Panama: Offshore Legal and Tax Regimes
Offshore Legal Introduction
The term 'offshore' is not used in Panama legislation; since taxation is on a 'territorial' basis, ie only Panama-sourced income is taxed, an entity which has its activities or assets outside Panama will automatically escape taxation. There are more than 120,000 corporate entities in Panama, of which the majority are 'offshore'.
In June 2000, Panama was identified by the FATF as a non-cooperative tax haven in the global fight against money-laundering. The result of this was that Panama was one of fifteen tax jurisdictions placed on an FATF blacklist. Each offending tax haven had a year in which to correct its regulations and legislation
The FATF released an annual report in June 2001, in which the organisation revised its list of countries and territories deemed non-cooperative. Only four were removed from the list, including Panama (the other three being the Cayman Islands, Liechtenstein and the Bahamas). Panama was praised by the FATF for its substantial efforts to conform to forty recommendations set out by the FATF in a code of good practice governing money laundering.
In April 2009, following that month's landmark G20 summit in London, Panama was placed on the OECD's 'grey list' of territories which have committed to, but not yet substantially implemented, the internationally agreed standard in tax transparency and information exchange. Later that month, the government of Panama announced the conclusion of the first round of negotiations towards a double tax agreement with the Netherlands, including tax information exchange provisions in line with the OECD standard. Panama’s deputy Economy Minister, Frank De Lima explained at the time that these negotiations "marks progress towards the removal of Panama from the Organization for Economic Cooperation and Development’s ‘grey list.’"
The OECD announced in July 2011 that Panama had moved to the list of jurisdictions considered to have substantially implemented the standard for exchange of information when it signed a tax information exchange agreement with France. This brought the total number of agreements to 12 - the international required minimum.
A DTA with Spain came into force in July 2011 and in September, a tax information exchange agreement with the country was signed by Panama. Israel and Panama initialled a double tax treaty in August 2011.
DTAs with France, Portugal and the Republic of Korea have come into force during 2012. Agreeements with the Czech Republic, Ireland, Israel, Italy and the UAE have been signed but are not yet in force.