Panama

*Updated July 2020*

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• Legal system
• Inheritance and succession
• Estate planning
• Taxation
• Residence and domicile
• Other relevant information

Legal system

Panama’s legal system is based on civil law. Several specific pieces of legislation such as the Negotiable Instruments Law of 1917, the Corporation Law of 1927 and the rules on maritime proceedings, have been adapted to Panama’s civil-law legal system from laws in effect in common-law jurisdictions.

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Inheritance and succession

Succession

Panama has adopted the principle of complete freedom of testamentary disposition on death. There are no forced-heirship laws in Panama, with the exception that sufficient support must be provided for the surviving spouse, offspring and parents of the deceased to secure their livelihood while in need. These include: their minor sons and daughters who, by law, are entitled to them, or who are attending college until they are 25 years old, and disabled children. If the testator fails to comply with this obligation, the heirs will not receive the estate, until and after ensuring sufficient funds to ensure alimony to those entitled by law, whose value will be subject to experts’ estimation.

Family law and defined inheritance rules

Yes. Testamentary freedom, with the limitations explained in the previous answer, is recognised by the Civil Code. Heirs instituted without designation will inherit in equal shares. Testamentary substitution is permitted. Legacies are recognised. The testator may appoint an executor.

Probate process

In the case of a person who dies intestate, the surviving spouse shares proportionately with all other heirs at law. If there is no surviving spouse, heirs at law receive the entire estate.

Assets located in Panama belonging to a deceased national or foreign person domiciled abroad are subject to Panamanian law. A foreign judgment adjudicating such assets to a particular person would be enforceable in Panama, unless such judgment conflicts with Panamanian law.

Both intestate and testate successions have similar rules with respect to procedure. Any person interested in commencing probate proceedings (for example, creditor, heir, legatee, executor, guardian) can file a request before the competent court. Probate proceedings might last from six to nine months.

Mental capacity

The key legislation for mental capacity is found in the Civil Code. A person of unsound mind cannot execute a valid will. A will is valid if it was executed before the time the testator’s mental capacity incompetence has been declared. The mental capacity of the testator will only be assessed with regard to the time of the execution of the will. Lack of capacity requires a declaration by a local court.

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Estate planning

Use of trusts in estate planning

In 1984, new provisions on trusts were enacted by means of Law No. 1 of 1984 (the 1984 Law) with the purpose of modernising the trust in Panama. Trusts may be settled in respect of present or future property. Additional property may be added to the settlement either by the settlor or by third parties. The trust must be in writing and the intention for the trust to be governed by Panamanian law must be expressed in the document. The trust may be revocable if the trust instrument so provides. If it does not so provide, the trust is irrevocable. It is not necessary that the settlor, trustees or beneficiaries be nationals of or resident in Panama. The trust must have a resident agent in Panama who must be a lawyer or a firm of lawyers. If a trust produces taxable income in Panama, the tax is levied on the trust and not on the trustee.

The 1984 Law was amended, in May 2017, to include revised regulatory issues and tax clarifications, and to incorporate a risk-based approach to the trust business in Panama. Among the regulatory issues contained in the law is the requirement that any natural or legal person who wishes to carry out trust business be properly licensed and subject to supervision. Trusts established before the entry into force of Law No. 21 of May 2017 (on 12 May that year) continue to be governed by the rules in force at the time of their establishment, although they can benefit from the new provisions by means of a written declaration of the settlor and the trustee. The two laws noted above also confirm that the laws of Panama apply when determining the legal capacity of the parties to consent to, or to enter into, a trust. Moreover, a trust subject to the laws of Panama will not be considered void or invalid on the basis that the settlor’s country of domicile or residence does not recognise the legal concept or legal form of a trust.

Use of foundations in estate planning

Private interest foundations were introduced in 1995. A private foundation is generally used to preserve assets for the benefit of a family, often as an estate-planning vehicle. It enables the separation of assets from the estate of the founder and ensures their independence and autonomy. The private foundation avoids assets being held, directly or indirectly, in a person’s own name, as an asset-protection vehicle, although substantial control over those can still be exercised. A private foundation may be constituted to begin its existence as of its registration at the Public Registry, or after the death of its founder. Property may be held directly in the name of the foundation. The foundation can acquire goods, have assets, enter into contracts and apply for a loan. A foundation may not conduct business activities. Law No. 25 of June 1995 (the 1995 Law) specifically excludes the operation of foreign forced-heirship rules.

Types of entities

The Panamanian legal system recognises corporations, limited liability companies (LLCs), general partnerships and limited partnerships by shares. 

• Corporations: corporations are the most popular vehicles for conducting business in Panama. The organisation and management of corporations is governed by Law No. 32 of 1927. The articles of incorporation are recorded at the Public Registry. Shares may be issued in registered or bearer form. The names of the shareholders are not filed in any public office and are not a matter of public record. A minimum of three directors is required. The names and addresses of the directors and officers are a matter of public record.
• Panama limited partnership LLCs: the organisation and management of LLCs is governed by Law No. 4 of 2009. At least two members are needed. The names of the partners must be registered with the details of the amount of capital committed and paid by each of them. The liability of each partner is limited to the amount subscribed to but unpaid. The partners can appoint an independent administrator for the partnership whose name is also registered.
• Panama civil partnership: the Commercial Code governs the civil partnership, which has legal personality, although the liability of the partners is unlimited. Civil partnerships are used for conducting civil operations by lawyers, accountants, physicians or architects.
• Other legal entities: commandite companies and participatory accounts may be formed in Panama./li>

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Taxation

Income tax system

Panama’s taxation system is mainly territorial. Only income earned from Panama sources generated within Panama or with respect to assets located in Panama is taxed.

Personal income tax rates

Income tax for individuals
Annual taxable income (USD)		Income tax	Maximum tax per bracket
From	To
0	11,000	0%
11,001	50,000	15%	5,850
50,001 and up		25%	5,850 plus 25% of the excess of 50,000

Payments to non-resident individuals hired by Panamanian residents for periods of fewer than 183 days (continued or rolled over in the same fiscal period) are withheld, at source, 15 per cent of their gross income as income tax and 2.75 per cent as educational tax. If the individual stays for more than 183 days (continued or rolled over in the same fiscal period), they will be considered as a Panamanian fiscal resident, and thus subject to pay taxes by the application of statutory rates contemplated in art.700 of the Tax Code (personal income tax rates listed above). Professional service fees paid to non-resident individuals are subject to withholding taxes at the personal income tax rates applied to local residents.

Corporate income tax rates

The general corporate income tax rate is 25 per cent.

• Companies whose capital is owned 40 per cent or more by the government pay income tax at a 30 per cent rate.
• In the case of corporate taxpayers whose taxable income exceeds USD1.5 million, the income tax is the applicable income tax rate multiplied by the higher of the traditional net taxable income (gross income, minus foreign-source income, non-taxable income and exempted income, and deductible costs and expenses); and the alternative minimum net taxable income resulting from multiplying the company’s total taxable income by 4.67 per cent.
• Taxpayers will have the option to request the non-application of the alternative method, if this amount is higher, when it has net operating losses or the effective tax rate is higher than the nominal 25 per cent rate. The request shall be addressed to the Internal Revenue Office of Panama (the IRO) along with certain documentation stipulated in the law. Tax authorities will have six months to provide an answer in reference to this matter.
• All costs and expenses incurred wholly and exclusively for the production of Panamanian source income and/or in the conservation of its source will be allowed as a deduction for income tax purposes.
• Allocation between different sources of revenue is primarily done by tracing the cost and/or the expense directly to the sources of revenue they aimed to produce and/or maintain, however all cost and/or expenses, even if traced directly to the sources of revenue they aimed to produce or maintain, do not exceed the proportion of taxpayers’ local gross income to total gross income in order to be deducted. In other words, the deductible costs and expenses shall not exceed the proportion resulting from dividing the taxable income with regard to the income total including the exempt ones and of foreign source. The following formula is established:

MCGD = (IG/IT) x CGT
MCGD = Maximum of costs and deductible expenses
IG: Taxable income
IT: Total incomes (taxable, exempt and of foreign source)
CGT: Costs and expenses incurred by the taxpayer

Capital gains tax

Capital gains tax (CGT) depends on the type of asset to be transferred. In general, the transfer of chattels located in Panama is subject to a 10 per cent CGT rate levied on the gain realised on the sale. The transfer of property located outside of Panama, owned by a local taxpayer, is generally not subject to tax.

• In the case of transfers of shares or quotas of a juridical person that has obtained Panama-source income or of a juridical person that is deemed to own directly or indirectly securities invested in Panama, the capital gains derived is subject to income tax at a rate of 10 per cent. The law obliges the purchaser to withhold 5 per cent of the total consideration payable to the seller and to tender such amounts to the tax authorities within the following ten business days, as an advance on the seller’s CGT. This advanced tax may be considered, by the seller, as a definitive tax.
• The transfer of shares or quotas of companies whose shares have been previously registered with the Superintendent of the Securities Market may be exempt from CGT if certain conditions are met.
• Transfer of shares of Panamanian companies that do not perform transactions or operations within Panama, and therefore do not generate taxable income, are not subject to the CGT regime.
• Donation of shares or transfer of shares that do not generate a profit, could be exempt of the CGT regime as long as certain documents are filed before the IRO, in order to demonstrate that no gains have been obtained.
• Transfer of shares of Panamanian companies are free of charge, and which in the opinion of the Internal Revenue Office of Panama (IRO) can be determined that a capital gain was not generated, are not subject to the CGT regime.
• Transfer of shares of Panamanian companies that do not generate a gain, and in the opinion of the IRO a capital gain was not obtained, such transactions are not subject to the CGT regime.
• The CGT levied on the transfer of real property located in Panama depends on whether or not the person that transfers the property is deemed to be engaged in the business of selling and/or purchasing real property. For persons not deemed to be engaged in such business, the CGT is 10 per cent of the gain realised on the sale, an advanced tax of 3 per cent on the higher amount between the cadastral value and the agreed selling price must be paid to the tax administration. This advanced tax may be considered, by the seller, as a definitive tax.
• If a person is deemed to be professionally engaged in the real estate business, because during the preceding year of the tax year under the declaration, the taxpayer has sold more than ten real estates, they will be subject to different CGT rules.

Non-residents taxable on

Non-residents are taxable only on income from services or royalties that are related to the generation of Panama-source income and are taken as a deductible expense by the Panamanian payor. However, if the payment is made by a taxpayer carrying on activities outside Panama and the payments are in connection with transactions entered into, financed or executed outside the country, no withholding tax is levied.

Interest payments made to non-residents are subject to a withholding tax of 12.5 per cent (the law, Panama Tax Codes, provides for 50 per cent of the interest to be subject to the tax rates set by art.699 for corporations, and art.700 for individuals). In the case of interest the law does not include an exception of non-application of the withholding tax (WHT) if the interest is not consider as deductible expense, therefore even if the interest payment is not deducted it must be subject to the WHT at the effective rate of 12.5 per cent. Bank-to-bank interest payments are exempt of withholding tax. In case the proceeds of the loan had not been used for the generation of taxable income in Panama, it might be exempt also.

However, all income from a Panamanian source, paid or accredited, by public law entities, be these from the central government, autonomous, semi-autonomous entities, local governments, state companies or corporations in which the state owns 51 per cent or more of their actions, entities that are not taxpayers of income tax, meaning non-profit organisations and taxpayers who are in loss, to a natural or legal person not resident in the Republic of Panama, are subject to the tax and consequently subject to the withholding in question this standard.

Companies operating under special regulations, as well as those regulated by other special laws that exempt these entities from applying any WHT, will benefit from the income tax withholding exemption on payments abroad for dividends, interest, royalties, fees and similar payments. However, this is only to the extent that the person or entity receiving the payment is unable to recognise as a credit, fully or partially, in its country of residence, the taxes that it would have paid in Panama if the exemption did not exist. Therefore, if the beneficiary of the payment is able to obtain a tax credit in its country of residence for the income tax withholding, the exemption will not apply in Panama and the payor will be required to withhold the tax in Panama at the current effective rate of 12.5 per cent.

If the person or entity receiving the payment is entitled only to a partial tax credit, the exemption in Panama will cover the portion of the income tax that would not be recognised as a tax credit.

In order to apply the income tax withholding exemption in Panama, the local entity will be required to document and keep available at the request of the tax authority a formal opinion issued by an independent tax expert to support that a total or partial income tax withholding is not due. The income tax regulation has established the requirements that such an opinion must contain.

Withholding tax rate (non-treaty)

The WHT rate applicable to payments of services, interests, royalties is 12.5 per cent when it is paid to a juridical person. If payment abroad is made to an individual person, WHT will be calculated based on the personal income tax rates, listed above, on 50 per cent of the amount to be remitted abroad.

Withholding tax rate (treaty)

Generally 0 per cent, 5 per cent or 10 per cent. 

Taxation at death

There are no estate taxes in Panama.

Other taxes

There are no gift or wealth taxes in Panama.

Dividend tax

• Dividends derived from Panamanian or from foreign-source income are considered taxable income, but taxed at their source at a single rate of 10 per cent for the former and 5 per cent for the latter. Once the dividend tax is paid there is no subsequent dividend tax withholdings applicable to the same payment.
• If a corporation does not declare any dividends in any one particular year, it must pay a ‘retained earnings tax’ (Impuesto Complementario) or minimum dividend tax, amounting to 10 per cent of 40 per cent of its after-tax income in the case of local source income, and 10 per cent of 20 per cent of its after-tax income if related to foreign source and exempt income.
• Distributing dividends or participations derived from income not produced in Panama is not subject to any dividend tax if the company that pays such dividend does not perform any operations within Panama and all its transactions take effect abroad.
• Branches of foreign corporations must pay 10 per cent of 100 per cent of their after-tax income as ‘complementary tax’ in connection with the Panamanian source income.

Business net worth tax

The tax is 2 per cent of the net worth of the business, with a minimum tax of USD100 and up to a maximum tax of USD60,000. Companies performing business from a free-trade zone or other special regimes are subject to the net worth tax at the rate of 0.5 per cent, with a maximum tax of USD50,000.

Sales tax (ITBMS)

This tax is the Panamanian equivalent to value-added tax. The general tax rate is 7 per cent (10 per cent in the case of alcoholic beverages and hotel services; a further 15 per cent rate is levied for tobacco-related products) applicable on the invoice value of the sale, lease (except as described above) or transfer of any good or services with the exception of intangibles, that are transfer or provided within the Panama fiscal territory.

Tax treaties

Panama has successfully signed 17 double taxation treaties, all of which are in force. Those treaties have been signed with Barbados, Czech Republic, France, Israel, Italy, Luxembourg, Mexico, Netherlands, Portugal, Qatar, Republic of Ireland, Singapore, South Korea, Spain, United Arab Emirates, and the UK.

In addition, Panama also signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which was ratified by Panama's National Assembly in February 2017.

Tax information exchange agreements (TIEAs)

Panama has entered into nine TIEAs: Canada, Denmark, Faroe Islands, Finland, Greenland, Iceland, Norway, Sweden, and the US.

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Residence and domicile

Special rules on becoming resident

Income tax in Panama is exclusively territorial. Only income actually derived from sources within Panama, whether by a citizen of the country or a foreigner resident or domiciled in Panama, is subject to income tax. Income not derived from Panama sources is not taxable in Panama.

Notwithstanding the immigration status, foreign individuals who remain in Panama for more than 183 days in any one fiscal year must file an income tax return and pay taxes on all their Panama-source income.

Tax residence for individuals is obtained by staying more than 183 days continuous or cumulative during the same fiscal year. Notwithstanding there are some additional principles that may grant a tax resident status, such as:

• Having a permanent home in the territory of Panama.
• If the vital centre or main interests are in Panama (e.g. family living in Panama).
• If the economic centre of interest is in Panama (the source where the income is obtained).

Having the management and administration of corporations in Panama can grant tax resident status to certain corporations when other special requirements required by the Tax Authority are met. Panamanian tax authorities require that corporations provide proof of a physical presence within Panama, or that they are performing business operations in the country regardless of whether such operations generate domestic taxable income.

Special rules on ceasing residence

Only income actually derived from sources within Panama is subject to income tax in Panama. Notwithstanding the immigration status, foreign individuals who remain in Panama for more than 183 days in any one fiscal year must file an income tax return and pay taxes on all their Panama-source income.

Domicile concept for gifts and inheritance

There are no gift or inheritance taxes.

Taxation of holdings by non-residents on death and of gifts

• Gifts: there are no gift taxes in Panama.
• Death: there are no inheritance taxes in Panama.

Reporting/auditing requirements

Corporations that do not conduct business in Panama are not required to file any financial statements or annual returns with any public or private authority in Panama. Merchants are required to maintain in Panama the accounting books required by law while engaged in business in Panama and for a period of five years following the closing of business. Panama has not yet committed to requiring the keeping of accounts by companies, partnerships, trusts and other legal entities established in Panama or having a place of business in Panama unless they carry out local operations in Panama.

Law No. 52 of 2016 (the 2016 Law) establishes the obligation of keeping accounting records and underlying documentation for any corporation, LLC, private interest foundation, or any other legal entity for commercial purposes, constituted under the laws of the Republic of Panama, whose activities and operations take place or have effects outside the national territory. The law does not mandate for those accounting records to be prepared in Panama, on the understanding that the registered agent would have sufficient information to identify where the records are kept, and who is responsible for maintaining them. The accounting records and supporting documentation must be kept at the office of the resident agent in Panama, or at any other place determined by its board of directors or administrators. It is important to note that in the event that accounting records and supporting documentation are not maintained at the resident agent’s office in Panama, the resident agent must receive written confirmation of both the physical address where they are maintained, and the name and contact details of the person who keeps them in their custody.

Further, the resident agent must be informed, in writing, of any changes in the physical address or contact information, within a period of no more than 15 working days, counted from the date on which the change was approved. When the accounting records and supporting documentation are not maintained at the resident agent’s office in Panama, and following a formal request from a competent authority, the entity must provide such documents to its resident agent within 15 days. If said request is not fulfilled, the resident agent must file its resignation with the public registry. The 2016 Law also includes an obligation to keep a copy of the register of shareholders, members or quota holders at the office of the resident agent in Panama.

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Other relevant information

Asset protection laws

Panama Trust Law and the Panama Private Interest Foundation Law may be considered under asset protection laws.

Under Panama law, the existence of legal provisions regarding succession in the domicile of the founder or of the beneficiaries of a Panama private foundation may not be opposed to the foundation, nor shall they affect its validity or prevent the attainment of its objects.

Foreign currency restrictions

There are no exchange controls or foreign currency restriction of any kind in Panama.

Foreign ownership restrictions

In general, there are no foreign ownership restrictions except for retail business activities, which are reserved to Panamanian citizens. 

Certain activities of public interest restrict the percentage of foreign shareholders.

Accounting records

The Republic of Panama established under the 2016 Law the obligation of keeping accounting records and underlying documentation for any corporation, LLC, private interest foundation and any other legal entity for commercial purposes, constituted under the laws of the Republic of Panama whose activities and operations take place or have effects outside of the national territory. In the event that accounting records and supporting documentation are not maintained at the resident agent's office in Panama, the following must be provided in writing to the resident agent: 

• physical address where accounting records and supporting documentation are maintained; and
• name and contact details of the person who keeps them in their custody.

AML/due diligence and other requirements and regulatory procedures for advisors

Trustees and foundation councils

Under Law No. 23 of 2015, trustees must obtain complete information on beneficial owners, including identification, letters of reference and proof of domicile. Origin of assets to be settled is also mandatory information for the know-your-client (KYC) procedure. Information on clients must be kept confidential. Every trust transaction in cash for USD10,000 or more and any suspicious transactions must be reported to the Superintendency of Banks. Licenced trustees administering private foundations’ assets must also report such administrative activities to the Superintendecy of Banks.

Resident agents

Under the provisions of Law No. 2 of 2011, all resident agents for companies and foundations are required to identify their clients and persons with a substantial beneficial ownership interest in a Panamanian entity, and persons with more than a 25 per cent interest in the entity. Resident agents are not required to keep information on the beneficial owners when the resident agent acts for an institution or professional body (such as banks, trust companies, law firms, insurance companies and securities firms). Resident agents must secure confirmation from its institutional or professional client/body to the effect that it maintains a business relationship with the beneficial owner of the relevant entity; and it is prepared to make available the information regarding the beneficial owners of the relevant entity if so required by the resident agent. The resident agent has an obligation to make available to any local competent authority any information/documentation gathered in compliance with the new KYC rules. Lawyers providing the services of resident agent must also comply with Law No. 23 of 2015 and all relevant regulations and decrees applicable including, but not limited to Resolution No. JD-REG-001-18 of May 2, 2018 issued by the Superintendency of Supervision and Regulation of Non-Financial Subjects under Law No. 23 of 2015, lawyers, authorised public accountants and notaries are subject to the supervision of the Superintendency of Supervision and Regulation of Non-Financial Subjects when, in the exercise of their profession, they perform some acts or activities on behalf of a client or a client: purchase and sale of real estate, act or arrangement for a person, paid by the lawyer or law firm, to act as a director of a company or a similar position in relation to other legal entities, provide a registered address, commercial address or physical space, postal or administrative address for a company, partnership or any other legal entity that is not owned by them, act or arrange for a person paid by the lawyer or law firm to act as a shareholder figurehead for another person, act or arrange for a person paid by the lawyer or law firm, to act as a participant of an express trust or to perform the equivalent function for another form of legal structure, etc.

To open a bank account

A regulated institution must adequately identify its clients. In the case of legal persons banks must obtain evidence of its organisation as well as identification of its directors, officers and attorneys-in-fact so as to document and establish the real or beneficial owner of the financial assets or transactions in question. Complete information on beneficial owners, including identification, letters of reference and proof of domicile is required for individuals. Each regulated institution must adopt procedures and mechanisms of internal control and communication in order to prevent money laundering operations.

Registry of beneficial owners.

The National Assembly of the Republic of Panama enacted Law 129 of March 17, 2020 (the Law), which establishes a beneficial ownership secure registry in the Republic of Panama. The obligation on the part of the resident agents to identify the ultimate beneficiaries of all the entities for which they provided their services was already in place before the Law was adopted.

The Superintendence must keep the information in a restricted access database. Only Panamanian public investigation entities expressly authorised by the Law, namely the Financial Analysis Unit, the Public Ministry, the Ministry of Economy and Finance, the Superintendence of Banks and the Superintendence of the Securities Market, may request information about the final beneficiaries through the submission of a formal request related to specific cases within investigative processes related to money laundering, terrorism financing and weapons of mass destruction, or of assistance under treaties or international agreements signed by Panama. The Superintendence shall only exercise custody, conservation and access functions of the information it receives from the resident agents and it is not allowed to carry out investigative functions, nor will it allow third parties to have access to said information.

In addition, the Law prohibits the adoption of precautionary or discovery measures in cases of judicial proceedings between individuals, so that a third party may not have access or obtain such information because of legal disputes.

The system is designed so that the resident agents directly file the information in the Superintendence database. The registered agent is obliged by law, and is responsible for, updating the information, under penalty of sanction.  Also, the information shall only be made available to Panamanian public investigation entities expressly authorised by the Law, by the two officials appointed by the Superintendence to have access to the information and who must go through a rigorous investigation process before their appointment in order to give certainty to the reservation and confidentiality of the information.

The resident agents must file with the Superintendence the following minimum information on the ultimate beneficiaries, which they must have collected during their due diligence process and which they must keep in their files along with updates:

• full name;
• personal identification document number;
• date of birth;
• address;
• date as of having the condition of ultimate beneficiary of the entity; and
• main activity.

This information must be filed into the system within 30 business days following the constitution of the entity, its establishment in Panama or since the change in the previously registered information occurred. The resident agent is obliged to resign if the client does not provide the information required to complete its due diligence process and from which the resident agent shall obtain the information with which the Superintendence database must be fed.

The law defines the ultimate beneficiary of an entity as, in general terms, the person or individuals who, directly or indirectly, own or control 25 per cent or more of the shares or voting rights in the legal person, or whoever owns, control and/or exercises significant influence over the account relationship, contractual and/or business relationship or the natural person in whose name or benefit a transaction is made, which also includes natural persons who exercise final control over a legal person. Trusts are not required to complete this report, unless the trust assets are Panamanian companies that are covered under this law.

Other points of interest

There are 20 signed and available double taxation treaties with: Austria, Bahrain, Barbados, Belgium, the Czech Republic, France, Ireland, Israel, Italy, Korea, Luxembourg, Mexico, the Netherlands, Portugal, Qatar, Singapore, the United Arab Emirates, the UK and Vietnam. From this list, the following treaties are in place: Barbados, the Czech Republic France, Ireland, Israel, Italy, Luxembourg, Mexico, Portugal, Qatar, Singapore, South Korea, Spain, the United Arab Emirates, the UK and Vietnam.

Moreover, Panama has signed treaties for the exchange of information with Canada, Denmark, Faroes Islands, Finland, Germany, Greenland, Iceland, Norway, Sweden and the US.

Common Reporting Standard

Through the enactment of Law 51 of October 27, 2016, Panama officially undertook to implement the Common Reporting Standard (CRS). As a result of this law, Panamanian Reporting Financial Institutions (RFIs) are required to carry out the detailed due diligence procedures of the CRS, aimed at determining whether a person holding a financial account is a tax resident in any foreign jurisdiction. Through Resolution No. 201-4037 of June 22, 2018, the General Directorate of Revenue of the Ministry of Economy and Finance of Panama adopted the list of the 99 participating jurisdictions of the CRS for the automatic exchange of information (AEOI).

The CRS is the standard for the AEOI, developed by the OECD, and refers to the regular exchange of financial information of accounts between participating jurisdictions for tax purposes. The purpose of the CRS is to detect and dissuade taxpayers from incurring tax evasion through the use of offshore bank accounts. The CRS requires RFIs (entities in participating jurisdictions that are a financial institution and that are not a non-reportable financial institution) to implement specific due diligence procedures to document and identify reportable accounts. Reportable accounts are those financial accounts maintained by reportable persons or by a passive non-financial entity with one or more reportable persons who exercise control.

Key resources for further information

WEBSITES

• National Legislative Assembly (Asamblea Nacional de Panama): www.asamblea.gob.pa
• General directorate of income: https://dgi.mef.gob.pa
• Superintendency of Banks of Republic of Panama: www.superbancos.gob.pa
• International Tax Planning Association: www.itpa.org
• Superintendency of Stock Exchange: www.supervalores.gob.pa
• http://www.oecd.org/tax/exchange-of-tax-information/multilateral-competent-authority-agreement.

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STEP branches in Panama

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