International Double Taxation

The Republic of Panama has adopted a firm State policy, to stop being considered a tax haven, and therefore to be excluded from the gray lists of international organizations like the OECD, among others. It has therefore committed to negotiate, sign and ratify at least twelve (12) Agreements to avoid double taxation.

Currently, the Panamanian government has successfully negotiated several agreements to avoid double taxation and has signed with Mexico, Spain, Barbados, Portugal, Italy, Netherlands, Luxembourg, South Korea, Qatar and Singapore. Soon, with the execution of the agreement with France and the agreement between United States and Panama for tax cooperation and the exchange of information relating to taxes, Panama will honor his commitment with the OECD and will leave the so-called grey listing. From the agreements that are signed, only Mexico, Barbados and the United States have been implemented.

The negotiation of treaties to avoid double taxation also implies the obligation to Panama to harmonize its tax laws (Law 33 of 2010) incorporating aspects such as rules governing the principle of free competition in tax, related parties, transfer pricing, permanent establishment and tax residence.

This is why there was a need to adapt the Panamanian tax administration to these changes, therefore the Ministry of Economy and Finance created by Resolution a Tax Information Exchange Unit and another one for International Taxation.

These efforts are intended to fight against international tax fraud, as set out in clause 26 of the convention with the OECD, and to work towards the administration and interpretation of tax treaties and the control of transfer pricing.

The Law No. 33 of 2010 grants additional powers to the Department of Revenue of the Ministry of Economy and Finance, such as:   to request and obtain tax information, beyond the domestic tax interest, in order to meet its obligations with regard to the tax information exchange. In addition, the Department of Revenue is also authorized and empowered to seek and obtain other information necessary to comply with international agreements signed by the Republic of Panama regarding the tax information exchange.

In all cases, the information collected is confidential, secret and for the exclusive use of the Department of Revenue, and under no circumstances, they can reveal it, unless is for the compliance with international agreements signed by the Republic of Panama for tax information exchange purposes or circumstances expressly enshrined in the law.