TERRITORIAL VERSUS GLOBAL TAXATION IN PANAMA

[COUNTRY EXPERT- JESSICA RAMESCH]

Good morning everyone,

I imagine some of you may have some questions, if you’ve heard reports on the blogosphere that Panama will be changing its legendary territorial tax system. For some 110 years Panama has only charged income tax on revenue generated in Panama. Funds you earn outside of Panama are not subject to income tax. This will remain the case.

While it is true that certain legislators tried to “slip in” an article changing the above to global taxation, the president responded immediately to outcries from businesspeople, lawyers…organizations across every level of Panamanian society…and indicated that the offended article would be repealed today (see date of this post).

Here’s a comment from Panama attorney Rainelda Mata Kelly:

I am not back in the office until Monday and frankly it was not until today (an hour ago) that I opened my emails to learn of this situation.

After scanning all the local media, I can only say this was a stupid move by the Tax Department Chief who apparently introduced it on second debate (as this was not included in the first draft which was discussed in first debate) and it was done at a time when most of the principal legislators where out of the city and it was passed into law before any of the Cabinet Ministers and anyone with any sense could react and advise the President to veto it.

The government is moving quickly to redress this situation and eliminate the offending articles which were added to this law at the last minute. Unfortunately due to the holidays this could not be done as fast as was necessary.

This should not have happened and unfortunately we will have to bear the burden of the mistrust that this will generate.

If there is anything positive out of this experience it is that the President and the Tax Department Chief are now very clear on the fact that no one wants this for Panama and if there was any doubt that Panama would keep its tax territoriality the massive response from all different sides of the economy have sent a very loud and strong message to the government and governments to come.

Wishing you a very happy New Year,
Rainelda Mata-Kelly

UPCOMING PUBLIC HOLIDAYS:
November 4, 5, 11
December 2, 9, 24, 25 31
January 1, 9

LAW OFFICES RAINELDA MATA-KELLY
Street address:
Suite 406-407, Tower B
Torres de las Americas
Punta Pacifica, City of Panama

Mailing address:
P.O. Box 0818-00534
Panama City, Republic of Panama

Tel (+507) 216-9299
Fax (+507) 216-9298

When calling from the USA or Canada, please dial:

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