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Panama Says Adios – Secret Tax Haven No More

Article Summary:

Panama’s move to abolish anonymity for bearer share holders, combined with recent double taxation and tax information exchange agreements, have amounted to the country saying adios to its once coveted status as a tax haven.

Photo Credit: Tropical Daily

Original Article Text From BN America:

Secretive tax havens no more – Panama and Cayman opt out of secrecy

A new law in Panama that makes it easier to identify owners of bearer shares and the conclusion by the Cayman Islands government of negotiations with the United States on the sharing of tax information under the US Foreign Account Tax Compliance Act (FATCA) have sounded the death knell for secrecy in the region’s tax havens.

Panama’s move to abolish anonymity for bearer share holders combined with recent double taxation and tax information exchange agreements have put the country’s secretive tax haven status at risk following concerted pressure from the OECD and G20.

At the start of August, Panama’s president signed law no.47 aiming to improve transparency in the country’s financial system. The law, which will come into force on August 6, 2015, sets out to establish a custodial regime applicable to bearer shares which requires owners to appoint an authorized custodian in order to maintain a record of the final beneficiary of the instruments.

The act was passed so as to allow a competent authority (such as a foreign government) to receive information about the owners of bearer shares. A three-year transition period will apply from August 6, 2015 in respect of bearer shares issued prior to the law’s entry into force.

Since being put on OECD’s so-called grey list in April 2009, Panama has worked hard to reach agreements with foreign tax authorities. By July 2011, following the firming of 12 Double Tax Treaties (DTT) and Treaty of Exchange Information Agreements (TIEA) that included the US and France, the OECD removed the country from its grey list. The country has continued its effort at increasing transparency and most recently agreed a DTT with the UK.

In 2010 the then US treasury secretary Tim Geithner declared that the agreement was “ushering in a new era of openness and transparency for tax information between the United States and Panama.” This latest act by Panama’s government improves on this level of openness.

While the agreement does not remove anonymity for holders of bearer shares, according to Isabel Chiri, manager of international tax services in Panama for consultancy firm Ernst & Young, “the TIEA and DTT signed by Panama only includes the exchange of information under requirement, and not the automatic exchange.”

The conclusion of a Model 1 intergovernmental agreement (IGA) and a new TIEA between the US and the Cayman Islands announced in August 13 by the Cayman Islands government pave the way for automatic exchange of information (AEOI) under FATCA.

The agreement means that the islands join Mexico as the only nations in Latin America and the Caribbean to have concluded a deal with US tax authorities on FATCA.

The islands’ finance industry welcomed the news of increased transparency provided by the agreement which has yet to be signed. “This has clarified the way forward, in order for industry to progress with the implementation,” said Cayman Finance CEO Gonzalo Jalles.”We are particularly thankful to government for including Cayman Finance and the broader industry in the consultation process, and commend them for ensuring that we remain a well regulated and transparent IFC [international financial center]“.

The government of the Cayman Islands also revealed that once the signing takes place it will have further discussions with the UK’s treasury department in order to finalize the terms of the UK Model 1 IGA FATCA agreement.

Link to Original Article:

From BN America

  • Roy Fiore

    If i become a Panamanin citizen am I liable to capital gains tax. I trade stocks and receive dividends. The usa irs is killing me.

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