I want to thank John H, one of my avid readers, for sharing this important information with us.
Below you will find a machine translation of the Tax agreement that is to be signed by Panama and the U.S. on the 30th of November. I have also included an article from La Prensa with comments by the Minister of Finance and other interested parties.
My understanding after reading these brief 12 articles is that it gives the U.S. complete access to any information it may request on any U.S. resident or citizen who it believes may hold assets in Panama.
Last week the minister of Finance and Economy stated that the U.S. would need to have a criminal investigation open on an individual before information could be requested, but I see nothing in this agreement that requires this. I have spoken to several senators this morning who were surprised that the agreement does not include that requirement and question whether it would be ratified by the assembly without it. We will have to see how the assembly handles it when they get back in session in January.
According to the agreement as it is currently written, the only limitation is that the U.S. cannot just ask for names of U.S. persons who may have assets in Panama. They have to have an individuals name and present it to the Panamanian authorities. I see nothing in the agreement preventing the U.S. from giving a list of names without limit. I see nothing in this agreement that would prevent the U.S. from requesting information on an individual that has done nothing more than traveled to or from Panama.
The requesting party only need contact the requested party with the name and reason for requesting the information (that it falls under tax investigation) and then the requested party is obligated to go to the banks, public registry, legal agents, and investment houses and see what that individual controls. This falls in line with recent changes of the laws in Panama where the beneficial owners of all society anonymous must be on record and the authorities must have access to this information.
If you are a U.S. resident or citizen and are thought to have any monies or assets held in Panama, the U.S. government now has the right and the means to know about it and only needs to make a request to receive it.
Unless the assembly stops this from going forward, it appears that after November 30 2010 and ratification by the assembly, hunting season will be open.
I am providing a copy of the agreement in its original Spanish at the bottom.
THE GOVERNMENT OF THE REPUBLIC OF PANAMA
THE GOVERNMENT OF THE UNITED STATES OF AMERICA
FISCAL COOPERATION AND EXCHANGE OF INFORMATION WITH RESPECT TO TAXES
Whereas the Government of the Republic of Panama and the Government of the United States of America ("the Parties") wish to establish the terms and conditions governing tax cooperation and exchange of information relating to taxes;
Accordingly, the Parties have agreed as follows:
SCOPE OF AGREEMENT
The competent authorities of the Parties shall provide assistance through exchange of information that might be relevant to the administration and enforcement of domestic legislation of the Parties concerning taxes covered by this Agreement, including information that may be relevant for identification, assessment, enforcement or collection of taxes with respect to persons subject to them, or for investigation or prosecution of criminal tax matters.
The information is provided in accordance with this Agreement by the competent authority of the requested Party, regardless of whether the person to whom the information relates is a resident or if the information is held by a resident of a Party. However, the requested Party is not obliged to provide information that is not in its custody or possession or control of persons within its territorial jurisdiction. For purposes of the preceding sentence, "authorities" includes all government agencies, political subdivisions and local authorities.
1. This Agreement shall apply to the following taxes imposed by the Parties:
(A) in the case of the United States, all federal taxes, and
(B) in the case of Panama, all national taxes.
2. This Agreement shall apply equally to all identical taxes established after the date of signature of this Agreement to be added or to replace existing taxes. This Agreement shall also apply to substantially similar taxes that are imposed after the date of signature, to add or replace existing taxes if the competent authorities of the Parties so agree. The competent authority of each Party shall notify the other of any substantial change in taxation and in the information gathering measures covered by this Agreement.
3. This Agreement shall not apply to taxes imposed by states, municipalities or other political subdivisions, or possessions of the Parties.
1. In this Agreement the term:
(A) "competent authority" means, for the United States, the Secretary of the Treasury or his representative, and Panama, the Ministry of Economy and Finance or his representative;
(B) "criminal tax matters" means tax matters involving intentional conduct which is liable to prosecution under the criminal laws of the Requesting Party;
(C) "criminal laws" means all criminal laws designated as such by national law, irrespective of whether contained in the tax law, penal code or other laws;
(D) "information" means any act, statement, document or record in whatever form;
(E) "information gathering measures" means judicial, regulatory, criminal or administrative action to allow the requested Party to obtain and provide the information requested;
(F) "national" of a Party means:
i) any natural person possessing the nationality or citizenship of that Party;
ii) any legal person, partnership or association to obtain that status in accordance with the laws of that Party.
(G) "person" means a natural person, corporation or any other organization or group of persons;
(H) "requested Party" means a Party to this Agreement who has been asked or has provided information in response to a request;
(I) "Party" means a Party to this Agreement submits an application or who has received the requested information, and
(J) "tax" means any tax covered by this agreement established a national or federal level by a party, not including customs duties.
2. For the purposes of determining the geographic area within which can be exercised jurisdiction to compel the delivery of information, the term "United States" means the United States of America, including Puerto Rico, the Virgin Islands, Guam, and any other possession or territory of the United States.
For the purposes of determining the geographic area within which can be exercised jurisdiction to compel the delivery of information, the term "Panama" means the territory of the Republic of Panama, according to its legal and international law.
3. Any term not defined in this Agreement, unless the context otherwise requires a different meaning, or the competent authorities agree on a meaning in accordance with the provisions of Article 9 of this Agreement, shall have the meaning attributed to it by law party seeking the application of this Agreement, any meaning assigned by the tax laws of that Party on the meaning given to that term in other laws of that Party.
EXCHANGE OF INFORMATION ON REQUEST
1. The authority of the Requested Party shall provide upon request of the competent authority of the requesting information for the purposes referred to in Article 1 of this Agreement. This information will be exchanged regardless of the requested Party may not need such information for its own tax purposes or the conduct being investigated would constitute a crime under the laws of the Requested Party if it had occurred on the territory of the requested Party . The competent authority of the requesting party may lodge a request for information under this Article when it is not able to obtain the requested information by other means, unless the use of such media lead to disproportionate difficulties.
2. If the information held by the competent authority of the requested Party is not sufficient in order to comply with the request for information, the competent authority of the requested Party shall take all relevant information gathering measures to provide the party requesting the information requested , although the requested Party may, at that time, not need such information for its own tax purposes. Privileges under the laws and practices of the requesting Party shall not apply to the requested Party to execute a request for information and such matters are reserved for resolution by the requesting Party.
3. If specifically requested by the competent authority of the Party, the competent authority of the requested Party shall, to the extent possible under its domestic law
(A) specify the date and place for taking testimony or the production of books, documents, records and other tangible property;
(B) take an oath to the individual to give testimony or produce books, documents, records and other tangible property;
(C) protect the books, documents and original and unpublished records, and other tangible property;
(D) obtain or submit true and correct copies of books, documents and records original works
(E) to determine the authenticity of the books, documents, records and other tangible goods produced and provide certified copies of original documents;
(F) examine the individual submitting the books, documents, records and other tangible property in relation to the purpose and manner in which the respective element is or was maintained;
(G) to allow the competent authority of the requesting party to provide written questions to which the person making the books, documents, records and other tangible property is liable in relation to the items produced;
(H) any other act that is not in violation of the laws or administrative practice fight with the requested Party;
(I) certify the procedures as requested by the competent authority of the requesting Party were followed or that the procedures requested could not be followed by an explanation of the deviation and why were not followed.
4. Each Party shall ensure that it has the power to give effect to the provisions of Article 1 of this Agreement and, subject to Article 2 of this Agreement, to obtain and provide, through its competent authority and upon request:
(A) information held by banks, other financial institutions and any person, including nominees and trustees, acting in a representative or fiduciary, and
(B) information relating to the ownership of companies, partnerships, trusts, foundations and others, including the limitations set forth in Article 2 of this Agreement, the ownership information of all persons in an ownership chain , in the case of trusts, information on settlors, trustees and beneficiaries and in the case of foundations, information on founders, members of the board of trustees and beneficiaries.
However, as provided in subsection 4 (b) above, this Agreement does not impose an obligation for parties to obtain or provide information about publicly traded companies or public funds or collective investment schemes, unless such information can be obtained without incurring disproportionate difficulties.
5. All requests for information made by one party must be made with the highest degree of specificity possible. In all cases, such requests must specify in writing the following:
(A) the identity of the taxpayer whose taxes or criminal liability which is under investigation;
(B) the time period over which information is sought;
(C) the nature of the information requested and the manner in which the requesting Party would prefer to receive it;
(D) the matter under the tax laws of the requesting Party for which the information is requested;
(E) the reasons that they subscribe to the belief that the requested information may be relevant to the tax administration requested and the execution by it in relation to the person identified in subsection (a) of this paragraph;
(F) reasons for believing that the information requested in the requested Party or is in possession or control of a person within the jurisdiction of the Requested Party;
(G) to the extent they can be determined, the name and address of any person believed to be in possession or control of the information requested;
(H) a statement whether the requesting party may obtain and provide the information requested if a similar request was made by the requested Party;
(I) a statement that the requesting party has exhausted all reasonable means at their disposal in their own territory to obtain the information, except in cases this leads to disproportionate difficulties.
POSSIBILITY TO REFUSE AN APPLICATION
1. The competent authority of the requested Party may refuse a request for assistance:
(A) when the application is not made in accordance with this Agreement;
(B) where the Party has not exhausted all reasonably available means in their own territory to obtain the information, except that resort to such means to rise to disproportionate difficulties, or
(C) if disclosure of such information is contrary to public policy of the requested Party.
2. This Agreement shall not impose upon any Party the obligation:
(A) provide the information under the laws of the requested Party is (i) subject to professional secrecy or (ii) contains any trade secret, industrial, commercial or professional secret or trade process, provided the information described in paragraph 4 (a) of Article 5 of this Agreement shall not be treated by that fact alone as a secret or trade process, or
(B) administrative measures at variance with its laws and administrative practices, provided that nothing in this paragraph (b) impair the obligations of a Party under paragraph 4 of Article 5 of this Agreement.
For purposes of paragraph 2 (a) (i), the term "information subject to professional secrecy" means information that would reveal confidential communications between a client and an attorney, when such communications are made to seeking or providing legal advice or intended to be used in existing or anticipated legal proceedings.
3. A request for information may not be refused on the grounds that the tax liability giving rise to the application is contested by the taxpayer.
4. The requested Party may refuse a request for information if the information is requested to administer or enforce a provision of tax law of the requesting Party, or any requirement connected to it, which discriminates against a national of the requested Party, compared with a national of the requesting Party under the same circumstances. Shall be deemed a tax provision or a requirement for it discriminates against nationals of a state required when, in similar circumstances, the standard becomes more onerous for them than it was for national of the requesting state. For the purposes of the preceding sentence, a national of the requesting Party that is subject to tax on their worldwide income is not in the same conditions as nationals of the requested Party, which is not subject to tax on their worldwide income. The provisions of this paragraph shall not be construed as preventing the exchange of information with respect to taxes imposed by the Parties on the profits of branches or on premium income of foreign insurers.
5. The Party shall not be obliged to obtain and provide information to the requesting Party would not be able to obtain under its own laws in similar circumstances in order to administer or enforce its own tax laws or in response to a request by the party required under this Agreement.
6. The statute of limitations in the law of the requesting Party concerning taxes described in paragraph 1 of Article 3 of this Agreement, governing the application of information exchange. The expiration of the limitation period established by the laws of the requested Party relating to such taxes shall not prevent the requested Party to obtain and provide the requested information.
Any information received by the requesting Party under this Agreement shall be treated as confidential and be disclosed only to persons or authorities (including courts and administrative bodies) in the jurisdiction of the requesting party responsible for the identification, collection, enforcement, prosecution or resolution of Appeals for the taxes to which this Agreement, or supervisory bodies to the extent necessary for individuals, authorities or bodies to fulfill their respective responsibilities. Such persons or authorities shall use this information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. The information received by the requested Party, along with the request for assistance under this Agreement shall also be treated as confidential by the requested Party. The information will not be disclosed to any other person, entity or authority, or used for purposes other than those set forth in Article 1, except in cases where the requested party's prior written consent provided that the information can also be used to the purposes permitted in accordance with the provisions of the existing Mutual Legal Assistance Treaty in Criminal Matters between the parties, signed on April 11, 1991, under the same may be amended. In any case the information provided under this Agreement is disclosed to another country without the express prior written consent of the competent authority of the Party providing the information.
Unless the competent authorities of the Parties agree otherwise, the recurrent costs of assistance shall be borne by the requested Party and the extra costs incurred in providing assistance shall be borne by the requesting Party.
MUTUAL AGREEMENT PROCEDURE
1. Where difficulties or doubts arise between the parties on the application or interpretation of this Agreement, the competent authorities will do their best to resolve the matter by way of mutual agreement.
2. The competent authorities may adopt and implement procedures to facilitate implementation of this Agreement, including additional forms of information exchange to promote more effective use of information.
PROCEDURES FOR MUTUAL ASSISTANCE
If the competent authorities of both Parties deem it appropriate, may agree to exchange expertise, develop new audit techniques, identify areas of noncompliance, and jointly study areas of noncompliance.
ENTRY INTO FORCE
The Parties shall notify to reciprocate when they have completed their internal procedures necessary for entry into force of this Agreement. This Agreement shall enter into force on the later of the dates of such notifications. Once the Agreement enters into force, it will have effect for applications to be made on or after the date of enactment, with respect to matters pertaining to fiscal years beginning on or after three years prior to signing this Agreement.
1. This Agreement is effective until terminated by either party.
2. Either party may terminate this Agreement by written notice to the other party. Such termination will be effective the first day of the month following the expiration of a period of three months after the date of receipt of notice of termination.
3. If either Party terminates this Agreement without prejudice to such termination, both Parties shall be bound to comply with the provisions of Article 7 of this Agreement with respect to any information obtained under this Agreement.
IN WITNESS WHEREOF the undersigned duly authorized for this act by the respective Parties, have signed this Agreement.
DONE at Washington, in duplicate, in English and Spanish languages, both texts being equally authentic, on November 30, 2010.
FOR THE GOVERNMENT OF THE REPUBLIC OF PANAMA FOR THE GOVERNMENT OF THE UNITED STATES OF AMERICA
JUAN CARLOS R. VARELA
Vice President and Minister of Foreign Affairs
From La prensa:
Rafael E. R. Berrocal
Edith Castillo Duarte
Contrary to the apprehensions of some sectors, the Economy and Finance Minister, Alberto Vallarino, came out yesterday in defense of the agreement to exchange tax information with the United States will be signed next Tuesday.
The fear is that the deal put at a disadvantage to the Panamanian banking center for the benefit of banks operating from Miami, in the opinion of counsel Edward Morgan.
The Banking Association of Panama (ABP) declined yesterday to issue a position to better analyze the issue. But Vallarino no negative effects, but benefits that will help Panama in a white list of the Organization of Economic Cooperation and Development (OECD) as well as to attract higher income in the tourism sector.
After the signing in Washington, Panama will be only two covenants requiring minimum of 12 OECD to exclude a country from its list of tax havens. For the U.S., the benefit is that Panama should ensure their tax information to individuals or businesses. This means information held by banks, other financial institutions and any person.
Panama also undertakes, in a supplementary note to the agreement, to approve a bill to identify the holders of bearer shares.
The MEF said yesterday that the identification of the bearer shares and is part of a bill that is included in the nine agreements signed by Panama, which was prepared by the International Bar Association.
"Here is a background of other, as these same lawyers have applauded the double taxation treaties negotiated. We should ask if they are protecting a specific business, "said Vallarino.
With the agreement, Panama also obtained a decrease in the tax on remittances of about $ 50 million per year, representing about 50% of what it collects annually national treasury for this purpose, according to MEF.
Another point that emphasizes the institution is that the United States agreed on an additional note to agree that their citizens and businesses can deduct from income costs incurred while attending conferences or conventions in Panama.
REPORT TO THE BANK
Vallarino met yesterday with the ABP to explain the path to signing the agreement.
The president of the ABP, Moses Cohen, declined to comment until this body considers the issue in depth.
Industry sources said that what happens is that "no consensus", because depending on the nature of each bank, some may be affected and not others.
The lawyer and former ambassador of Panama in Washington, Eloy Alfaro, not clear yet what wins Panama, as the country does not require information on earnings of its nationals abroad.
"Nor is it clear whether the conclusion of this agreement responds to U.S. pressure or is rather an informal gesture by the Panamanian government to promote better environment to the approval of Trade Promotion Agreement (TPA) or if for other reasons "he said.
To counsel Carlos Cordero, the benefits themselves are clear in the agreement.
"The competitiveness of Panama in the provision of legal and financial services will not be diminished by the conclusion of this agreement. Evidenced by the fact that there are many countries and jurisdictions that compete with Panama, which have concluded such agreements with the United States and its competitiveness is not affected, but on the contrary, has improved, "said Lamb.
He noted that the agreement eliminates the notion that Panama is a tax haven holding conventions draw by American companies and help improve the environment for approval by the U.S. Congress of the CPC.