Panama signed on October 27, 2016 its adhesion to the Convention on Mutual Administrative Assistance in Tax Matters (MAC). This instrument provides for all forms of administrative cooperation between States in the assessment and collection of taxes, that includes: exchange of information on request, spontaneous exchange, tax examinations abroad, simultaneous tax examinations, assistance in tax collection and the service of documents. The Convention also provides for automatic exchanges of information, that will only require to be implemented an administrative agreement between the competent authorities of two or more interested Parties. The agreement would address issues such as the procedures to be adopted and the information that will be automatically exchanged.
Taxes covered by the Convention comprise a much wider range of taxes than bilateral double taxation agreements, including taxes on income, profits, capital gains and net wealth levied at the central government level; and also VAT / sales taxes, local taxes, compulsory social security contributions, estate, inheritance or gift taxes.
As to the approval process, the Convention has already been ratified by our National Assembly, and is expected to be sanctioned by the President of Panama in the next few days. Once this process is completed, the Convention shall enter into force on the first day of the month following the expiration of a period of three months after the date of deposit of the instrument of ratification of the treaty. Updates on the list of signatories, could be reviewed on the link that follows: http://www.oecd.org/ctp/exchange-of-tax-information/Status_of_convention.pdf
In addition to this effort to comply with international standards of tax transparency, Panama has also introduced a series of changes to its legal and regulatory framework to enhance its ability to effectively respond to requests to provide information for tax exchange purposes. Type of legislation that has been enacted to fulfill this purpose comprises the following:
- Revised KYC regulations for attorneys that act as resident agents of Panamanian companies.
- The obligation to keep updated share registers and records of shareholders' meeting, subject to non-compliance penalties if not maintain accordingly.
- The implementation of a custodial regimen for bearer shares, under which authorized custodians are required to keep identity information on the owners of bearer shares issued by Panamanian corporations.
- Revised AML regulations, under which attorneys acting as resident agents are require to hold detailed records of their clients, including those of final beneficiaries.
- Accounting requirements for all companies registered in Panama, irrespective of whether they conduct business within the country.
- A clear set of rules to comply with the exchange of financial information in compliance with the commitments agreed for FATCA and in the context of CRS exchange requirements. This regulation also enhances the ability of Panama Tax Authorities to access information from private sources and apply penalties for non-compliance.
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