Offshore choices for Latin American investors

Small world

8 Jul 2011

 

The scramble for yield and return has sent investors scouring the globe in the post-credit crisis environment. Although still unprepared to invest too far from the beaten track, improved liquidity in markets like Latam has meant there is real opportunity for investors to reduce their risk profile through allocations to emerging markets. 

...

Latam investor base

The message appears to be that there is little let up in the demand for Ucits structures among investors who crave onshore structures, particularly in the absolute return format, but clearly that isn’t for everyone. In Brazil the opposite can be said. The market is currently awash with financial products and investors aren’t desperate for the security offered by Ucits, particularly in an absolute return fund.

“Things are going well in the real economy. When you analyse the risk assets, like the Bovespa, then there are certainly some problems but it’s because investors are wary of putting their money to work at the moment,” says Otavio de Magalhães Coutinho Vieira, director of investments Safdie Private Bank based in Sao Paolo. “This is because there are so many IPOs and financial products coming to the market. It’s a type of digestion the market is going through, and I believe that it will pass through a period of ups and downs and there won’t be too much definition for the markets.”

The ‘multimercados’ make up the majority of the market, regulated onshore products, whereas traditional hedge funds are set up as offshore vehicles attracting a different  client base. There’s no real rush by local institutional investors to invest in Ucits-wrapped funds, even hedge funds. “There is no rush. The majority of the investors here, the big endowments and the pension funds, prefer to go down the managed account route,” says Vieira. “And the ones that are launching these structures are the big banks so it depends more on the size and the objectives of the manager.

“Independent managers need to have some control over their client base so naturally prefer pension and endowments, which are longer term investors than the retail investors. In general these retail investors want to have a very liquid strategy and these independent guys are more dedicated to mid-caps and even small-caps, and they want a long term-oriented client base.”

A survey completed by KPMG released in early June indicated that the appetite for Ucits was still strong but that the wholesale shift to Ucits [Undertakings for Collective Investment in Transferable Securities] products hadn’t quite happened as many expected. In a lot of cases hedge fund managers opted to keep an offshore vehicle while at the same time create an onshore product that appeals to a certain investor base, largely reflecting the mixed attitude of investors.

Pension funds and endowments in places like Brazil have yet to come round to Ucits, and may not, although some of the institutional in Peru and Chile are more avid investors in Ucits products. “Here in Latam we didn’t have those problems that a lot of places had in 2008. So if a Latin American investor wants to have an absolute return type of product they’ll go toward a Cayman vehicle [offshore]. It is a different game [in Latin America],” says Vieira.

“For other investors Luxembourg protection matters but for Latam investors you see more plain vanilla type of products with a certain alpha attached. Hedge fund managers are receiving demand for their capacity and their skill at alpha generation and the growth is coming from big institutional investors, so Luxembourg [Ucits] is not an issue for them.”

Full text in http://www.latamfm.com

Panama Punching above its weight

Punching above its weight

3 Oct 2011

Keywords: investment appeal, Market, News, Panama

Panama continues to appeal to international investors despite its relative insignificance in size. The Central American tax haven of just three million people has not attracted brokers and service providers to develop into a financial hub, but its attractive tax environment has helped it attract more than $10bn in foreign direct investment (FDI) since 2006, a quarter of which arrived in 2010.

“Investors use our jurisdiction for reduced taxes for the income from investment vehicles,” explains Ernesto Chong Coronado, CEO of PMC International Management Corp.  “Panama is not like a modern financial centre where you see everybody coming here to be a brokerage house or broker-dealer.”

With limited direct investment opportunities, funds play an important role in getting investors access to the Panama growth story – indeed, Panama continues to be one of Latam’s fastest growing economies. The World Bank projects that Panama’s GDP, which grew 4.5% in 2010, will grow at 7.8% in 2011 and 6.8% in 2012.

“The growth outlook for Panama´s economy is very promising,” says Ricardo Zarak, senior vice president at Prival Securities. “Construction, tourism, logistics and financial services are the sectors that offer the best investment opportunities and potential.”

BBVA Research says the Panamanian economy rallied by 7.5% year-on-year in 2010, regaining momentum after growth slowed during 2009. “Panama thereby consolidated its position as one of the fastest growing economies in Latam. Quarterly GDP growth accelerated over the year, supported by the strong growth of domestic demand, driven by increased spending on the public sector investments programme and Panama Canal expansion works,” the firm said.

Indeed, Panama’s significant government spending on a pipeline of high profile projects is one of the main factors drawing in international investors (and also fuelling a hefty account deficit). “A lot of developments are beginning in Panama,” says Jorge Vallarino vice president of treasury and institutional relationships at MMG Bank. “When you look at the canal expanding, for example, there are a lot of opportunities to develop services tied to that in particular.”

Considerable amounts of capital are going into certain sectors including tourism-related real estate, with a lot of construction around the hospitality sector planned for the future. “I think the real gems here are going to be the projects that have been developed in beach areas,” says Vallarino.

However, political risk still exists, with the government changing every five years and new rules evolving, often as a result of constantly changing agendas, which can make development somewhat unpredictable. A more pressing concern, however, is the potential inflationary pressures associated with global commodities.

“The main economic weakness of Panama is the high dependency on imports, especially on fuels, and an unspecialised labour force, which has caused wage inflation in the country,” says Zarak. “Panama´s dependency on fuel imports could damage growth – a spike on the price of oil due to circumstances from the Middle East will have a negative effect on consumer´s disposable income.”

“Inflation is set to be close to 5.3% on average, driven by strong business activity and high international commodity prices,” said BBVA Research. “The main risk threatening the economy’s performance would be intensification of the political crisis in the Middle East and the subsequent effects of this on oil prices and world trade flows.

“We forecast inflation of close to 5.3% on average during 2011, moderating in 2012 towards a rate of 4.4%, consistent with the adjustment expected in international commodity prices and the strengthening dollar, due to a more restrictive monetary policy in the US,” the firm added. “However, amid strong momentum in terms of economic activity and in the absence of monetary policy instruments to temper spending, inflation will remain a challenge for economic policymakers, reducing the economy’s competitiveness and highlighting outstanding problems facing productivity.”

Financial markets

Panama’s equities and debt markets are relatively underdeveloped. “Sophistication in the market is derived through the international investors, but not the local investors,” explains Coronado.

The market is fixed-income orientated (although there is a significant number of equities funds relative to the market’s small size), with many investors prioritising regular returns over long-term capital gains. The equities universe is small, with the stock exchange dominated by a handful of companies that power much of the economy and employ most of the workforce.

The biggest challenge for the local equity markets is that most of these companies’ shares are controlled by insiders, according to Vallarino.  “Even in the face of a high valuation, no one wants to give up control - that is one of the biggest challenges that we are trying to get people here in the Panamanian space to understand,” he says.

MMG Bank

MMG Bank currently runs two funds, a fixed income fund and a land fund, overall running around $55m in mutual funds.  The bank is a market maker in government debt, issuing the majority of the deals coming to the market.  This primary focus ties very well into the investment banking unit, which is bringing companies to the market by, for example, structuring debt deals.  Investment banking was at the core of the business at its inception, with everything else born from that centre, according to vice president of treasury and institutional relationships Jorge Vallarino.Sustaining liquidity is a also challenge for fund managers. According to Vallarino, it is important to be trading with the right bank to get access to the right deals. “We are structuring most of the new deals that are coming to the market, and we are going to give our customers a better entry point than any other firm,” he says.  “It is a big challenge, getting the deals and then trying to trade in the secondary market – it is far easier to sell than buy here, which presents another challenge for fund managers.”

Panama's strength

LatAm FMspoke with Prival Securities senior vice president Ricardo Zarak to discuss opportunities and growth in the Panamanian fund space

LatAm FM (LFM): When was Prival’s fund business formed?

Ricardo A. Zarak A. (RZ):Prival Securities is a 100% subsidiary of Prival Bank, and is an asset management firm that received its licence in 2010.  The executives of Prival Bank and Prival Securities have more than 10 years of fund management experience; and under their previous fund administration managed more than $300m in assets, mainly in the Latin American fixed income space. Prival Securities acquired the operations of Mundial Asset Management late last year, who had a family of funds. The Mundial Global Diversified Fund (MGDF) is a blended fund, currently being modified by Prival so it can be a purely fixed income fund, concentrated in investing in Latam. From 30 June, the MGDF, renamed the Prival Bond Fund after amendments, had $33m AUM and distributes dividends monthly to investors.  Year to date dividends are around 5% annualised. The breakdown of our clients is 90% Panamanian, and 10% international.

LFM: To what extent are you looking to attract more international investors?

RZ:We are always looking for ways to diversify our client base.  However, we are extremely careful

in how we allocate assets, since managing the capacity of the fund is always a challenge.  We have a deep evaluation process of the opportunities that come from the open market, and from private deals.  We want to maintain a dividend yield that is 150 basis points above the average deposit offering at local banks, so there are only a few assets that we can allocate each month.  We are growing between $3-5m a month, and we are seeing that level of growth until the year end. 

LFM: How developed are Panama’s fixed income and equities markets?

RZ:The market consists mainly of government bills and notes, as well as corporate bonds, commercial paper and preferred shares.  Most of the fixed income securities are bought by local institutional and private clients who hold the investments until maturity; therefore, sometimes finding a secondary market can take a few trading sessions.  Recently, the government has launched, through local broker dealers, a market maker programme to give liquidity to government bills and notes.Panama´s equity market looks positive overall.  As of 15 July, the equity market was up 14.18%.  The most important component of the stock market is in financial firms, which have sound liquidity, and must enjoy the benefits from a growing economy. 

LFM: How positive is investor sentiment towards Panama at the moment?

RZ:Investor sentiment towards Panama is very strong.  Another encouraging sign is that Panama received around $2.3bn in foreign direct investments (FDI) in 2010, which represent around 8-9% of GDP.  Furthermore, Panama has received more than $10bn in FDI since 2006. Because Panama has a limited market in terms of the quantity and size of the issuers, finding enough deals to meet inflows is always the main challenge; for this limitation, fund managers must look to other markets, or at private deal opportunities.

Meanwhile, the legal environment for funds poses few challenges; it is relatively sophisticated and efficient, making the fund space relative easy to navigate for external players. The management of assets is very well regulated, but the administrative services are not regulated for those funds. What is required, though, says Coronado, is a more competitive edge from the market’s administrators.

“We need to be more aggressive, more sophisticated, to compete with, for example, Colombia and Brazil,” he says. “This aggression should not manifest in the form of risk, but, rather, in a way that we can be more sophisticated and stay in control of our jurisdiction, and to stay in touch with international investors.”

Full text in http://www.latamfm.com

Germany Becomes Tax Haven for Firms and Wealthy 2/2

Germany Becomes Tax Haven for Firms and Wealthy

09/02/2009

By Beat Balzli and Michaela Schiessl

Part 2: 'The State Is Lagging Hopelessly Behind'

Methods like the Malta loophole work in part because of international double taxation agreements, or DTAs. In these agreements, two countries stipulate in which of the two taxes will be assessed, so as to avoid double taxation. Providers of closed investment funds have discovered the benefits of DTAs. They offer investments in British life insurance, Romanian forestry operations and Spanish solar plants. Thanks to DTAs, German investors only pay taxes on their foreign investments in the respective countries.

The finance committee in the German parliament, the Bundestag, is kept informed about all DTAs, but this does little to address the underlying problem. "Under most tax savings models, the state is lagging hopelessly behind," says Axel Troost, a financial expert with Germany's Left Party.

One of the biggest tax scandals in postwar history illustrates how expensive it can get when politicians are hoodwinked by the machinations of high finance. The process was known as "EX/CUM trade" in bankers' jargon. The trick was so daring that it even made officials at the Association of German Banks queasy.

On Dec. 20, 2002, the bankers alerted the Finance Ministry about the problem. They described a systemic error in the sale of borrowed shares near the ex-dividend date of German corporations. Because of a blind spot in the market transaction system, the original owners of the shares and the buyers receive a statement on the capital gains tax from the respective custodian banks. This enables both parties to claim a refund on the tax, even though it was only paid once.

Out of Reach

Despite this obvious problem, it took a long time for Berlin to react. For another four years, the proprietary trading departments of German banks and wealthy private customers, in particular, fraudulently obtained additional tax statements and submitted them to the tax authorities so that they could claim tax refunds. The German Finance Ministry did not close the loophole until the fall of 2006. According to the ministry, "the current administration, immediately after coming into office in early 2006, drafted legislation to address the issue, which came into effect at the end of 2006."

But this had only solved the problem at the national level. The bank association's warnings that sales through foreign institutions remained "out of reach" were ignored. As a result, the game went merrily along through foreign banks -- until a fired executive of the US investment bank J.P. Morgan allegedly disclosed the full scope of the tricks to officials in Berlin this spring.

A loss totaling in the billions, which had apparently accumulated over several years, was later mentioned in the Bundestag finance committee. Nevertheless, it took the Finance Ministry until May to issue a directive requiring auditors to certify that submitted tax statements were clean.

'Excessive' Requirements

But can the government even win this constant cat-and-mouse game? How can the tax officials be brought up to speed with the highly specialized tax model wizards?

One method, common in the United States and Britain, is to introduce a reporting requirement for tax savings models. This would give the tax authorities advance notice of potential loopholes and enable them to react immediately. The subject was given favorable attention in the Bundestag's finance committee in 2007. "But then the proposal suddenly disappeared," says Green Party Bundestag member Christine Scheel, the champion of the early warning system. Members of Steinbrück's staff justified dropping the proposal by claiming that the reporting requirement contradicted "the goals of reducing bureaucracy."

Tax expert Hanno Berger is extremely pleased with the outcome. He believes that a reporting requirement would be "excessive." In fact, Berger feels that many things are excessive, including Steinbrück's primitive method of amending laws retroactively.

He cites the example of foreign family foundations. Steinbrück wants to amend a paragraph in the German Foreign Transaction Tax Act so that negative income can no longer be claimed to reduce tax liability -- and he wants to do so retroactively, spanning several decades. Even Franz Wassermeyer, a former judge on the Federal Tax Court, says: "This is a catastrophe. It's scandalous."

The Finance Ministry takes a different view of the issue: "Only if the retroactive application is required only in exceptional cases and is consistent with the rulings of the Federal Constitutional Court will it be included in the draft legislation."

Customized Models

The truth is that the retroactive application of laws eliminates all legal certainty. Besides, by constantly issuing new directives the Finance Ministry is practically playing the role of lawmaker, thereby circumventing the separation of powers. "This is unconstitutional," Berger complains. "When it comes to tax law, we are living in a banana republic," he says, referring to laws that he claims have been put together in dilettantish ways.

Such laws do in fact exist. For instance, the new Paragraph 15b of the Income Tax Act prohibits "tax deferral models" which are based on a ready-made approach. But this provision likely applies only to standardized financial products for small investors. The ultra-rich have models customized to suit their needs and, according to a decision by the tax court in the southwestern state of Baden-Württemberg, are not subject to the new paragraph of the law. The Finance Ministry, for its part, argues: "It does not follow from the cited decisions that Paragraph 15b of the Income Tax Act should be inapplicable."

Such inadequacies abound in the complicated German tax system. Only a drastically simplified system without significant deduction options, as Heidelberg tax professor Paul Kirchhof advocates, would truly hurt Berger's industry.

...

Translated from the German by Christopher Sultan

Full text in http://www.spiegel.de/international/business/0,1518,646558-2,00.html

Germany Becomes Tax Haven for Firms and Wealthy 1/2

Germany Becomes Tax Haven for Firms and Wealthy

09/02/2009

By Beat Balzli and Michaela Schiessl

German Finance Minister Peer Steinbrück has been railing against tax havens such as Switzerland and Luxembourg with harsh rhetoric. But he has paid too little attention to completely legal loopholes -- such as having subsidiaries on Malta -- that allow German corporations and the ultra-rich to minimize their tax burdens.

The Swiss are essentially a placid people. But for the past few months, two words have been sufficient to transport them into a state of agitation: Peer Steinbrück.

They have referred to the German finance minister as "Peitschen Peer" ("Whip Peer"), ever since he threatened to call in the cavalry unless Switzerland, traditionally a tax haven, cooperated with other countries. Even Luxembourg Prime Minister Jean-Claude Juncker, whose country Steinbrück also included in his verbal attack, feels deeply offended.

Only one person is pleased with these reactions: Steinbrück himself.

"It wasn't only friends that I made during the fight against tax havens," he says. However, he adds, it was important to "sail against the wind and stay on course in this effort." But now Steinbrück lacks more than popularity. Now he also needs money. Last week, Germany's Federal Statistical Office reported a national deficit of €17.3 billion ($24.8 billion) for the first half of 2009.

Completely Legal

But the minister's rage against tax havens risks obscuring a much bigger problem: A completely legal tax avoidance industry is flourishing right at home in Germany. It is an industry that thrives on the mistakes made by ministries and the parliament in drawing up tax legislation. And hardly any other industry is as successful, irrespective of the current economic situation, or operates as efficiently.

While ordinary German workers are at the mercy of the tax authorities, millionaires and corporations use aggressive tax models to make themselves appear to be artificially poor -- and it's completely legal. In fact, seminars on "International Tax Structuring" are even tax-deductible in Germany as professional training.

What the national treasury loses in the process is far from insignificant. The German Institute for Economic Research (DIW) has calculated that there is a gap of €100 billion between the demonstrated profits of corporations and partnerships and the profits they have reported for purposes of taxation. "This points to tax breaks and structuring options with which companies can lower their taxable profits or shift them abroad," writes the DIW.

In fact, German corporations structure their international subsidiaries in such a way that the most profitable ones are located in the countries with the lowest tax rates. Corporate tax paid by corporations makes up only 2.8 percent of the government's total tax revenues of €561 billion. Germany's army of wage-earners contributes the largest share.

"Germany is a tax haven for large companies," says Wiesbaden-based economist Lorenz Jarass. "People with normal incomes are being robbed."

Toothless Tiger

Steinbrück isn't so keen to discuss this injustice. He prefers to draw attention to his latest coups in the fight against tax havens: Belgium and Luxembourg have agreed to release information about potential tax evaders. And Swiss representatives will arrive in Berlin on Sept. 8 to negotiate a new double-taxation treaty that provides for increased mutual assistance between Swiss and German authorities.

This is undoubtedly progress. But another one of Steinbrück's prestigious projects has already failed: The interest-rate barrier that limits the tax deductibility of interest costs for businesses has been relaxed.

He was also forced to make concessions on the tax evasion law passed in July. Instead of leaving it solely up to the finance minister to determine which countries are to be ostracized as tax havens, the Foreign Ministry and Economics Ministry will also be involved in such decisions in the future. However if a country is classified as a tax haven, it will mean that investors and companies doing business there will be subject to stricter requirements regarding providing tax-related information.

Corporations have little to fear from such a toothless tiger. They maintain entire departments for the sole purpose of optimizing their tax situation. In their international web of subsidiaries, they manage to control the internal flows of money with the help of three adjusting mechanisms: interest payments, license fees and transfer prices.

It works in the following way: Swiss subsidiaries charge their German parent company high fees for the use of patents or charge prices higher than the cost price for product shipments. The resulting profits are earned in the tax havens.

However Dieter Ondracek, head of the German Tax Trade Union, claims some of these problems have already been fixed. "Many of these loopholes were plugged with the 2008 corporate tax reform," he says.

Financial Monopoly

Tax expert Hanno Berger, for one, finds that argument laughable. Berger, a stout man in his late fifties with a construction worker's handshake, spent 14 years auditing Frankfurt banks for the German tax authorities -- until he succumbed to the lure of private industry. Nowadays, he sits in his office on the 31st floor of the Skyper building in Frankfurt and designs tax savings models for the ultra-rich and large corporations.

Berger's trademark is zero taxes for multi-millionaires. He is considered the king of the industry. With the skyline of Frankfurt's financial center as a backdrop, he uses a flipchart to illustrate his most successful structures -- those with tax-free returns of up to 10 percent. For Berger, finding ways to beat the tax system is an "athletic and intellectual challenge." Is it his problem that Berlin enacts amateurish laws? It's no wonder that the Finance Ministry sees Berger as one of its greatest enemies.

Of course, Berger is also familiar with the latest mecca for Germans seeking to optimize their tax structure: Malta. In the global game of financial Monopoly, the small Mediterranean country has become one of German industry's preferred locations in the time since it joined the European Union in 2004.

Companies like Lufthansa, Puma, BASF, K+S and Fraport have their offices in the town of St. Julian's, near the "Stiletto Gentleman's Club" and the pubs where foreign language students drink themselves into oblivion. The offices of the BMW Malta Group are near the casino in the upscale Portomaso waterfront development.

"The number of companies in Malta is growing rapidly," says Andrew Manduca, a partner in the accounting firm Deloitte Malta. He avoids using the term tax haven. "Companies pay a 35 percent tax rate here, which is more than in Germany." Technically, this is correct, but in a second step, shareholders can apply for a refund of the bulk of those taxes. On balance, profit distribution in the form of dividends is taxed at only 5 percent. After taxation, the net dividends are returned to the coffers of the German parent companies -- 95 percent tax-exempt, thanks to the decisions of the former Social Democratic and Green Party coalition government under former Chancellor Gerhard Schröder.

No one seems to be troubled by the fact that this loophole deprives the German treasury of massive amounts of revenue. On the contrary.

Last summer, Germany's ambassador to Malta invited German banking executive Frank Krings -- now a member of the management board of the troubled mortgage lender Hypo Real Estate -- to his private residence for a meeting with representatives of subsidiaries of German companies. Krings apparently liked what he heard. The local media has reported that banking giant Deutsche Bank plans to expand its business in Malta this year.

Full text in http://www.spiegel.de/international/business/0,1518,646558,00.html

New Permanent Resident Visa for US, EU and OECD countries

Executive Order 343 of 16 May 2012 was published in the Official Gazette, "which creates the sub-category of Permanent Resident in the form of foreign nationals from specific countries which maintain friendly, professional, economic, and investment relationships with the Republic of Panama within the immigration category of Permanent Resident."   Citizens of the following countries may apply for this visa:

•Germany

•Argentina

•Australia

•Austria

•Brazil

•Belgium

•Canada

•Spain

•United States

•Slovakia

•France

•Finland

•Netherlands

•Ireland

•Japan

•Norway

•Czech Republic

•Switzerland

•Singapore

•Uruguay

•Chile

•Sweden

 

Applicants must provide bank statement showing at least 4 middle digits "or another which shows their income and is acceptable to the National Immigration Service", as well as police record with Apostille and all other general documents required from immigrants.   Immigration takes currently around 9 months for approval of applications.  All applications must be filed by a lawyer.

 

However, work permits are still granted separately by the Ministry of Labor under the usual categories, with applicants requiring a Panama company or spouse to sponsor their application filed through a lawyer.

Changes to Panama foundation taxes

The Panamanian government has increased the government tax for Panama Companies and Private Interest Foundations.

Effective May 9, 2012, all new companies must pay US$300 at the moment of incorporation instead of the usual US$250; the annual government tax after the first year remains unchanged at US$300. The first annual tax for Panama Private Interest Foundations increases $100 to US$350 at the moment of incorporation and every year thereafter will increase to US$400 yearly.

All companies that do not pay its annual maintenance fee for two consecutive years will incur on a penalty of US$300.00 in addition to the current penalty of US$50 for each year of non-payment.

Non-profit associations, Unlimited Liability Companies and unregistered Trusts will continue to be exempt from the flat tax. All entities will continue to be exempt of Panama income tax on transactions sourced outside of Panama and interest earned from bank accounts.

These changes do not affect our rates for Resident Agents and Independent Directors. Other options can also be provided from Belize and other jurisdictions at competitive rates.

For further information regarding these changes please contact us or download here a free brochure with additional information.

About Lombardi Aguilar Group

Lombardi Aguilar Group was created as an alternative for clients worldwide who seek fast, innovative and effective solutions to their legal problems. The firm currently provides services to individual and corporate clients in Panama as well in the Americas, Europe and Asia. Its partners maintain a commitment with professional ethics and social responsibility by participating in the board of directors of groups such as the Panama Bar Association, the German Chamber of Commerce, the American Chamber of Commerce (AMCHAM) of Panama and the Association of Chinese-Panamanian Professionals.

The firm centers its law practice in private client services and asset protection (Private Interest Foundations, Trusts), business structures (Offshore Corporations), tax planning, real estate and e-commerce. It also advices in areas of Law such as Corporate, Commercial, Intellectual Property, Maritime, Tax, and Immigration Law as well as related litigation.

For more information, contact +507 340-6444, e-mail aaguilar (at) laglex.com, or visit: Lombardi Aguilar Group http://www.laglex.com/

See also the updates in Linkedin and Facebook .

Antigua dissatisfied with US position on Internet gaming

Published: Tuesday April 17, 2012
 

Prime Minister Baldwin Spencer says the United States (US) has not done enough to settle a long outstanding Internet gaming dispute with Antigua and Barbuda.

The Antiguan PM met with the US Trade Representative Ron Kirk on the issue on the weekend, but expressed disappointment that, although the case was first adjudicated in 2003, Antigua and Barbuda and the US are yet to find a "mutually agreeable solution to settle the case".

Spencer said Antigua and Barbuda had put forward several options to settle the case but that "there has been no fairness in the proposals received from the United States to date.

"Antigua and Barbuda's Internet gaming sector has been decimated by the actions of the United States, and we believe that we must be fairly compensated for those losses," Spencer said.

In an effort to bring a fresh perspective to the case, Spencer said he urged the trade representative to accept Antigua and Barbuda's recent proposal to take advantage of a "good offices" mediation effort by the director general of the World Trade Organization (WTO).

Spencer said Kirk acknowledged that a solution to the case had been elusive but assured him that "the United States remained committed to working with Antigua and Barbuda in finding a solution to the case".

The Antiguan leader said Kirk "expressed the willingness of his office to review the latest proposal from Antigua and Barbuda and to hold further discussions with Antigua and Barbuda's Ambassador in Washington, DC, over the next few days so that a strategy for further action could be discussed."

In 2005, the WTO ruled that the US had violated international trade agreements by prohibiting operation of offshore Internet gambling sites.

Antigua claimed that it lost US$3.4 billion a year due to the US action, but the WTO awarded Antigua US$21 million.

- CMC http://jamaica-gleaner.com/gleaner/20120417/business/business2.html

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Antigua considers new case against USA at World Trade Organization

Steven Stradbrooke
April 9, 2012

Many in the gambling industry thought they’d received an early Christmas gift following December’s surprise announcement by the US Department of Justice that the Wire Act pertained only to online sports betting. For the nation of Antigua, it was like getting a Christmas gift they’d been promised years ago, but appeared to have got lost in the mail. For Antigua, the DoJ opinion appeared to be the first serious acknowledgement US authorities had given the World Trade Organization’s ruling that America needed to get its online gambling house in order.

...

‘OLD RELIABLE’ JUST WON’T CUT IT ANYMORE

Mark Mendel, Antigua’s lead attorney in the WTO dispute with the US, told CalvinAyre.com that the DoJ’s pre-Christmas bombshell had “vaporized … the entire defense. The American government has now admitted that we were right all along in our assertions about US gaming law. It is going to be very hard for them to fall back on the ‘old reliable’ that they ban all remote gaming because it is incapable of regulation. I am hopeful that they will realize at this point that settlement is in everyone’s best interest and engage on a constructive basis with Antigua.”

Problem is, as Mendel knows all too well, “to date, [the Americans] have simply ignored the whole thing.” It’s tempting to conclude that the US attitude towards the WTO is like how Robert De Niro’s character in Casino described the betting habits of Joe Pesci’s character Nicky Santorro. “When he won, he collected. When he lost, he told the bookies to go fuck themselves. I mean, what were they going to do, muscle Nicky? Nicky was the muscle.”

Looking ahead, Mendel says Antigua is considering a number of options, including “commencing a new case altogether.” In arriving at the $21m annual compensation figure, the WTO used a formula that considered only Antigua’s theoretical share of the US online horse wagering market. Given the imminent expansion of online betting options in the US, that horse-racing-only formula now seems even more insufficient.

Full text in http://calvinayre.com/2012/04/09/legal/antigua-considers-new-case-against-usa-at-world-trade-organization/


See also:
•WTO Antigua dispute still smoldering
• http://www.antiguawto.com/   WTO online gambling trade dispute brought by Antigua against the United States - Measures Affecting the Cross-Border Supply of Gambling and Betting Services (DS285) ("US-Gambling") case papers.
•WTO official case page

IRS allows deducting expenses for conventions held in Panama

Part I

Section 274.—Disallowance of Certain Entertainment, Etc., Expenses

26 CFR 1.274-1: Disallowance of Certain Entertainment, Etc., Expenses

Rev. Rul. 2011-26

....

Rev. Rul. 2007-28, 2007-1 C.B. 1039, identified each of the following jurisdictions as a beneficiary country for which there was in effect an agreement with the United States as described in section 274(h)(6)(C)(i) and for which there was not in effect a finding by the Secretary of the Treasury that the tax laws of the beneficiary country discriminate against conventions held in the United States: Antigua and Barbuda, Aruba, Bahamas, Barbados, Bermuda, Costa Rica, Dominica, Dominican Republic, Grenada, Guyana, Honduras, Jamaica, Netherlands Antilles, and Trinidad and Tobago.

Since publication of Rev. Rul. 2007-28, the “Agreement Between the Government of the United States of America and the Republic of Panama for Tax Cooperation and the Exchange of Information with Respect to Taxes” entered into force on April 18, 2011. See Treas. News Release at http://www.treasury.gov/presscenter/press-releases/Pages/tg1144.aspx (April 18, 2011). This new agreement qualifies as an agreement described in section 274(h)(6)(C)(i). Panama is a beneficiary country, and no finding is in effect by the Secretary of the Treasury that the tax laws of Panama discriminate against conventions held in the United States. Therefore, Panama is included within the North American area under section 274(h)(6) as of April 18, 2011.

Three other beneficiary countries -- the Cayman Islands, the British Virgin Islands, and Saint Lucia -- have entered into tax information exchange agreements with the United States that are not of the type described in section 274(h)(6)(C)(i) because of certain limitations in the scope or implementation of those agreements. Accordingly, these three beneficiary countries are not included as part of the North American area under section 274(h)(6). In the case of Saint Lucia, certain transition relief has been provided, as reflected in the Holding below.

HOLDING

For purposes of determining whether deductions are allowed for expenses incurred in connection with a convention, the following areas are included in the North American area as of the effective date of section 274(h) except as otherwise indicated:

Panama April 18, 2011

Full text in http://www.irs.gov/pub/irs-drop/rr-11-26.pdf

Forex companies are now subject to special licenses

The law which overhauls securities legislation has closed the loophole which allowed forex companies oto set up shop in Panama. Effective March 1, 2012, all forex companies - whether they operate inside or outside of Panama - are required to apply for a brokerage house ("casa de valores") license granted by the new Superintendent of Securities.

The abuse by several forex operators was brought to the attention of the authorities which reformed Law Decree 1 of 1999. While forex futures and options could only be traded by licensed companies, spot and cash operations were exempt from licenses. Fines for engaging in forex operations without a license are now of at least US$1,000,000.

Article 44 of the reform defines Forex activity as the operation of buying and selling coins and currency at a price or exchange rate (Foreign Exchange Market) on a recurring basis, and authorizes the Superintendent to develop procedures and special requirements and technology that the brokerage houses should maintain for the exercise of this activity. Some exceptions from the compulsory licensing are granted to government transactions.

Agreement 2 of 2004 has the requirements for the brokerage house and now the forex license. Applicants must have a paid-in capital of US$150,000, as well as:
1. Be exclusively dedicated to activities related to the broker-dealer house business.
2. Articles of Incorporation which have a corporate purpose adequate to the activities related to the broker-dealer house business and social capital of at least US$150,000 in registered shares.
3. A Board of Directors or its equivalent composed by at least three individuals (no corporate directors), all of them individuals of "proven business and professional integrity. At least one third of the members of the Board of Directors shall also possess knowledge and experience in subjects related to the stock markets or the financial sector in general.
It shall be understood that individuals with a record of respect for the commercial laws and other laws regulating the economic and business activities, as well as good business and financial practices, possess commercial and professional honorability. In any case, it shall be understood that individuals lack such honorability, when the individual is under one of the causes of incompetence to hold offices, pursuant this Agreement. Only individuals who have performed duties as principal executives or other similar responsibilities in other public and private entities for a period of at least 2 years, are deemed to have appropriate knowledge and experience.
4. Have the number of principal executives that the broker-dealer house business volume requires, who must have the corresponding licenses issued by the Commission. Every broker-dealer house must at least appoint one person as Principal executive.

The 2001 Supreme Court Schedule sets attorney fees for this type of license application of at least US$5,000. Registration fees for a brokerage house are of US$5,000. On a yearly basis a supervision fee must be paid to the Superintendent equivalent to 0.0025% of yearly trades (min $5,000.00 max. $100,000.00).

See http://mypanamalawyer.blogspot.com/2008/12/making-your-panama-investment-safer.html

Hilton Hotels announces return to Panama

Hilton Hotels Corporation announces return to Panama with four properties
May 18, 09 1:54 am
Hilton Hotels Corporation announces its return to Panama with the signing of four multi-year agreements in Panama City, Panama: two management agreements for a brand-new Hilton and new build Embassy Suites by Hilton hotel, one franchise agreement for a Doubletree by HiltonTM conversion and one franchise agreement for a newly built Hilton Garden Inn. Each hotel will represent the first in the country for each brand.
"We are truly excited about these developments in Panama City and being back in such a great city," commented Daniel Hughes, senior vice president of operations, Caribbean, Mexico, and Latin America, for Hilton Hotels Corporation. "These newest additions reinforce our commitment to add a number of properties to our Central America portfolio and to have a presence in one of the region's fastest growing destinations. We're looking forward to being part of a thriving city that continues to offer some of the best tourist attractions in the region."
The 351-room Hilton Panama will be a first class property developed by Star Bay Group, Inc., and Hilton Hotels Corporation will operate the hotel under the terms of a multi-year management agreement. Led by F&F Properties and its president Saul Faskha, construction of the Hilton Panama has begun and completion is scheduled for 2011. Located in Panama City's financial district, the hotel marks the Hilton brand's return to the capital. Just 13 miles from Tocumen International Airport and five miles from the Panama Canal, the Hilton Panama will boast an array of recreational facilities including an 8,200 square-foot fitness center, a 10,750 square-foot world-class spa, outdoor terrace swimming pool, and a Las Vegas-style casino. The property will have more than 22,000 square feet of meeting space, including a 7,500 square-foot ballroom. Dining options will include an upscale specialty restaurant, a three-meal restaurant with outdoor terrace and ocean views, and lobby bar. The 27-floor hotel will form part of a 68-floor mixed-use complex with 650,000 square feet of office space.
The Embassy Suites by Hilton Panama City will be developed by Sabadell Investment Inc. and Hilton Hotels Corporation will operate the hotel under the terms of a multi-year management agreement. Construction of the 306-room upscale, all-suite full service Embassy Suites by Hilton Panama City is scheduled to begin in 2009 with an estimated completion date of October 2011. Located in the prime financial district of Panama City, the hotel is approximately 12 miles from Tocumen International Airport and will feature a number of recreational facilities including fitness center, spa, outdoor swimming pool, gift shops, and casino. The property will offer a business center and more than 15,500 square feet of meeting space, including a 12,750 square-foot ballroom. Dining options will include a signature restaurant, a lounge bar, complimentary breakfast and evening reception area, and Flying Spoons outlet. The 21-floor hotel will be part of 71-story building with premier office space.
The Doubletree by Hilton Panama City will be developed and operated by Blue Star Hospitality, S.A., under a franchise agreement with Hilton Hotels Corporation. The 213-room property is undergoing an extensive renovation to re-brand as a Doubletree by Hilton hotel in Spring 2010. The eight-story hotel is strategically located at one of the city's most important intersections in the business district - Via España and Avenida Federico Boyd - across from the architecturally striking Iglesia del Carmen. The Doubletree by Hilton Panama City will offer a rooftop fitness center, pool and spa, retail outlets, 2,000 square feet of meetings space, and a full-service restaurant.
Developed by Metropolitan Hotels SA, the Hilton Garden Inn Panama will feature 163 spacious guestrooms and seven suites offering the Garden Sleep System® bed; ergonomic Mirra® chair by Herman Miller; complimentary wired and Wi-Fi high speed Internet access; high definition flat screen television; MP3 capable clock radio. The hotel also features a complimentary 24-hour business center; a comfortable lounge area to enjoy a cup of coffee in the morning or unwind at the end of the day with a refreshing beverage; and a total of 160 square meters of flexible meeting space -- ideal for business meetings, social events and wedding receptions. For dining options, the hotel will feature the Great American Grill® restaurant offering freshly prepared breakfast and dinner; evening room service and the 24-hour Pavilion Pantry® convenience mart with a selection of beverages, snacks, and sundries. Recreational facilities at the hotel will include an outdoor rooftop heated whirlpool; complimentary fitness center featuring Precor® cardio and strength equipment; and Stay Fit Kits® that can be checked out from the hotel front desk and enable guests to do yoga, Pilates and core workouts in the privacy of their guestroom or in the workout facility.
All properties will participate in Hilton HHonors®, the only guest rewards program that allows members to earn Points & Miles® for the same stay and redeem points for free nights with No Blackout Dates.
Ted Middleton, senior vice president, development, the Americas, for Hilton Hotels Corporation commented, "Hilton's expansion in Panama City is part of our overall plan to grow our portfolio of properties in the Caribbean and Latin America. Owners and developers understand the value of our brands and we are very optimistic about our growth opportunities in the region."
Panama City is the political and cultural center of Panama, and the financial center of Central America. Located at the Pacific entrance of the Panama Canal, the city is well known as the home of some of the tallest skyscrapers in Latin America. Tourists can explore a variety of attractions including the famous Bridge of the Americas spanning over the Panama Canal, tropical forests, and the city's old quarter featuring a waterfront promenade, theaters, museums, restaurants, and the presidential palace.
Full text in http://ehotelier.com/hospitality-news/item.php?id=A16245_0_11_0_M

London, the citadel of the offshore world

Why bother with black lists and immobilization of bearer bonds in BVI and other countries? You can get bearer shares from United Kingdom Limited Liability entities and be welcome by tax authorities and banks in most countries which have black lists copied verbatim from the France-based OECD.

The final irony is that Panama and the United Kingdom will start negotiations for a double-taxation agreement http://www.prensa.com/uhora/economia/panama-negocia-mas-acuerdos-para-dejar-de-ser-considerado-un-paraiso-fiscal/40666

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LONDON, THE CITADEL OF THE OFFSHORE WORLD

The modern offshore company, which began its all-conquering journey in the islands which once formed the British Empire in the 1970s and 80s, can justifiably be described as an English invention. At that time, it was also possible to incorporate so-called "non-resident" companies in England, which, if managed from outside of the United Kingdom, were not subject to taxation in England, although even then London could never have been described as a classic offshore zone.

This possibility ended in the early 90s, but, England, and in particular, London remained an extremely popular place for the incorporation of companies, for both English and foreign businesses alike. Numerous businessmen chose to incorporate in London; Companies House now boasts a register with over three million companies, ranging from small business to multinational companies. So what makes people want to incorporate in London?

The tax advantages related to English companies

The above shows quite clearly that English companies cannot be categorized as traditional tax-free companies, and in fact they are quite the opposite. How, therefore, can English companies be used advantageously in international business transactions? The following section shows just two of the possible uses.

Trading company for nominee purposes.


Blacklists have meant problems for a large number of offshore companies, particularly those providing services. One very efficient way of overcoming this problem is by using an English company, which concludes a special contract with the offshore company, which may be incorporated in a traditional offshore zone such as The Bahamas, BVI or Belize. According to the terms of the contract, the English company concludes contracts with foreign partners on behalf of the offshore company, prepares invoices for the total amount of the services provided, and receives full payment into its bank account, although the offshore company actually provides the services. Periodically (as defined in the contract between the English and offshore companies), the English company is entitled to an agency fee of between 5 & 10 % of the value of the contracts concluded. The English company must declare this income and pay tax accordingly, whereas, the remaining 90-95 %, is transferred to the account of the offshore company, as set down in the contract. An offshore company is subject to tax in England on income with an English source. Although the offshore company operates through an English resident company, the actual source of the income is not England, but the foreign partner. At the same time, it is an important condition that the offshore company should be managed from outside England, and that the directors, shareholders and bank account signatories of the offshore and English companies should not be the same people.

Dual resident companies

An English company must be classified as resident in England if it was incorporated in England and/or the majority of the directors are resident in England and manage the company from England. However, according to the agreements made by England for the avoidance of double taxation (DDTs) it is possible for a company to be resident in two or more places, if, for example, it is managed from a different company. Such companies are known as "dual resident companies". As long as the company is managed from a country which is protected by a DDT, then the company can apply to the English tax authorities to be taxed in that country rather than in England. And if that country has more favorable rates of taxation, then it is worth operating the company as a dual resident company. Currently, the most attractive jurisdiction with which England has signed a DDT is Cyprus. According to Cypriot law, if a company, or a branch of that company, operates outside Cyprus, then that branch is subject to the 4.25% profit tax of the worldwide income. The English company becomes resident in Cyprus by establishing an offshore branch there. The majority of the directors of the English company must be Cypriots and all the decisions relating to the running of the company must also be managed from outside England, preferably from Cyprus. Similarly, the company must not receive income from English sources. This is all the more problematic as activities carried out in England are subject to VAT. Dual resident companies must file annual returns in both Cyprus and England, but can also take advantage of the DDTs signed by Cyprus.

This information is not intended and should not be construed as concrete tax advice. Should you wish to make use of one or any of the structures mentioned, we recommend that you consult your personal tax adviser, as well as experts on the legal systems of all the countries involved.

Source: LAVECO brochure. Extract posted with thanks to N. Remé (Humboldt-Universität zu Berlin, EJP).
Photo: UK Inland Revenue offices

Former strongman returns to Panama "largely irrelevant"

PANAMA CITY, Panama - More than two decades after the U.S. forced him from power, Manuel Noriega returned to Panama on Sunday as a prisoner and, to many of those he once ruled with impunity, an irrelevant man.

Some Panamanians feel hatred for the former strongman and rejected American ally; a few others nostalgia. But as he returned to his native country for the first time since his ouster, it seemed like few people had any strong feelings at all.

Full text in http://www.newsday.com/news/nation/noriega-returns-to-panama-a-largely-irrelevant-man-1.3381838

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Noriega was convicted in absentia in three homicide cases involving 11 murders, including the 1985 beheading of Hugo Spadafora, a physician who threatened to reveal Noriega's drug ties, and the 1989 execution-style slaying of nine officers who staged a failed coup.

Sentenced to 20 years in each case, he will serve the terms concurrently. Official photographs of the facility prepared for him at the El Renacer prison showed a spartan, beige-painted cell with a bathroom, table and small bed.

Noriega will also face charges over the 1970 murder of Heliodoro Portugal, an opponent of Panama's military leaders.

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Panamanian media showed images confirming the imprisonment of the former strongman, while pointing out at the cameras.