

.... the flaws in the Model TIEA overwhelm its positives.


The OECD has frequently noted that havens that had agreed to adopt the TIEA failed to implement it. There is a real concern that some or many of the haven jurisdictions that rushed to announce their commitments to the TIEA were simply playing for time, hoping the furor will die down before they actually have to implement the agreements.

Domestic bank secrecy laws trump these agreements. Indeed, UBS has raised Swiss bank secrecy laws as its primary defense in the current John Doe summons enforcement proceeding.

Havens are exempt from supplying information they do not collect and they often collect little. The British Virgin Islands, for example, has more than 400,000 registered corporations but requires neither the identification of shareholders or directors nor the maintenance of financial records.

Severe procedural restrictions are imposed to preclude "fishing expeditions" — i.e., broad, general inquiries. Automatic information sharing is expressly excluded.

The requesting jurisdiction must:

- Identify a specific person,
- Identify the specific information sought and the tax purpose for seeking it,
- Identify why it believes the information is within the requested jurisdiction and
- Demonstrate that it has exhausted all other means for obtaining the information.

The result is a slow and unwieldy process that precludes serious real-time help to tax authorities. Offshore tax cases are complex and labor-intensive, taking 500 days longer than normal to develop. The cumbersome, low-yield information exchange process contributes to these delays and deters the IRS from aggressive enforcement. Even when the government has proven criminal activity, the process is ineffectual. The U.S. sent tax information requests to Switzerland after UBS admitted to criminal activity; it received back only 12 names (out of an estimated 52,000 U.S. accounts holding $15 billion). It is not surprising that there are only a few dozen TIEA requests each year. To be of genuine value, information sharing needs to be comprehensive, real-time and automatic.

Critics argue that the havens' rapid adoption of Model TIEA is little more than public relations, allowing them to make a show of cooperation while going about business as usual, supported by governments that are more than happy to have their taxpayers believe that offshore tax evasion has become much more dangerous.

The OECD's Model TIEA seems to have adopted a lowest-common-denominator approach — offering minimal effectiveness to gain widespread acceptance by havens, in turn allowing world leaders to proclaim a global assault on offshore tax evasion. Given the sharply opposed interests of some of their members, the TIEA's endorsement by the G-7, G-8, G-20, United Nations and EU is supportive of this view.

The establishment of a low information exchange standard for the international community could backfire. Tax havens — little deterred by their TIEAs — are likely to assert that, by having implemented the benchmark standard, they have ceased to be "tax havens." The Bahamas' ambassador to the U.S. has suggested as much on behalf of the Caribbean TIEA adopters. This assertion may be hard to counter without embarrassment; and it may become very difficult to sanction adopting havens when it becomes obvious that their behavior has not changed.


There are many reasons not to engage in offshore tax evasion, but the Model TIEA is not one of them.

The public has been led to believe that all it takes now to open the international information floodgate is a simple request by a tax authority. Not so. The Model TIEA is a slow, largely ineffectual, resource-intensive process that seems unlikely to be used much more in the future than it has been in the past, despite the increased number of haven jurisdictions adopting it.
Tax practitioners should be rendering advice based on the reality, not the perception, of these agreements.

Kristofer Neslund, CPA/DBA, LLM, JD, is an associate professor of taxation at the Golden Gate University.
Read the full text in

Tuesday, November 30, 2010

U.S., Panama Sign New Tax Information Exchange Agreement

The U.S. has Tax Information Exchange Agreement (TIEAs with the following offshore financial centers:
Cayman Islands
Costa Rica
Netherlands Antilles
St. Lucia

The TIEAs with Antigua and Belize were terminated.

Fortunately, Panama law allows entities to redomicile corporations and foundations to other countries...

In a ceremony at the U.S. Department of the Treasury on Tuesday, November 30, Treasury Secretary Tim Geithner and Panamanian Vice President and Minister of Foreign Affairs Juan Carlos Varela signed a tax information exchange agreement (TIEA) between the United States and Panama.

A press release on the TIEA can be viewed at link; the full text of the TIEA can be viewed at this link; and the TIEA Joint Declaration at this link.

The Department of State has the honor to refer the Embassy of the Republic of Panama to the
Agreement between the Government of the United States of America and the Government of the
Republic of Panama for Tax Cooperation and the Exchange of Information Relating to Taxes
(“the Agreement”), signed today, and to confirm on behalf of the Government of the United
States the following understandings reached between our two Governments (“the Parties”):
With respect to subparagraph 1(a) of Article 3 (Taxes Covered) of the Agreement, it is
mutually understood by the Parties that the term “all federal taxes” includes the following
taxes imposed by the United States:
With respect to subparagraph 1(b) of Article 3 (Taxes Covered) of the Agreement, it is
mutually understood by the Parties that the term “all national taxes” includes the
following taxes imposed by the Republic of Panama:
Income Tax
Real Estate Tax
Vessels Tax
Stamp Tax
Notice of Operations Tax
Tax on Banks, Financial and Currency Exchange Companies.
Insurance Tax
Tax on the Consumption of Fuel and Oil Derivates
Tax on the Transfer of Movable Goods and the Provision of Services
Tax on the Consumption of certain Goods and Services
Tax on the Transfer of Immovable Goods
With respect to Article 9 (Costs) of the Agreement, it is mutually understood by the
Parties that costs that would be incurred in the ordinary course of administering the
(a) Federal income taxes;
(b) Federal taxes related to employment;
(c) Federal estate and gift taxes; and
(d) Federal excise taxes.

domestic tax laws of the requested State shall be borne by the requested party when those
costs are incurred for purposes of responding to a request for information. It is also
mutually understood by the Parties that all other costs are considered extraordinary costs,
and shall be borne by the requesting party. Examples of extraordinary costs include, but
are not limited to, the following:
fees charged by third parties for research and copying documents;
fees for non-government counsel or experts appointed or retained, with the
approval of the competent authority of the requesting Party, for litigation in the
courts of the requested party related to a specific request for information;
fees and expenses of a person who appears for an interview, deposition or
testimony relating to a specific information request. The fees and expenses will
be the ordinary amounts allowed under the laws of the party in which the
interview, deposition or testimony is held or taken.
The competent authorities shall consult with each other in advance if extraordinary costs
are likely to exceed $1,000, or in the case of subparagraph (c) of this paragraph, $100, in
order to determine whether the requesting Party will continue to pursue the request and
bear the cost.
The Government of the United States of America and the Government of Panama intend
that the Agreement enter into force as soon as is practicable following the enactment of
any legislation by Panama that is necessary under its domestic laws in order for Panama
to comply fully with the terms of the Agreement. The Government of Panama expects
that this legislation will be enacted before the end of 2011. As soon as practicable after
such legislation has been enacted, the Government of the United States and the
Government of Panama intend to take such actions, including exchange of notifications,
as are necessary to cause the Agreement to enter into force in accordance with its terms.
The United States understands that, with respect to the necessary legislation referred to in
paragraph 4, Panama intends to enact legislation requiring the identification of the
owners of bearer shares. The United States further understands that such legislation:
will require resident agents acting for Panamanian entities to obtain and
maintain in their records information sufficient to identify the owners of
those entities, even in cases in which shares of those entities are issued in
bearer form, including, where the owner is a legal person, information
sufficient to identify substantial owners of that legal person. For this
purpose, a resident agent will not be required to obtain and maintain
information sufficient to identify substantial owners of legal persons in
cases where the resident agent acts for a professional client that is part of

an organization that is required to maintain information on such entities
and that has agreed to make available such information to the resident
agent when requested;
will require resident agents to produce ownership and client identity
information in their possession in response to a proper request under the
Agreement, whether with respect to newly-formed entities or entities in
existence at the time the legislation is enacted; and
will require resident agents to obtain such ownership information with
respect to entities existing at the time the legislation is enacted within a
five year period from the date of the enactment of the law.
It is mutually understood that under laws currently in effect, each party is authorized to
obtain and exchange information, including information held by financial institutions and
other fiduciaries, pursuant to a request under a tax information exchange agreement,
regardless of whether the requested party has a domestic tax interest in such information.
Under section 274(h) of the U.S. Internal Revenue Code, an individual may deduct from
income expenses incurred with respect to attendance at a conference or convention held in
Panama in the same manner and to the same extent the individual would be permitted to
deduct such expenses with respect to attendance at a conference or convention held in the
United States, provided that there is in effect between Panama and the United States a tax
information exchange agreement meeting the requirements of section 274(h)(6). It is
mutually understood that the Agreement is intended to meet those requirements.
It is mutually understood that the entry into force of this Agreement does not prevent the
Parties from discussing the possibility of an agreement for the avoidance of double taxation
in the future.
The Department has the further honor to propose, on behalf of the Government of the United
States of America, that the present note and the Embassy’s affirmative reply thereto confirming
that the Government of the Republic of Panama shares these understandings shall constitute an
agreement between the two Governments on these points which shall enter into force on the
same date as the Agreement.
Department of State,
Washington, November 30, 2010

Wednesday, November 17, 2010

Say goodbye to your BVI bearer shares on December 31, 2010

Many users of British Virgin Islands (BVI) International Business Companies are not aware that by December 31, 2010 they must have turned in their bearer shares to an authorized custodian. An additional tax of One Thousand Dollars (US$1,000) and a custodian fee must be paid every year. Alternatively, shareholders can amend the company charter to prohibit bearer shares and replace any bearer shares for shares made out to a nominee.

Resident Agent / Offices of British Virgin Islands (BVI) Companies are required to remind customers to comply with the BVI BC Act 2004 in relation to bearer shares and the possible consequences of not complying with the new regime which took effect from January 1, 2010.
The consequences for companies that did not comply with the new regime of bearer shares, as confirmed by the BVI regulator, include among others:
- the loss of all rights which a shareholder may have as such("disabled bearer shares") .
- The payment of the cumulative difference between the rate applicable to government companies without bearer shares and the new government rate for companies with bearer shares in custody.
- Fines by the BVI Financial Services Commission (BVI FSC) for breach of the law.
BVI Service providers and Resident Agents reserve themselves the right to provide services such as restoration, change of registered agent, amendments to the charter and articles of association of companies, or to sign documents for companies with disabled bearer shares.
As for companies which nominee director services are provided, information of the new shareholders must be provided, in order to prepare the necessary documentation and to comply with the requirements of the law. Nominee directors who do not receive said information on time, are likely to resign as directors of these companies.
For more information on BVI companies see :
BVI INternational Financial Center

7 May 2004


The BVI is poised to take a major step in July towards immobilising bearer shares by starting the applications procedure for custodians of bearer shares.
New legislation will ultimately require all bearer shares in BVI International Business Companies (IBCs) to be held by a custodian and thus immobilised. Companies formed before 1 January 2005 will have until 31 December 2010 to comply.
Companies formed after 1 January 2005 must comply from their date of formation.
To enable custodians to be in place by 1 January 2005, the BVI Financial Services Commission will consider applications to act as custodians from 1 July 2004.
Those eligible to apply as an “authorised” custodian will be service providers licensed under any BVI financial services legislation, as well as bodies corporate incorporated or formed outside the BVI that are not resident in, and do not have a place of business in, the BVI.
Those eligible to apply as a “recognised” custodian will be investment exchanges or clearing organizations that operate securities clearance or settlement systems in a jurisdiction which is a member of the Financial Action Task Force.
All applicants to be “authorised” custodians will have to satisfy the Financial Services Commission that they meet certain “fit and proper” criteria and have the necessary systems in place for safe custody of their bearer shares.
For bodies corporate, the Commission will consider the prudential regulation and anti-money laundering regulations with which the bodies have to comply.
The Commission may attach conditions to its approval and vary or revoke these.
To assist potential applicants for custodian status, the Commission has issued a new Aide Memoire, entitled, Criteria for Approval of Authorised Custodians of Bearer Shares of BVI Incorporated Companies. Besides setting out the criteria the Commission will use when approving custodians, the Aide Memoire addresses, inter alia, the duty of custodians and the grounds on which the Commission may revoke approvals.
Commenting on the new bearer shares regime, Robert Mathavious, Managing Director and CEO of the Financial Services Commission, said, “These measures enable the BVI to comply with all international standards, including the 40 anti-money laundering recommendations of the Financial Action Task Force. They are the result of close cooperation between the BVI private sector, government and regulator. The Commission encourages all potential custodians to apply from 1 July.” NOTES TO EDITORS 1. The Aide Memoire is available on the Financial Services Commission’s website at 2. The International Business Companies (Amendment) Acts of 2003 and 2004 provide the legal framework for immobilising bearer shares. The Acts are due to come into force on 1 January 2005.
3. The Financial Services Commission (Amendment) Act of 2004 addresses the regulatory framework for immobilising bearer shares, in particular the rules governing custodians. It is due to come into force on 1 July 2004.
4. IBCs will be able to amend their Memoranda of Association to state that they are authorised to issue only registered shares and that these may not be exchanged for bearer shares. They will be required to file this statement with the BVI Registrar of Companies, along with a declaration that they have no bearer shares in issue.
5. The new rules are the result of extensive consultation with BVI service providers. They are based on the recommendations of a private sector panel that the Financial Services Commission convened to examine the issue.
6. Although the IBC (Amendment) Act of 1993 envisaged a deadline for immobilisation of bearer shares of 31 December 2004, the private sector panel recommended a seven-year transition period before the new legislation took effect. A further IBC (Amendment) Act of 2004 gave effect to this recommendation, setting a new deadline for immobilisation of 31 December 2010.
7. Most of the 500,000 IBCs registered in the BVI currently have the power to issue bearer shares. Whether they have in fact issued these and have bearer shares outstanding is not certain.
8. Bearer shares are not unique to BVI IBCs. They are widely used in Europe by non-listed companies and are also popular in Latin America, the Far East and some US states.

If you need a Resident Agent or Custodian for the bearer shares of your BVI company, contact us through our website, by email, Bitwine or Skype

My status

Friday, November 12, 2010

U.S.-Panama Business Group Gears Up For Washington FTA Lobbying Push

Inside U.S. Trade - 10/22/2010
Posted: October 21, 2010

U.S.-Panama Business Group Gears Up For Washington FTA Lobbying Push

A U.S.-Panama business group is planning a new push to lobby the Obama administration and Congress to secure the approval of the long-stalled U.S.-Panama free trade agreement, according to a Panamanian private-sector source.
The U.S.-Panama Business Council will hold meetings in Washington on Nov. 18-19 with U.S. lawmakers, State Department officials and members of the U.S. private sector, this source said. He did not provide further information on what the group planned to discuss during these meetings.
Panamanian sources said the primary obstacle to the passage of the U.S.-Panama FTA remains the demand by the U.S. that Panama sign a tax information exchange agreement (TIEA) with the U.S.
Panamanian Vice President Juan Carlos Varela and U.S. Trade Representative Ron Kirk discussed the tax transparency issue during a Sept. 30 meeting in Washington, according to USTR spokeswoman Nkenge Harmon.
The two officials also discussed U.S. concerns with "certain aspects of Panama's labor regime," Harmon said in an e-mailed statement.
One Panamanian source said during this meeting the U.S. sought to entice Panama into signing a TIEA by saying that in exchange it would allow a tax deduction for U.S. business travelers who visit Panama for conventions, seminars or other meetings.
Such a deduction is currently available for domestic travel, as well as travel to Canada, Mexico, Costa Rica, Guyana, Honduras and some Caribbean destinations, according to Rebecca Wilkins, senior counsel for federal tax policy at Citizens for Tax Justice. However, this deduction is not available if such meetings are held on cruise ships, Wilkins said.
Such an agreement would require the Panamanian government to hand over information on Panamanian bank accounts used by U.S. persons upon request by the U.S. government, which goes against current bank secrecy laws in Panama, they said.
Panama is currently listed on the Organization for Economic Co-operation and Development's "gray list" because of its status as a tax haven. In order to secure removal from the list, a country needs to implement 12 TIEAs or Double Taxation Treaties (DTTs) with full tax information exchange provisions (Inside U.S. Trade, June 11).
As of Oct. 20, Panama had signed nine such DTTs, according to a press release from the office of Panamanian President Ricardo Martinelli. Panamanian sources said three additional DTTs have already been negotiated and their signing is expected before the end of the year.
According to one Panamanian source who opposes the signing of a TIEA with the U.S., a recently passed U.S. law already would require some Panamanian banks to report information automatically on U.S. account holders.
The Hiring Incentives to Restore Employment (HIRE) Act, which President Obama signed on March 18 and is slated to go into effect on Jan. 1, 2013, includes provisions that will require foreign banks that do business with U.S. banks to report information on U.S. account holders in one of two ways, according to Wilkins.
The first option is for these banks to submit a Form 1099 to the Internal Revenue Service that would report the income earned on the U.S. account. The second option is for these banks to fulfill more stringent reporting requirements contained in the HIRE Act, under which the banks would not have to report the total income on the account but would have to provide information on the maximum amount in the account and the aggregate amount of transactions on the account.
In both cases, the banks would have to report the name, address and taxpayer identification number of the U.S. account holder.
Asked if these reporting requirements would make information exchange provisions in the TIEA redundant, Wilkins said this would not be the case. While the HIRE Act provisions would be helpful because they could aid the U.S. in identifying tax evaders by name, the TIEA provisions are also necessary because they allow U.S. authorities to request Panamanian authorities hand over any information about U.S. account holders upon request, Wilkins said.
One Panamanian source said the government had recently implemented a change to its law that would allow Panama's tax agency to gather information on account holders if such information is requested by a foreign government under the DTTs Panama is signing with other countries. He explained that this change was necessary in order to implement the tax information exchange provisions chapters of these DTTs.
TIEAs spell out in great detail the procedure for exchanging tax information between two governments. For example, the TIEA between the U.S. and the Cayman Islands consists of 13 detailed articles in information exchange.
By contrast, the OECD Model Tax Convention Article 26 Panama wants in a DTT with the U.S. is comprised only of five sections outlining basic commitments (Inside U.S. Trade, June 11).

See full text in

Read Also:
Un Acuerdo con Pocos Beneficios

Monday, November 08, 2010

Nov 17, 2010 'Panama Week' planned in Washington, D.C.

'Panama Week' planned in Washington, D.C.

The new version of "Panama Week" will take place starting Nov. 17 in Washington, D.C.

Félix Carles, president of the U.S.-Panama Business Council, said the motto of this year's event is "Panama, changing world trade."

One of the objectives of the event is to promote the ratification of the free trade agreement between the two countries that is still waiting to be discussed by the U.S. Senate.

It will also emphasize the role of the country as a maritime center, the progress of the Panama Canal expansion and the modernization of Tocumen International Airport.

The Panama Tourism Authority will also discuss its master plan at the event, which is aimed at increasing the number of visitors to the country.

Panama: Changing Global Commerce
Venue: Washington Hilton Hotel, 1919 Connecticut Ave., NW, Washington, D.C

For registrations and sponsorship opportunities contact UNITED STATES-PANAMA BUSINESS COUNCIL (USPA)
5353 Memorial Drive #2041, Houston, Texas 77007
Tel. (713) 426-0554 / Fax. (713) 426-0375 / E-mail: Panamerica @msn.con

November 1, 2010

Dear Friends of Panama and the United States

The U.S.-Panama Business Council (USPA) was created in 1994 with the mission of strengthening relations between the United States and Panama, and promoting business opportunities between the two countries. During its sixteen years of existence the Council has organized hundreds of programs and events which have greatly contributed to enhancing relations between the two countries.

Every year the Council organizes a comprehensive program in Washington D.C. entitled Panama Week. This year Panama Week will be held on November 18-19 in the Nation's Capital, coordinated by both the U.S. and Panama USPA associations. We anticipate a strong attendance this year, and several high profiled speakers that will address the numerous business opportunities offered by Panama.

Panama's excellent economic climate has produced positive news over the past five years with annual growth close to double digits. Even in 2009, when the world was impacted by a financial crisis, Panama still registered economic growth. The Panama Canal is undertaking an ambitious expansion, unemployment has decreased dramatically, the country attained investment grade and recently a $13 Billion investment plan was announced for the next five years.

An updated program is enclosed and periodic updates will be published in USPA USA website Ministers from Panama will be attending the program including Minister of Commerce and Industry H.E. Roberto Henriquez, Minister of Tourism H.E. Salomón Shamah, Minister of Energy H.E. Juan Urriola and Deputy Administrator of the Panama Canal Authority Jose Barrios Ng. The traditional black tie Gala Friendship Awards Dinner will be held on the evening of Thursday, November 18th and H.E. Jaime Alemán, Ambassador of Panama to the United States, will be the Keynote Speaker.

We avail of the opportunity to thank sponsors for their generous support. Please review the website for additional information. Should you have any questions you may contact Amb. Juan B. Sosa at (713) 426-0554. We look forward to see you in Panama Week 2010.

Best regards,

Amb. Juan B. Sosa President, USPA (USA)
Amb. Roberto Alfaro President, USPA (Panama)

Wednesday, November 03, 2010

Nov 1 - 6: Panama Week in Hanoi

The first Panama cultural week is being held in Hanoi from November 1 to 6 to celebrate 35 years of diplomatic relations between the two countries.

The event includes a photo exhibition titled “Discovering Panama” and the Panamanian Film Week will be held at National Library of Vietnam and Hanoi Cinematheque respectively.
During the Panamanian Film Week, “The Fists of A Nation” (Los Punos de Una Nacion, 2005, 73 min) and “Blood is Blood” (Sangre es Sangre, 2008, 25 min) will be screened on November 5 &6, 2010.
The “Panama Week” organized by the Embassy of the Republic of Panama also marks the capital’s 1,000th anniversary.

From Panama Embassy:The “Panama Week” organized by the Embassy of the Republic of Panama will take place in the first week of November to celebrate 35 years of diplomatic relations. During the “Panama Week”, the exhibition of Photography and Craft titled “Discovering Panama” and the Panamanian Film Week will be held at National Library of Vietnam and Hanoi Cinematheque respectively.
Schedule:Exhibition of Photography and Craft: Discoverying PanamaTime: 01 – 06 Nov 2010, 8 am – 8 pmNational Library of Vietnam31 Trang Thi, Hoan Kiem, Hanoi
Panamanian Documentaries Time: 05 – 06 Nov 2010
Hanoi Cinematheque 22A Hai Ba Trung, Hoan Kiem, Hanoi
During the Panamanian Film Week, “The Fists of A Nation” and “Blood is Blood” will be screened.
Film: The Fists of a Nation Screening time: 05 – 06 Nov 2010, 7.30 pm

Film: Blood is Blood Screening time: 05 – 06 Nov 2010, 9 pm

Monday, November 01, 2010

Panama and Taiwan start talks for signing of Double Taxation Agreement

Photo: With this meeting the Panamanian delegation, lead by the president, Ricardo Martinelli concludes its Asian tour. Photo / Courtesy of the Presidency

During a meeting with Panamanian businessmen and Taiwan, the president, Ricardo Martinelli, announced that the two countries begin talks on signing an double taxation agreement.

"Panama respects foreign investment and we are open to receive new investments," said Martinelli to Taiwanese businessmen who mentioned that with the signing of the Free Trade Agreement, Taiwan companies have invested heavily in developing the service transportation, technology, among others.

On another topic, Martinelli presented to entrepreneurs in Taiwan's competitive advantages offered by the country to foreign investment.

"In Panama they have opportunities to invest in agriculture, real estate, among other areas, where already several companies that have entered this Asian country," he said.

For its part, Taiwan's deputy foreign minister, Thomas Hou Ping-fu noted that Panama is Taiwan's staunchest ally in Central America that have maintained diplomatic relations for more than a century and that these bilateral ties have increased after the entry into force the Free Trade Agreement between both countries, as Taiwanese investments in Panama have increased by over 215 million Dollars.

More on Taiwan-Panama business


Sunday, October 31, 2010

Are offshore structures for you?

Private Interest Foundations

The private foundations were born some years ago in Panama , in order to give the offshore users a new approach, a more civil and familiar approach.

They have the same Tax and Registry principles, but with a civil oriented system.

The foundations can sign and negotiate commercial contracts eventually and they are not subject to income tax when the income was produced outside Panamanian territory.

The Panama Private Foundation (hereinafter known as PIF) has its origins in the Law 25 of 1995, which in turn was inspired in the PGR or better known as the “Liechtenstein Persons and Company Act”, which contains one of the first references to the private non profit foundations. In Panama, this and the most recent innovations in the Anglo-Saxon Trust enabled the creation of the Private Foundation utilizing the best features and characteristics of both worlds.

A PIF is a legal entity that can be created by either a natural person or a corporation that later transfers part or all of his/her assets to the Private Foundation so they can be managed and protected in favour of the Beneficiaries.

Among the features of the Panamanian Private Foundations we find:

  • Quick registration 24-72 hours;
  • They provide a fiduciary structure for the orderly transfer and disposition of assets to beneficiaries upon the death of the Founder, keeping control of the assets during lifetime;
  • They may be established to have effects from the date of their constitution or after the death of the Founder; According to Law 25 of 1995, inheritance laws that apply in the domicile of the Founder or the Beneficiaries, shall not be effective against the Foundations assets nor may these laws affect the validity or performance of the Foundations objectives;
  • Foundations are established to carry the specifics goals set out in the Foundation Charter and may additionally undertake sporadic commercial activities, exercise rights pertaining to their holdings, own property, contract obligations and take part in administrative or judicial proceedings.
  • A Private Interest Foundation should be established with a patrimony destined to fulfill its objectives, which shall be no less than US$10,000.00.
  • Said patrimony may be increased by additional contributions of the Founder or third parties and does not have to paid in part or in full before the incorporation;
  • The assets of the Foundation become legally independent and do not form a part of the private estate of the Founder. Such assets are not sizeable and may not be subject to any precautory action or measure, unless such action or measure pertains to obligations incurred or damages arising from the fulfillment of the Foundations objectives.

Notwithstanding the creditors of the Founder or of a third party shall have the right to contest the contribution or transfer of assets to a foundation when such transfer constitutes an act in fraud of the creditors. The rights and actions of such creditors shall lapse at the expiration of three (3) years, counted from the date of the contribution or transfer of the assets to the foundation was done.

According to article 27 of Law 25 of 1995, Private Interest Foundations are exempt from payment of any taxes, contributions, duties, liens or assessments of any kind arising from the acts of constitution, amendment or extinction of the same, as well as acts of transfer or encumbrance of the Foundations assets and the income arising thereof, when related to:

  • Assets located abroad;
  • Money deposited by natural or juridical persons whose income does not derive from a Panamanian source is not taxable in Panama for any reason;
  • Shares or securities of any kind issued by corporations which income is not derived from a Panama source, or which are not taxable for any reason, even when such shares or securities are deposited in the Republic of Panama.
  • The transfer of unmovable property, titles, certificates of deposits, assets, funds, securities or shares carried out by reason of the fulfillment of the objectives of the foundation or the termination of the same, in favor of relatives within the first degree of consanguinity or the spouse of the Founder shall also be exempted from all Panama taxes.

Among the most important uses of the Panamanian Private Foundations we find:

  • Family and family office support
  • For Tax purposes
  • For the protection and management of assets
  • For educational purposes Testamentary purposes
  • For life annuity purposes
  • For charitable purposes
  • To receive and manage capital and titles
  • For the purpose of serving as guarantee or collateral
  • For the management of insurance.

We must comment that several or all uses mentioned above can be given to a particular PIF, there are no restrictions as to the objects or uses one PIF can be given. For example, one PIF can be created to protect assets, but also with a testamentary use or in any case, with all the above-mentioned uses. However, a PIF cannot engage in commercial or for profit activities as a day-to-day activity.


Panamanian offshore corporations are an easy vehicle to negotiate and close deals.
The simple and yet formal provisions of the Law, render the users to trust the system. The amendments necessary to close one deal are quickly done by registering them at the Public Registry Office, and since it is a government institution, the certificates and Apostilles are easy to obtain in order to sign a contract in a short period of time.

Directors of the companies do not necessarily have to be shareholders and vice versa. Panamanian companies are not bound to issue shares. Powers of Attorneys may or may not be registered in the Public Registry Office.

For over seventy five (75) years the Panamanian offshore corporations has been recognized worldwide as a suitable offshore vehicle and with the proper legal advice can be utilized in a diversity of structures to conduct international business, asset protection, and estate planning, among others.

Among the most important features of the Panamanian offshore corporations we can mention:

  • Quick registration in 24 to 48 hours.
  • The Panamanian offshore corporations can be registered notwithstanding the nationality of its directors or shareholders.
  • The income produced by a Panamanian offshore corporations outside the territory of the Republic of Panama is exempt of paying Income Tax in Panama.
  • The capital of the company does not have to be paid partially or fully at the moment of incorporation.
  • There is no obligation to file annual reports, financial statements or sworn income declarations, always that the company does not generate Panamanian sourced income.
  • Legal entities of any country can be appointed as directors, officer or shareholder.
  • There is no obligation to undertake annual meetings of the Board of Directors or Shareholders.
  • The directors and shareholders can meet in person, by Proxy, phone or by any other electronic means.
  • Three (3) directors are required, either physical persons or legal entities of any nationality.
  • The officers (usually a President, a Secretary and a Treasurer) not necessarily have to be directors and one person can occupy one or more or all offices.
  • The officers can be either physical persons or legal entities.
  • The shares can be issued in nominative or bearer form.
  • In any case, the name of the shareholder is not required to be registered at the Public Registry, so confidentiality is ensured.
  • The corporate books can be kept in any part of the world and can be managed by electronic files or program.
  • A Panamanian offshore corporations can do transactions and own assets in any part of the world, without having the obligation to maintain assets in the Republic of Panama.
  • The Panamanian offshore corporations can undertake any type of legal business activity in any part of the world.
  • The use of the Apostille is permitted.

Among the most important uses of the Panamanian offshore corporations we can find:

  • As a holding entity for shares, bonds, bank accounts, term deposits, investment projects or any other financial or commercial title.
  • Owner of shares in other companies, be them Panamanian or foreign.
  • Owner of property, such as apartments, lots, houses or any other asset, be them personal or real estate.
  • Manager or promoter of international commercial transactions.
  • International lease of aircraft, vehicles, machinery, vessels and others.
  • Instrument to receive and deliver loans in cash or commissions for products and services.
  • Marketing and promotion of products and services.
  • Other financial or commercial activities.


Belize 's modern and up-to-date offshore legislation provides maximum flexibility in global asset protection and tax and investment planning.

Particular features of the Belize international business companies are:

  • Registration is quite fast as you can have your company registered in one (1) hour.
  • Conducts its trading and business outside of Belize.
  • Tax exempt from, the payment of all forms of local taxation, the payment of stamp duties for transactions in respect of its shares and debt obligations or other securities.
  • Absence of exchange control.
  • Disclosure of the beneficial owner(s) is not required;
  • share register may be inspected only by a shareholder;
  • nominee shareholders and bearer shares are permitted;
  • assets are protected from confiscation or expropriation orders or similar actions by foreign governments.
  • Security and Confidentiality.
  • Only the Memorandum and Articles of Association are required for public records;
  • the registration and deregistration of Registers of Directors, Members, and Mortgages and Charges is optional.
  • No minimum capital is required.
  • No audit of accounts is required.
  • No filing of annual returns is required.
  • Only one shareholder and one director are required, who may be a legal entity.
  • No company secretary is required.
  • No annual general meeting is required, meetings may be held outside of Belize , and attendants may be present therein by telephone or other electronic means.
  • Shares may be issued with or without par value and in any currency.
  • Re-domiciliation into and out of Belize is permitted, registration in any foreign language is permitted.

Additional reporting compliance may be required from entities doing business with local clients inside said jurisdictions, as well as from shareholders and/or beneficiaries resident in some jurisdiction. Advice from a tax attorney and accountant in your country of citizenship and residence must be sought before using offshore entities.

Contact Us through our website, by email, Bitwine or Skype


My status

Tuesday, August 31, 2010

Panama heading for target of 12 Double Taxation Agreements

Panama will negotiate with Singapore next week the 12th double taxation agreement (DTA) required to exit the gray list of the Organization for Economic Cooperation and Development (OECD).

On Aug 18 negotiations were completed for a double taxation avoidance agreement with South Korea.

A double taxation agreement with Mexico has been ratified by the Panama legislature. Other treaties have been signed with Barbados, and negotiations have been closed with France, Italy, Belgium, Spain, Netherlands, Qatar, Luxembourg and Portugal. Mexico-Panama Agreement for Double Taxation Avoidance and Tax Evasion Prevention

In the last 6 months, bills have been entered into the Panama legislature to ratify Bilateral Investment Treaties for the protection of investments with Italy, Belgium, Qatar, and Luxembourg granting national treatment to investments from those countries. Qatar Italy Belgium-Luxembourg Finland

A bill to ratify a Mutual Legal Assistance Treaty with Russia has been submitted. This Agreement provides that:
Bank secrecy can not be used as a basis for denying legal assistance.
3. The Parties may not refuse a request for legal assistance only because it is considered that the crime also involves tax matters. Russia MLAT Bill

Wednesday, August 25, 2010

Panama Property Tax Lawyer

You do not need a lawyer to do your property tax. If you are computer proficient and can follow some Spanish with Google translate, you can go to and:

- get a NIT password to see your annual property tax statement online and print tax certificates online,

- download the eTax 2010 software from which can help you estimate payable capital gains and property transfer taxes in case of a sale.

Alternatively, CPAs are better at estimating taxes than lawyers, who can be of help if a claim against the Ministry is involved. Property tax rules change a bit every year. Some rules are posted at:

--- On Tue, 7/6/10, maukapete <maukapete@yahoo. com> wrote:

From: maukapete <maukapete@yahoo. com>
Subject: Americans In Panama - Panama Property Tax Lawyer
Date: Tuesday, July 6, 2010, 11:01 AM

Does anyone know a Panamanian lawyer named N who does property taxes for homes? If no one knows Lic. N, does anyone know a Panamanian lawyer who does property taxes without jerking me around? Pete Peterson

Monday, August 23, 2010

Panama-France Treaty protects Panama corporations

A little-known treaty, called the Franco-Panamanian Treaty of Establishment from 1953, provides that investments in each of the signatory countries by investors of the other state, are subject to equal treatment. A Panama corporation with one Panamanian as shareholder was therefore exempt from a punitive anti-tax haven 3% tax levied on French properties owned by non-residents.

Friendship treaties can also serve as tax avoidance tools when double taxation treaties are absent.

France: Non-Discrimination and the Treaty of Establishment with Panama

by Stefan N. Frommel, London

  1. Conseil d'Etat: Resources Management Corporation S.A., 16 December, 1991

A. The facts

Resources Management Corporation was a company limited by shares incorporated in Panama. The company had issued 5,000 shares in bearer form and only two of the shareholders were known to the French tax authorities: a Mr. Arias and a Mr. Suarez, each holding one share. The remaining 4,998 shares were in the hands of shareholders who had not been identified.

Resources Management owned a villa in Eze-sur-Mer, on the Còte d'Azur; it had no other property or other activities in France. The villa was – the whole year round an free of charge – atthe disposal of Mr. Chofaras, a Greek national, who lived in Paris, at avenue de l'Are de Triomphe.

Resources Management had never filed a tax return. The tax authorities assessed the company to corporation tax for the years 1974 to 1977. For 1974 to 1976 the tax was assessed on the basis of the real rental value of the property. For 1977 it was assessed on three times the real rental value, according to article 209A, which came into force on 1 January, 1977.

Only the assessment for 1977 is relevant for our purposes.

B. The Conclusions of the Commissaire du Gouvernement

In his conclusions, M. Fouquet made the observations summarized below and requested the court to discharge the assessment for 1977.

(a) The administration argued that tax treaties traditionally allocate the right to tax income from immovable property to the Contracting State in which such property is situated. M. Fouquet observed:

  • The court had previously decided (in Le Beau Logis and Quadriga) that the non-discrimination clauses in the tax ([...])

  • As a result of these decisions the Government has asked Parliament to abolish Article 209A and replace it with the 3 percent annual tax on the market value of French real property (article 990D of the General Tax Code).

  • Article 7 of the treaty with Panama, being similar (analogue) to the non-discrimination clauses found in the vast majority of tax treaties, should be given the same effect.

  • It was not contested that “nationals”, the term used in the treaty, applied not only to individuals but also to legal persons, according to Royal, which he cited.

(b) The administration argued that article 7 of the treaty with Panama did not refer to “corporation tax”. M. Fouquet observed:

  • The wording of article 7 (“duties, levies, taxes, or contributions, of whatever denomination”) was sufficiently wide to include corporation tax.

  • Moreover, it was no longer relevant, since Nicolo, that the law of 29 December 1976 (at the origin of article 209A) was subsequent to the treaty.

(c ) The administration argued that the treaty with Panama was not valid because it had not been ratified by the president of the Republic, M. Fouquet replied:

  • According to the decision in Navigator (1965), the treaty had been properly introduced into French law by a decree of the President followed by publication in the Official Journal.

(d) To conclude, M. Fouquet mentioned Société Panagest, where the court,following his own submissions, had applied article 209A to two Panamanian companies: “Lack of sufficient time”, he said, had prevented him from discovering earlier the existence of the treaty with Panama.

  • Following Carboline-Europe (1986), he added, “the equality-of-treatment clause in a treaty is of [concern to] public policy (ordre public) and must be applied by the court ex officio, [even if it has not been pleaded by the taxpayer].”

C. The Decision

The relevant part of the decision reads as follows:

As far as the year 1977 is concerned:

Whereas, according to article 209A of the General Tax Code, in force at the time: 'If a legal person (personne morale) whose seat (siège) is situated outside France, has at its disposal one or more real properties or grants the use of such property either gratuitously or for a rent inferior to the real rental value, it is subject to the corporation tax on a basis which cannot be lower than three times the real rental value of the said property'; that for 1977 the petitioner has been subject to corporation tax, according to that provision, on a base equal to three times the rental value of the aforementioned villa; that, however, petitioner invokes the provisions of article 7 of the treaty of establishment between France and Panama of 10 July, 1953, published by virtue of decree 58-438 of 12 April, 1958 in the Official Journal of 23 April, 1958, according to ([...]) within the territory of the other Party, to any other or higher duties, levies, taxes, or contributions, of whatever denomination than those which are imposed on the nationals'; that these provisions form an obstacle to the fixed rate taxation (taxation forfaitaire) foreseen by article 209A of the General Tax Code; that the company limited by shares Resources Management Corporation is, accordingly, entitled to demand the discharge of the assessment to corporation tax to which it was subjected for the year 1977.

[The court] decides: …

The company limited by shares Resources Management Corporation is discharged from the assessment to corporation tax and ancillary penalties to which it was subjected for the year 1977.”

VI. A Point That Was Not Raised: Abuse of Rights

A word of caution for anyone planning to use Panamanian companies to hold French real estate: beware of the doctrine of abus de droit. It was not raised in Resources Management, but might well be invoked in other cases.

In French tax law, the expression abus de droit (abuse of rights) refers to unacceptable tax avoidance. Outside the tax field it has a different meaning and refers to a doctrine that has been developed by the French courts and become a “general principle of law”: a person acts unlawfully, or he made use of a right with the intention or purpose of causing harm to another person. Transposed to taxation matters, the doctrine means this: although a taxpayer has a right to arrange his affairs in any way which is legal, he abuses that right if he exercises it solely to avoid tax.

VII. Are Panamanian Companies Protected from the 3 Percent Annual Tax on the Market Value of French Real Property?

A short note, signed with the initials “O.F.” (Olivier Fouquet?) is appended to the report of Resources Management in the Revue des Sociétés. ([...]) … times the rental value of French real property) appeared to be “transposable” to the “new” 3 percent annual tax on the market value of the property (imposed by article 990D which replaced article 209A) because the Cour de Cassation had also decided (in Société Royal) that a non-discrimination clause in a “bilateral treaty” was an obstacle to application of this tax.

This analysis is correct and is shared by another commentator, M. Phillipe Derouin.

Comparing Société Royal with Resources Management it is apparent that both decision have three fundamental points in common:

  • A tax that is discriminatory because it applies only to companies which have their seat outside France (both taxes are closely related: one replaced the other).

  • A treaty with a non-discrimination clause (both clauses have similar wording).

  • A constitutional principle of supremacy of treaties over domestic legislation (both taxes were enacted after conclusion of the treaties).

In this circumstances, unless the Constitution is amended or the treaty is renegotiated, it is doubtful that the 3 percent tax imposed by article 990D of the General Tax Code could ever apply to Panamanian companies.

Full text in Tax Planning International Review (1992) . Extract posted with thanks to Alexandra Stoffl (University of Vienna, B.Sc., LLM)

Wednesday, August 11, 2010

US citizens face penalties when failing to report their offshore accounts

Kevin Mullin: Ramifications of U.S. Crackdown on Foreign Tax Havens
By Kevin Mullin, JD, CPA, LLM (Tax)

Compelled by the current recession to raise revenues from all quarters and emboldened by reports of thousands of U.S. taxpayers with unreported foreign accounts, the current administration is moving to crack down on rogue U.S. taxpayers with investments stashed abroad.

While the UBS scandal has attracted the most publicity, leading to the discovery of thousands of unreported accounts held by Americans, Switzerland is not the only focus. The Internal Revenue Service recently announced the opening of its first criminal investigation office in Panama and the agency is targeting far-flung jurisdictions which permit bank-secrecy, as well as tax havens around the world.

This has a direct impact on the thousands of U.S. taxpayers investing in real estate outside of the U.S., who often use a foreign bank, financial account, corporation, partnership or trust to take title to the property. They provide a convenient cash management account from which to make such investments or meet expenses of ownership. But they don't necessarily shield owners from IRS scrutiny, as the U.S. account-holders of UBS have found out.

Most U.S. taxpayers with international investments are likely aware that they are required to declare income earned from all sources located anywhere in the world, but many are not aware of the extensive reporting requirements on foreign accounts and investments, regardless of whether they generate any taxable income. Nor are many investors aware of the draconian penalties that attend their non-compliance.

Besides the obvious obligation to report income, there are extensive requirements for the owners (or constructive owners) of such accounts to report transfers and ownership of foreign corporations and trusts, as well as ownership or signature authority over foreign financial accounts.

While many of these reporting requirements have been on the books for years, the focus of the U.S. on enforcing them has been, until recently, pretty half-hearted. But now the IRS is pursuing this arena with vigor.

The administration's efforts culminated earlier this year with amnesty program for U.S, taxpayers with unreported income from foreign accounts--an admission that providing amnesty might bring new sources of revenue, which would otherwise simply burrow deeper underground. The amnesty program allowed qualified U.S. taxpayers with unreported income from foreign accounts to generally be relieved of criminal sanctions, although they would still be subject to back taxes, interest and civil penalties.

The announcement of the amnesty program, which ended on Oct. 15, triggered an avalanche of disclosures that have overwhelmed IRS staff. In its wake, a plethora of proposed legislation has been introduced aimed squarely at bringing a spotlight to the offshore arena.

Hereafter, the gloves are off and U.S. taxpayers who are discovered to have unreported income from foreign accounts should not expect a conciliatory attitude on the part of the IRS. For those U.S. taxpayers with foreign-source income and financial accounts, the requirement for obtaining competent legal counsel and accounting advice could not be more critical to their overall tax compliance efforts.

The following is a summary of the reporting requirements and potential civil penalties that could apply to a taxpayer, depending on their particular facts and circumstances. Note that serious criminal penalties with financial, as well, as incarceration possibilities are also possible for willful infractions. And if the IRS discovers non-compliance prior to the taxpayer providing information on a voluntary basis, the opportunity of pleading ignorance or inadvertence will likely fall on deaf ears and the likelihood of a criminal investigation increases.

A short summary of some of the compliance requirements:

  • A penalty for failing to file the Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts, commonly known as an �FBAR�). U.S. citizens, residents and certain other persons must annually report their direct or indirect financial interest in, or signature authority (or other authority that is comparable to signature authority) over a financial account that is maintained with a financial institution located in a foreign country if, for any calendar year, the aggregate value of all foreign accounts exceeded $10,000 at any time during the year. Generally, the civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign account. Non-willful violations are subject to a civil penalty of not more than $10,000 for each account and for each year that the account is unreported.
  • A penalty for failing to file Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. Taxpayers must also report various transactions involving foreign trusts, including creation of a foreign trust by a U.S. person, transfers of property from a U.S. person to a foreign trust and receipt of distributions from foreign trusts. This return also reports the receipt by U.S. persons of gifts from foreign entities. The penalty for failing to file each one of these information returns, or for filing an incomplete return, is 35 percent of the gross reportable amount, except for returns reporting gifts, where the penalty is five percent of the gift per month, up to a maximum penalty of 25 percent of the gift.
  • A penalty for failing to file Form 3520-A, Information Return of Foreign Trust With a U.S. Owner. Taxpayers must also report ownership interests in foreign trusts, by U.S. persons with various interests in and powers over those trusts under section 6048(b).The penalty for failing to file each one of these information returns or for filing an incomplete return, is five percent of the gross value of trust assets determined to be owned by the U.S. person.
  • A penalty for failing to file Form 5471, Information Return of U.S. Person with Respect to Certain Foreign Corporations. Certain U.S. persons who are officers, directors or shareholders in certain foreign corporations (including International Business Corporations) are required to report information. The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.
  • A penalty for failing to file Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation. Taxpayers are required to report transfers of property to foreign corporations and other information. The penalty for failing to file each one of these information returns is ten percent of the value of the property transferred, up to a maximum of $100,000 per return, with no limit if the failure to report the transfer was intentional.
  • A penalty for failing to file Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships. U.S. persons with certain interests in foreign partnerships use this form to report interests in and transactions of the foreign partnerships, transfers of property to the foreign partnerships, and acquisitions, dispositions and changes in foreign partnership interests. Penalties include $10,000 for failure to file each return, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return, and 10 percent of the value of any transferred property that is not reported, subject to a $100,000 limit.

Kevin Mullin is a tax attorney with more than 20 years experience in international tax and estate planning services. With offices in Denver, Co., and McLean, Va., he can be reached at He also maintains representative offices in Latin America and the Middle East to support his professional and client relationships globally.