Costa Rica: Updates On Trust Regulations In Panama

Last Updated: 2 June 2017
Article by Arias Law

Law 21 of May 10th, 2017 establishes dispositions for the regulation and supervision of trustees and the trust business and issues other provisions that modify articles of the Fiscal Code, Law 47 of 2013 which adopts a custodial regime for bearer shares and Law 23 of 2015 on prevention of money laundering and regulation of non-financial obliged parties. This Law confers exclusive competence to the Superintendence of Banks to: (i) regulate and supervise trustees holding licenses or those authorized by law to exercise the trust business and; (ii) to ensure the proper functioning of trust business.

What should you know about the abovementioned Law?

  • They are listed as activities authorized to be carried by the trustees:

    1. Set up and managing trusts in accordance with what is established by the aforementioned Law.
    2. Manage bank accounts and escrow accounts.
    3. Provide financial consulting services.
    4. Act as a representative with the right to vote at Shareholders or Partners meetings and act as representatives of bondholders and other securities.
    5. Participate or intermediate in the constitution and/or administration of corporate, trustees and foundational structures.
    6. Acting as custodians of shares, documents and securities.
    7. Exercise any other activity related to the trustee activity authorized by the superintendent in a general or individual way.
  • Trustees must keep separate accounting for each trust fund and submit audited financial statements of all trusts under their responsibility within three months of the end of the fiscal year.
  • Trustee bankruptcy is established as inadmissible.
  • Trustees are prohibited from performing operations, acts, and contracts with the assets of the trust for the benefit of the trustee, their officers, directors, shareholders, employees, external auditors or companies linked to the same economic group. Likewise, the trustees may not include clauses in which they are appointed directly or indirectly as the beneficiary.
  • Trusts will have effects against third parties from the moment in which the signatures of the trustor and the trustee or the proxy of these have been authenticated by a notary. This law adds that in cases where the trust is constituted by a public deed, it will produce effects against third parties from the date of said public deed. However, trusts on real estate will be considered constituted from the date of registration in the Public Registry.
  • The legal figure of "adherent trustor" is established, who is the natural or legal person who, without having subscribed the original trust agreement, subscribes by subscribing it and subsequently accepting the terms and conditions established in the original agreement. This condition is subject to the subscription of the adherence contract, make the contribution corresponding to the trust and have a direct interest in the fulfillment of the purposes of the trust.
  • Reestablishes the validity of Section 1 of Art. 709 of the Fiscal Code, which establishes that once the taxable income on which the Income Tax is to be paid, natural persons will have the right to deduct annually the interest that is paid by reason of Trusts on real estate that are constituted with the purpose of guaranteeing the repayment of a loan for the acquisition, construction, building or improvements of the principal housing of own use of the natural person taxpayer, provided that the taxpayer is the joint debtor of the guaranteed obligation and the annual amount to be deducted does not exceed fifteen thousand dollars. In these cases, the financial creditor will issue the respective certification.
  •  Likewise, it creates paragraph 15 of Art. 752 of the Fiscal which establishes that those false statements will be sanctioned, with a fine of ten times the amount certified, to both the beneficiary who makes use of said certification and the financial creditor that issue it.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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