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The Exchange of Tax Information Portal is an initiative of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The Global Forum conducts peer reviews of its member jurisdictions' ability to co-operate with other tax administrations in accordance with the internationally agreed standard. The standard provides for exchange of information on request where it is foreseeably relevant to the administration and enforcement of the domestic tax laws of the requesting jurisdiction. Effective exchange of information requires that jurisdictions ensure information is available, that it can be obtained by the tax authorities and that there are mechanisms in place allowing for the exchange of that information. The Global Forum's peer review process examines both the legal and regulatory aspects of exchange (Phase 1 reviews) and the exchange of information in practice (Phase 2). The EOI Portal will track the development of these peer reviews, including changes that jurisdictions make in response to the Global Forum's recommendations.

Peer Review: Phase 1 Peer Review - Panama

This report for Panama has been published on 17 Nov 2010. You can buy this report, or browse it online below.

Skip directly to the Executive Summary. You may also want to view the tables of determinations and ratings.


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Determinations and Recommendations

Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities. (ToR A.1)
Determination Factors Recommendations
The element is not in place.   Information on the owners of bearer shares is not available.  Panama should take all necessary steps to ensure that its competent authorities can identify the owners of bearer shares. 
There is no requirement for nominees to have, or make available, information about the person on whose behalf shares are registered.  Where shares or securities are registered in the name of a person the competent authorities should have power to require that person to state whether he/she holds the shares as a nominee and if so to identify the person on whose behalf the shares are registered. 
Although “know your client” rules apply to resident agents for companies and foundations, in accordance with Executive Decree No. 468 of 1994, it is not clear what information these rules require to be kept.  The “know your client” rules for resident agents should be amended to ensure that ownership information held by resident agents identifies the owners of companies and the founders, members of the foundation council and beneficiaries of foundations. 
Unless a Sociedad AnĂłnima is subject to audit by the tax authorities there appears to be no mechanism to ensure that the stock register is kept up to date, or at all.  Penalties for failing to maintain stock registers up to date should be prescribed for all Sociedad AnĂłnima . 
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements. (ToR A.2)
Determination Factors Recommendations
The element is not in place.   Only companies and partnerships operating in Panama are required to maintain accounting records.  The record keeping requirements in the Commercial Code should apply to all companies, limited partnerships and partnerships limited by shares registered in Panama irrespective of whether they carry on business in Panama. 
The Trusts Law and Foundations Law are silent on the type of records which are required to be kept and their retention period.  The record keeping requirements for trusts and foundations should be clarified to ensure that reliable accounting records are kept and retained for a period of five years. 
Banking information should be available for all account-holders. (ToR A.3)
Determination Factors Recommendations
The element is in place.      
Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information). (ToR B.1)
Determination Factors Recommendations
The element is not in place.   The power of Panama’s tax authorities to obtain information for exchange purposes is limited to circumstances in which the information is also required for their own tax purposes (domestic tax interest).  The statutory powers given to the Directorate General of Revenue information amended include power to obtain information for the purposes of responding to a request for information under an international agreement that provides for the exchange of information in tax matters, even if Panama does not need the information for its own tax purposes. 
It is unclear that the Directorate General of Revenue’s power to obtain information overrides competing requirements prohibiting disclosure of information, particularly with respect to lawyers acting in capacity other than that of legal representative.  It should be made clear in legislation that the Directorate General of Revenue’s power to obtain information to respond to a request for information under an international agreement overrides any obligation to secrecy imposed by any other legislation or other restriction on the disclosure of information subject to recognised exceptions such as attorney-client privilege. 
The penalties available to ensure access to information for exchange purposes are not adapted to ensure access to information likely to be requested under exchange of information arrangements.  Panama should review the penalties provided for in its Fiscal Code to ensure these meet the requirement of ensuring access to information necessary to comply with its treaty obligations. 
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information. (ToR B.2)
Determination Factors Recommendations
The element is in place.      
Exchange of information mechanisms should provide for effective exchange of information. (ToR C.1)
Determination Factors Recommendations
The element is not in place.   Panama has no agreements in force which provide for effective exchange of information.  Panama should pursue policies to ensure it signs and brings into force agreements currently under negotiation as soon as possible. 
The jurisdictions' network of information exchange mechanisms should cover all relevant partners. (ToR C.2)
Determination Factors Recommendations
The element is not in place.   Panama has been approached by a number jurisdictions to negotiate TIEAs but has not done so. Further, recent amendments to its domestic law to allow for exchange of information in the case of DTCs do not extend to TIEAs or other information exchange arrangements such as a multilateral agreement.  Panama should enter agreements for exchange of information (whether DTCs, TIEAs or multilateral instruments) with all relevant partners, meaning those partners who are interested in entering into an information exchange arrangement with it. 
The jurisdictions' mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received. (ToR C.3)
Determination Factors Recommendations
The element is in place.      
The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties. (ToR C.4)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   Professional secrecy protects information held by lawyers even when they are not acting as legal representatives.  Professional secrecy rules should be amended to ensure they do not prevent the disclosure of information for exchange purposes beyond the limits permitted in the international standard, particularly in cases where lawyers are acting as resident agents. 
The jurisdiction should provide information under its network of agreements in a timely manner. (ToR C.5)
Determination Factors Recommendations
The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review.