Information exchange and double taxation treaties in Panama
Overview
Panama has become an attractive destination for international investment and business due to its favorable tax structure and its position as an international financial center.
However, in an increasingly regulated and connected world, financial transparency and international tax cooperation are becoming more important in preventing tax evasion and money laundering. To meet these international standards, Panama has established information exchange agreements and double taxation treaties with other countries.
Panama has three purposes through these treaties and agreements:
- To cooperate in the implementation of regulations against international tax evasion.
- To comply with international requirements with the Organization for Economic Cooperation and Development in order to be considered a sanctuary against international tax evasion.
- To avoid double taxation of citizens or foreign companies domiciled in Panama and their countries of origin.
Double Taxation Agreements
Double taxation refers to the fact that an individual or company may be subject to taxes in both countries for the same income, which can create an excessive tax burden. In Panama, double taxation treaties are important because they can affect the amount of taxes that an individual or company must pay in Panama and in other countries. If a double taxation treaty applies, the person or company will only pay taxes in one of the countries, or will pay a reduced amount of taxes in each countries.
The basic double taxation treaty includes a list of the classification of taxes recognized by each country and the Republic of Panama. The most important taxes included in each treaty are: dividends, capital gains, rental income, royalties, interest on paid loans, rents, and salaries, among others.
Panamaās network of income tax treaties expanded rapidly, as it aimed to comply with the review process by the Organization for Economic Cooperation and Development (OECD), in order to be removed from its blacklist of tax havens. As of April 2023, Panama had a total of eighteen (18) double taxation treaties in force with different countries.
Barbados | Czech Republic | French Republic |
Grand Duchy of Luxembourg | Kingdom of Spain | Kingdom of The Netherlands |
Portuguese Republic | Republic of Ireland | Republic of Italy |
Republic of South Korea | Republic of Singapore | Socialist Republic of Vietnam |
State of Israel | State of Qatar | United Arab Emirates (U.A.E.) |
United Kingdom of Great Britain and Northern Ireland | United Mexican States |
Barbados | Czech Republic | French Republic | Grand Duchy of Luxembourg |
Kingdom of Spain | Kingdom of The Netherlands | Portuguese Republic | Republic of Ireland |
Republic of Italy | Republic of South Korea | Republic of Singapore | Socialist Republic of Vietnam |
State of Israel | State of Qatar | United Arab Emirates (U.A.E.) | United Kingdom of Great Britain and Northern Ireland |
United Mexican States |
Information exchange
In Panama, the exchange of information is governed by Law 33 of 2010, which establishes the rules and procedures for the request and exchange of tax information between Panama and other jurisdictions. The law establishes that the exchange of information will be carried out in compliance with the international agreements in which Panama belongs, and that the exchanged information must be kept confidential and used solely for fiscal purposes.
This means that tax authorities from other countries can request financial information from taxpayers in Panama through official channels established by bilateral or multilateral agreements. For example, if a tax authority in another country suspects that a taxpayer has hidden income in Panama, they can file an official request to the tax authorities in Panama to obtain relevant financial information.
The exchange of information helps strengthen Panamaās image as a cooperative jurisdiction in the international fight against tax evasion and the misuse of financial systems, allowing the jurisdiction to maintain and improve its competitiveness within the international financial community while maintaining access to correspondent banking and enabling free flows of financial and monetary transactions.
Panama also complies with the Common Reporting Standard (CRS). The CRS is a global standard developed by the OECD for international tax transparency. The objective of the CRS is to ensure that taxpayers pay taxes where they generate their income, thereby preventing tax evasion and money laundering. Executive decree No 9 of June 28 of 2023 reports a list of jurisdictions with which Panama maintains unilateral or multilateral treaties for information exchange for fiscal purposes. Below is the list of jurisdictions that Panama reports to base on the number 30 of article number 3 of Law 51 of the 27th of October of 2016 and the Executive Decree 124 of May 12th of 2017.
Antigua & Barbuda | Argentine Republic | Bailiwick of Guernsey |
Bailiwick of Jersey | Barbados | Canada |
Commonwealth of Australia | Cook Islands | Czech Republicā |
Faroe Islands | Federal Republic of Brazil | Federal Republic of Germany |
Federal Republic of Nigeria | Federation of Saint Kitt and Nevis | Gibraltar |
Granada | Grand Duchy of Luxembourg | Greenland |
Hellenic Republic (Greece) | Hungary | Iceland |
Ireland | Isle of Man | Japan |
Kingdom of Belgium | Kingdom of Denmark | Kingdom of Norway |
Kingdom of Saudi Arabia | Kingdom of Spain | Kingdom of Sweden |
Kingdom of The Netherlands | Malaysia | Most Serene Republic of San Marino |
New Zealand | Oriental Republic of Uruguay | Popular Republic of China |
Principality of Andorra | Principality of Liechtenstein | Principality of Monaco |
Republic of Austria | Republic of Azerbaijan | Republic of Chile |
Republic of Colombia | Republic of Costa Rica | Republic of Croatia |
Republic of Cyprus | Republic of Ecuador | Republic of Estonia |
Republic of Finland | Republic of France | Republic of India |
Republic of Indonesia | Republic of Italy | Republic of Kazakhstan |
Republic of Latvia | Republic of Lithuania | Republic of Malta |
Republic of Mauricio | Republic of Peru | Republic of Poland |
Republic of Portugal | Republic of Seychelles | Republic of Singapore |
Republic of Slovenia | Republic of South Africa | Republic of South Korea |
Republic of Turkey | Russian Federation | Slovak Republic |
State of Israel | Swiss Confederation | United Kingdom of Great Britain and Northern Ireland |
United Mexican States |
Antigua & Barbuda | Argentine Republic | Bailiwick of Guernsey | Bailiwick of Jersey |
Barbados | Canada | Commonwealth of Australia | Cook Islands |
Czech Republic | Faroe Islands | Federal Republic of Brazil | Federal Republic of Germany |
Federal Republic of Nigeria | Federation of Saint Kitt and Nevis | Gibraltar | Granada |
Grand Duchy of Luxembourg | Greenland | Hellenic Republic (Greece) | Hungary |
Iceland | Ireland | Isle of Man | Japan |
Kingdom of Belgium | Kingdom of Denmark | Kingdom of Norway | Kingdom of Saudi Arabia |
Kingdom of Spain | Kingdom of Sweden | Kingdom of The Netherlands | Malaysia |
Most Serene Republic of San Marino | New Zealand | Oriental Republic of Uruguay | Popular Republic of China |
Principality of Andorra | Principality of Liechtenstein | Principality of Monaco | Republic of Austria |
Republic of Azerbaijan | Republic of Chile | Republic of Colombia | Republic of Costa Rica |
Republic of Croatia | Republic of Cyprus | Republic of Ecuador | Republic of Estonia |
Republic of Finland | Republic of France | Republic of India | Republic of Indonesia |
Republic of Italy | Republic of Kazakhstan | Republic of Latvia | Republic of Lithuania |
Republic of Malta | Republic of Mauricio | Republic of Peru | Republic of Poland |
Republic of Portugal | Republic of Seychelles | Republic of Singapore | Republic of Slovenia |
Republic of South Africa | Republic of South Korea | Republic of Turkey | Russian Federation |
Slovak Republic | State of Israel | Swiss Confederation | United Kingdom of Great Britain and Northern Ireland |
United Mexican States |
Contact us
Contact Kraemer & Kraemer to obtain answers to your questions regarding tax matters and to learn more about Information Exchange and Double Taxation Treaties.