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Tuesday, June 27 2017 @ 03:10 AM EDT

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Cabinet Approves Repeal of Articles 2 and 3 of Law 120

Money MattersThe Cabinet Council met on 2 January 2014, and approved a Cabinet Resolution authorizing the Minister of Finance to present a bill to the National Assembly to repeal Articles 2 and 3 of Law 120 of 2013, thereby restoring the effect of Article 694 of the Tax Code.

This law will be of public order, and is retroactive from December 30, 2013.

The project will be presented on Monday, January 6, when the National Assembly restarts sessions in the regular period.

With this move the Government reaffirms its historic commitment to the principle of territoriality in the source for the purpose of calculating the income tax applies for both natural and legal persons operating within the territory of the Republic of Panama. (Critica)

Editor's Comment: So, they tried to slip in this thing about taxing worldwide income, and it got slapped down. They admit they "made a mistake" and now they make it go away. Nice try. Boy, that was stupid...

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Panama's Government Reverses Plans To Tax Everyone and Everything (Stop Panicking)

Money MattersBy Don Winner for Panama-Guide.com - Panama's National Assembly recently passed Law 120 which would have (among other things) changed the way Panama collects income tax. If the law had gone into effect, worldwide income would have been taxable in a manner similar to what the United States does.

There was a brief but intense uproar among the community of English speaking expatriates in Panama who were concerned the government of Panama might try to tax their retirement checks or income from sources outside of Panama. In the grand scheme of things, the concern and worry voiced by the expat community was relatively meaningless.

The real noise came from the richest families of Panamanians who have been playing by the same rules for a long time. They have literally billions of dollars invested outside of Panama, and Martinelli's scheme would have made those dollars subject to his new income tax. This plan was yet another move to try to bring more money into the government coffers. Because, when the government is spending tax dollars, there's more available for them to skim and steal through graft and corruption. More is better when your job is to steal tax dollars.

But there is a fly in the ointment. Those same rich Panamanians who actually run the country from behind the curtain called up the government and delivered a very firm "no" message. They have enough money combined to bring the country to its knees overnight. There's no way in hell they were going to allow the government of Ricardo Martinelli (or any other politician) to take their money in the form of more taxes.

So, this morning it really wasn't all that surprising when Luis Cucalón Uribe, the Director of Panama's version of the IRS, came out and said he had "made a mistake." The Minister of the Presidency Roberto Henríquez announced via his Twitter account they would start working on Thursday, 2 January 2014, to reverse the new law and undo the changes that were so onerous to the richest Panamanians. President Ricardo Martinelli put the blame on Luis Cucalón Uribe saying he should "be more careful in the future" - but that's bullshit.

This was plain and simple - an attempt (by Martinelli) to snatch and grab more money as a last ditch effort right before the next General Elections in May. If he did it now, then the new Arias administration to follow would have more money to build more stuff, and there would be more to skim from the contracts. Blaming it on Luis Cucalón Uribe was typical political "wasn't me" behavior and an attempt to hide behind a combination of plausible deniability and a scapegoat.

But whatever. What matters most is that the law will be undone and it will never be implemented. In the 108 years of Panama existence as a nation only income generated within the national territory has been the subject of income tax. And, now it's going to stay that way.

Happy New Year! And yeah, they always try to slip these sorts of things in while everyone is partying and drunk. Typical...

Copyright 2013 Panama-Guide.com.

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Panama will close 2013 with rising foreign investment

Money MattersPanama will close 2013 with foreign direct investment (FDI) of about $4 billion, nearly a billion dollars more than the previous year, according to projections by the Executive.

In 2012, there was a total of about $8.8 billion in FDI in all of Central America.

Panama saw the most, with just over $3 billion, according to the Economic Commission for Latin America and the Caribbean. (Prensa)

Editor's Comment: Excellent news! Foreign Direct Investment is one of the best ways to feed the furnace of a relatively small economy such as Panama's. And the fact that FDI in Panama increased from $3 billion in 2012 to $4 billion in 2013 is a further manifestation of the strategically sound economic and fiscal policies being followed by the Martinelli administration. However the abject lack of judicial security in Panama may turn out to be the relatively hidden rotting timbers under the bridge decking that most people can't see until it's too late. Because right now rich foreigners come to Panama to invest their money, only to be screwed over by richer (and politically connected) Panamanians - who can only win in court because they buy off the judges. This problem simply has to be fixed in Panama, if the CD wants the "economic miracle" to keep going.

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MEF Halts Property Tax Reassessments

Money MattersPanama's Minister of Economy and Finance Frank De Lima has signed a resolution to halt the reassessment of property values for tax purposes.

Now, the resolution only has to be published in the Official Gazette.

The document signed by De Lima orders "suspend the proceedings and registration of new property values ​​resulting from appraisals that were made in the areas of Punta Pacifica, Punta Paitilla, Costa del Este, Obarrio, Marbella, Via España, El Carmen, Coco del Mar and Altos del Golf." (La Estrella)

Editor's Comment: Property taxes in Panama are supposed to be based on the real and true market value of a property or an apartment. Many of these values as assessed and registered in the government's databases are old and outdated. An apartment might reflect a value of $60,000 (what it was worth when originally built and sold more than 20 years ago) but in today's market that same apartment might be worth more than $200,000. The MEF and the government of Panama started down the road to update all of those values, in an attempt to get more money into the government's coffers. However, once they actually started doing it the relatively rich people who live in these apartments started howling like banshees. And, the government intelligently acquiesced, mostly because of the upcoming elections in May 2014. It's not wise to suck more tax money out of the rich a few months before an election. They will now just wait until after they win, and go back after the money later.

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Problems With International ATM's All Over Panama

Money Matters By Don Winner for Panama-Guide.com - There have been many reports coming in from all over Panama regarding people having problems making withdrawals from ATM machines, and not being able to access their funds from bank accounts in the United States. Here's what's going on...

Sunday - Day Five? Apparently the problems started on Wednesday last week. Many people have been talking about these problems on all of the Panama related Yahoo! email groups. Everyone has been talking about this issue for the past several days and the issue has literally been dominating the airwaves lately. Money matters, especially when you can't get to your money, and you want to do important things. Like, eating for instance.

It Happened To Me: I tried to pull funds from two different ATM machines on Wednesday night, and was unable to get money from three different US accounts. I tried using three different cards, two of them Visa and one Mastercard. All three cards can be used as both credit cards and debit cards. I tried to make the pulls in the Arrocha on Via España on two different ATM machines - one owned by Banco General and the other (was a different bank, maybe Credicorp?)

I Like A Challenge: After several unsuccessful attempts using the cards from my US accounts, I eventually decided to "punt" and just pulled the cash I needed from my Panamanian bank account. Then I was able to get an inquiry to process, to check the account balance of a checking account in the US, using the card as a debit card. Then I figured that since that worked, I should be able to make a withdrawal from that account - and it worked. So anyway I was eventually able to get cash from one of the US accounts, but only by using the card as a debit card (not as a credit card) and by pulling the cash from the checking account. By then a line of others waiting to use the machines had formed, so I moved on.

People's experiences have been varying greatly. Some people are reporting they made multiple attempts to withdrawal funds from an ATM machine in Panama. The transaction is unsuccessful and no money is received. However when they check their online bank accounts, the money shows has having been delivered.

In my case I tried to withdraw money from three different accounts, both as credit and debit cards. None of those accounts reflected any of this activity. There were no charges of any kind made to my accounts. No money was taken out of my accounts. As far as I could tell, the transactions never made it out of Panama. This leads me to believe the problem is a local Panama problem, and not a problem with the system in the US.

Apparently I Was Lucky: Others have had greatly different experiences;

  • "CLAVE, the International clearing house for Panama is having computer troubles. It started Wednesday and has continued today. People are being charged the amount of the intended withdrawal plus $6 but no money is forth coming from the ATM. I went inside Banco National, here in Pedasi and talked to a Manager. They know there is a problem and they advised that NO bank in Panama will honor any foreign credit or debit card, because it will cause the bank more problems when you file a dispute over the transaction. So this effectively cuts you off from obtaining any cash, unless you have a Panamanian bank account." (24 Oct 2013)

  • "I too have been charged a $6 fee today in addition to the cash requested but the ATM failed to dispense (Banco General ATM machine)."

Your Results May Vary: The problem has not been consistent with all users. The ATM machines have been working for some, at exactly the same time as they have not been working for others. One user wrote "I've been here for 6 years and this has never once happened to me. In fact I just used the ATM at El Rey in David for two transactions and no problem. $3.00 fee, got my money both times."

It's Not A "Scam" Some people have been calling these technological glitches a "scam" for lack of a better term, I guess. If you ever see any transaction reflected on your account that didn't go through - like if you tried to withdraw money from your account, never got the cash, but it shows up on your account as a completed transaction - simply report it to your bank. They have a much greater interest in making sure all went smoothly as you do. You have exactly one card - they have thousands. In any case, it normally takes a few days to get any problems cleared up. Your bank should immediately credit your account until they get to the bottom of it. Well, that's what any bank that's worth a shit would do. If they don't, then fire them and take your business somewhere else.

This Isn't The First Time: This sort of thing has happened in the past. If I remember correctly a few years ago the agency in Panama that acts as a clearinghouse for international transactions sort of crapped out, and nothing worked for a few days. Then they got it all straightened out and everything went back to normal pretty quickly. I expect the same thing will happen in this instance, in pretty short order.

Not The End Of The World: You should read some of the email that's been hitting my account in the past couple of days. You would think the Germans were attacking Poland or something. Yes, it's a problem. Yes, everyone knows about it already (including you.) Yes, it's going to be fixed. Yes, you will get your money back. No, your maid won't kill you if you can't pay her today. And No, I really don't know any more about this problem than anyone else does. Well, maybe except for having cracked the code about the whole idea of using your card as a debit card only (and not as a credit card.) That seemed to have made a difference.

Banks Own The World: They are not about to let the whole system go to hell in a handbasket. Three or four days are the most this sort of thing is likely to last, even if Wall Street was nuked by the Taliban. So my suggestion is to just relax and wait it out.

Another Third World Lesson Learned: Open a local bank account. Stick some emergency cash in there, and forget about it. Have a fallback position. Don't depend on any one account, card, bank, or source of funds. Have a plan B, C, D, and E. And if all of those don't work it's "Plan F" which means you're Fucked no matter what you do. So, there. Are you happy now? I've covered the great ATM Crisis of 2013. You can add one more notch on your gringo expat gunbelt for having survived. I expect this whole thing will be history by Monday morning at the latest.

Copyright 2013 Panama-Guide.com.

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CLAVE problems in Panama

Money MattersATM's are debiting account but not giving money
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Panama Makes a New Law Granting Tax Amnesty

Money Matters Law 51 passed by the National Assembly and signed into law by President Martinelli on September 5, 2013 provides a short window of opportunity for taxpayers to take advantage of a tax amnesty which expires on November 30.

Anyone who owns a Panama corporation, foundation, business, or real property, if they are behind on their personal or corporate income taxes, corporate franchise taxes, or real property taxes, qualify for this tax amnesty which provides elimination of all late payment penalties, as well as a discount of 25% on the late payment interest charges on taxes owed to the government of Panama. For those who are behind on their annual corporate franchise taxes on their Panama corporations or Private Interest Foundations, this law could save them thousands of dollars in late payment penalties.

Tax debtors can now straighten out their tax obligations with the National Revenue Authority (ANIP) up to November 30th.

The new law requires that taxpayers wishing to use it will make a payment, whose taxable income is: the sum of the total taxable income reported on income tax, in the last three income tax returns filed prior to the 2011 tax year, divided by three (3), and the outcome, will be charged a fee of twenty-five percent (25%).

Similarly, taxpayers may enter with the National Revenue Authority a payment arrangement with a credit which may not be less than forty percent (40%) of the total amount payable, and the difference will be canceled in a maximum of three (3) months.

It also clarifies that for those who enter into a payment arrangement, yet later violate the terms stipulated in the settlement agreement, it will be understood for all effects that they did not take advantage of this Tax Amnesty Act, or the benefits provided in this Act, and the amount paid will be credited to the respective statement.

Taxpayers who are delinquent in national tax jurisdiction of the National Revenue Authority of Panama may pay the debt, one hundred percent (100%) exempt from fines, surcharges, and a discount of twenty percent (25%) of the amount owed in interest, for a period of three (3) months from the effective date of this Act.

Panama’s income tax rates are fairly low when compared to the Northern Hemisphere and European countries. Expats earning income from Panamanian sources are subject to paying Panamanian income taxes if they earn more than $11,000 USD a year. Income above $11,000 up to $50,000 a year is taxed at a 15% rate. The rate rises to 25% for income of $50,000 and above.

If money is earned outside of Panama no income taxes are due in Panama. Taxes are only levied on locally generated wages or business activities that take place within the territory of Panama.

Individuals are considered Panama residents for tax purposes if they are working in Panama for more than 183 days of a calendar year. Non-residents who are legally working in Panama (for Panamanian companies) will have taxes withheld from their salaries at a 12.5% rate. Legal residents who are employed will be taxed at the sliding scale mentioned above.

Deductions are available including $800 for a married couple filing jointly, student loans interest for the taxpayer’s and dependents education in Panama, and health insurance premiums. Mortgage interest deductions on the primary home are available up to $15,000 per year. Private pension plan contributions not exceeding 10% of the taxpayer’s gross annual income up to a maximum of $15,000 are also deductible. A complete list of deductions is available from the Panama tax office and is supplied with the relevant tax return forms to aid with the completion.

The majority of local taxpayers will have the estimated tax deducted from their salaries every month. Unless this amount is an over payment of taxes due for the year, there will be no requirement to file a tax return. March 15th is the due date for income tax filing for the prior year’s earnings. A request can be made for an additional two months extension. Failure to file a tax return will result in a fine and interest accumulation on the late payments.

Contact the Panama law firm, Panama Offshore Legal Services, to take advantage of this short window tax amnesty.

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U.S., Panama in talks on tax evasion pact -Treasury

Money MattersBy Patrick Temple-West - WASHINGTON (Reuters) - The United States and Panama are in talks on a tax evasion agreement, the U.S. Treasury Department said on Friday, a sign of U.S. progress in implementing a crackdown on U.S. tax cheats.

The Foreign Account Tax Compliance Act (FATCA), enacted in 2010, takes effect in July 2014. It requires foreign financial institutions to tell the U.S. Internal Revenue Service about Americans' offshore accounts worth more than $50,000.

The United States does not have a full tax treaty with Panama, which has been listed in recent years by global authorities as a tax haven. But the United States and Panama did sign a tax-information exchange agreement in 2010.

The Panama talks mark a significant step for FATCA implementation because they demonstrate Treasury officials are going to the heart of the offshore tax evasion problem, said Alan Granwell, a former Treasury official now with law firm DLA Piper who is advising foreign governments on FATCA deals.

FATCA was enacted after a Swiss banking scandal showed U.S. taxpayers hid sizeable fortunes overseas from tax authorities. The Treasury has said previously it is in varying stages of FATCA negotiations with more than 50 countries.

The United States is Panama's largest trading partner. The Panamanian government said on Sept 18 on its website that it is working on a draft proposal for a FATCA deal, which it hopes to finish as soon as possible.

Banks, funds and other financial institutions that fail to comply with FATCA face a 30 percent U.S. withholding tax on their U.S. source income, a penalty that could effectively freeze them out of U.S. financial markets.

Panama, Belize and Costa Rica are three Central American countries the Organization for Economic Development and Co-operation has tagged as tax havens in the past.

Panama and other countries with very low taxes "historically may have had bank secrecy," Granwell said.

In August, the U.S. Treasury completed a FATCA deal with the Cayman Islands, perhaps prompting other low-tax nations to accelerate their talks with Treasury.

The United States already has FATCA deals with big trading partners such as Britain and Germany. The pacts are expected to help banks in those countries comply, Granwell said.

The Treasury has concluded nine FATCA intergovernmental agreements (IGAs) with foreign governments, but it is struggling to complete deals with China and Canada, leaving two potentially gaping holes in the FATCA dragnet, tax experts said

"There is a lot of tension between the U.S. and Canada," said Bruce Zagaris, a partner with the firm of Berliner, Corcoran & Rowe LLP who is advising foreign governments on FATCA.

"The Canadians have been really exasperated by the inability of the U.S. to have more concessions" for FATCA, he said.

The Canadian Department of Finance told Reuters this month that it hoped to sign an IGA in the near future.

In July, the Treasury postponed the start of FATCA to July 2014 from January 2014, in part to give U.S. negotiators more time.

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Discretionary Budget Funds In The Presidency Ministry Are Gone

Money MattersPresident Ricardo Martinelli spent almost the entire discretionary budget [from January until June 2013] destined for the entire 2013, according to the budget reports issued by the Presidency Ministry.

Out of the approved budget for 2013 regarding overall allocations including discretionary budget, contingency fund, contingency reserves and other overall allocations, a total of $4.8 was assigned.

However, in the expenses report of this budget, which is not constantly updated in the webpage of the Presidency of the Republic, they reveal a total of $4.3 million has been used; therefore there are only $5 thousand for the rest of the year.

These funds were used to cover local and foreign medical expenses for certain citizens, for disaster mitigation and home improvements, among other purchases.

During the first quarter of the year (from January to March), the president spent $2.16 million, and $2.17 million during the second quarter.

In the second quarter [from April to June] the President used $649 thousand for local medical expenses, $504 thousand for medical expenses abroad, $136 thousand in conventions, and $632 thousand in disaster mitigation and home improvements.

During his campaign, Martinelli strongly criticized the discretionary expenses of his predecessors. In fact, one of his campaign promises was to reduce these funds. “Discretionary budgets will be reduced and turned into a special fund for emergencies and disasters,” said his government plan. (Prensa)

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Martinelli Said Venezuela Has Not Paid A Single Penny Of Their Debt With The Free Zone

Money MattersPresident Ricardo Martinelli said the Colon Free Zone has not received “a single penny” from Venezuela despite their conversations with Panama and their agreement to finally pay the debt owed to the country.

Martinelli told the journalists “we have spoken several times, the parties are talking among each other, they have created committees, but they have simply not paid anything yet.”

In July, Martinelli went to Caracas to meet with the Venezuelan president, Nicolás Maduro, to talk about the debt.

After the meeting between Martinelli and Maduro, representatives from Venezuela and Panama met at the headquarters of the ZLC, located in the Caribbean shore and approximately 80 km to the north of the city, to reach a solution for paying this debt, calculated in $1,200 million.

The Panamanian president said he already did his part and the issue is being handled by the ZLC, but he said he was willing to travel to Caracas again if necessary.

"I will go to Venezuela if I must go and stand up for the rights and interests of Panamanian businessmen,” said Martinelli.

"But from what I understand, they have not paid a single penny.”

Venezuela is one of the main clients of the ZLC and Venezuelan businessmen said they are in debt due to the issues they have for accessing foreign exchange reserves within the exchange control policies.

The Colon Free Zone represents 8% of the GDP of Panama and holds approximately 3,000 companies, according to the details in their Users Association. (Critica)

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