Panama removed from the Financial Action Task Force (FATF) gray list

In a momentous announcement, the Financial Action Task Force (FATF) excluded Panama from its gray list, following a process initiated in 2019. This decision represents an important milestone for the country, which has demonstrated its commitment to the fight against money laundering and terrorist financing.

The FATF gray list is a supervisory mechanism for countries that do not comply with international standards against money laundering and terrorist financing. Panama’s inclusion on this list in 2019 raised concerns about the transparency of the country’s financial system.

In recent years, Panama has taken significant steps to address these concerns. These measures include:

• Updating the National Risk Assessment, which includes a more comprehensive assessment of money laundering and terrorist financing risks in the country.
• Increasing staff and resources for the Financial Analysis Unit (UAF), which is responsible for investigating money laundering and terrorist financing cases.
• The implementation of a risk-based supervision plan for regulated entities, which are individuals and entities that are required to comply with anti-money laundering and terrorist financing laws.
• The adoption of a lower threshold for domestic tax evasion, demonstrating that the country is committed to international cooperation.
• The AML/CFT (Prevention of Money Laundering and Terrorist Financing) regulation was modified, increasing the penalties for non-compliance up to 5 million balboas (Law 254 of 2021).
• The Single Registry of Beneficial Owners (RUBF) was adopted by means of Law 129 of 2020, which currently has an advance of 82% of the information population and the verification of the corresponding information is also being implemented.
• In conjunction with these actions, the following AML/CFT laws have been enacted since 2019: 70, 116 and 123 of 2019; 124 and 129 of 2020; and 254 of 2021. In addition, the issuance and publication of the Executive Decrees enacted from 2019 to date: 905 of 2019, 721 of 2020 and 13,15 and 35 of 2022.

The exclusion of Panama from the gray list is a recognition of the progress that the country has made in terms of transparency. This decision will have a positive impact on the Panamanian economy by facilitating foreign investment, improving access to credit and strengthening international relations.

Benefits for Panama

The exclusion of Panama from the FATF gray list will have the following benefits for the country:

• Improved international image: The exclusion of Panama from the gray list will strengthen the country’s image internationally, as a country committed to transparency and the fight against money laundering and terrorist financing.
• Increased foreign investment: The exclusion of Panama from the gray list will facilitate foreign investment, which will boost the country’s economic growth.
• Improved access to credit: Panama’s exclusion from the gray list will facilitate access to credit for companies and individuals, which will support investment and economic growth.
• Improved correspondent banking and international relations: It will lead to a significant improvement in relations between Panama’s local banks and their international correspondents. The basic links necessary for financial operations will be strengthened.
• Reduced pressure on the financial system: With the elimination of the pressure associated with special reviews, Panama’s financial system can operate more effectively and with greater confidence.
• Benefits for the insurance and securities industry: The removal of Panama from the gray list will attract the world’s leading reinsurers, which will be able to establish themselves in Panama and serve the Latin American market.

Panama’s exclusion from the FATF gray list is an important achievement for the country. This recognition is the result of the joint work of the Panamanian authorities, the private sector and the international community.

Source: Press release from the Presidency of the Republic of Panama

A. Ex Officio Prescription of debts from 2015 or previous years:

Within the transitory measures of tax recovery, Law 401 establishes that the debts for tax obligations of administration of the General Directorate of Revenue (from now on DGI) that are reflected in the current account of the taxpayer corresponding to fiscal years of 2015 or previous years concerning:

• Income Tax
• Educational Insurance
• Notice of Operation

Excluded from this benefit are:

1. Withholding agents
2. Debts caused by rulings issued by competent authority.
3. Zero or loss returns filed by taxpayers in 2016 concerning the 2015 tax year.

Requirements to benefit from the ex officio statute of limitations:

• Be up to date with the obligations for the years 2016 and subsequent years.
• Not being subject to investigation for tax evasion or tax fraud.
• Not being subject to an ongoing tax audit process or being appealed in any instance.

The DGI will verify each month the list of taxpayers susceptible to benefit from the application process for the ex officio statute of limitations. After this verification, within a term no longer than 5 working days, the DGI will send an e-mail to each taxpayer certifying the amount that can be ex officio prescribed. It will be necessary to keep the e-mail address registered in the DGI’s e-tax system up to date.

The DGI may ex officio decree a statute of limitations on debts that maintain appeals in an administrative (e.g. DGI) or jurisdictional (e.g. courts) venue. Such appeals will be declared non-existent because the tax obligation has been extinguished.

B. Transitory Procedure of Abbreviated Audit:

This procedure consists of obviating, on the part of the Tax Administration, the phase of discussion of the adjustments in an audit process and directly incorporating the technical evaluation.

This abbreviated audit will be carried out with respect to the following taxes:

1. Income Tax
2. Educational Insurance
3. Notice of Operation
4. ITBMS

Important details:

• Tax audits for alleged tax fraud or evasion are excluded.
• A request for an abbreviated audit procedure must be formalized before the DGI.
• The request must be accompanied by a CPA certification stating the preliminary verification of full compliance by the taxpayer.
• The DGI must accept or reject the request within a maximum of 60 calendar days and in no case shall the omission of a response represent positive administrative silence.
• All resolutions will be sent to the taxpayer’s RUC e-mail address.
• The resolution resulting from the abbreviated audit will contain the reasoned relation of the audit tests carried out in relation to the control of contingent risks involved in the taxpayer’s business model.
• After notification of the resolution, the taxpayer has a term of no more than 30 calendar days to pay the tax.

C. Benefits of the Tax Regularization:

1. 25% discount is granted to all taxpayers who pay the total real estate tax corresponding to fiscal period 2024, before November 30, 2023.
2. A 25% discount is granted to all taxpayers who pay the single rate corresponding to the 2025 tax period, before November 30, 2023.
3. The remission of 50% of all fines charged or not in the e-tax of taxpayers who, before November 30, 2023, pay the remaining 50% of the fines is authorized.
4. The penalties applied to the 2022 period to taxpayers on the filing of the Form 03 Return and Sales Form will be completely exonerated. If the taxpayer paid such fine, a non-transferable credit will be generated and it will only be offset with the debt of the same tax.
5. Interest and surcharges are eliminated for all taxpayers who pay 100% of the delinquent taxes, fees and contributions that are in the administrative or coercive collection phase and 50% of the fines on these taxes, fees and contributions, before November 30, 2023.

For further information please contact Nancy Ardines at nancya@icazalaw.com or Nicole Fernández at nfernandez@icazalaw.com.

The definition of “accounting records” includes financial statements, general and subsidiary ledgers, sales slips, contracts and invoices, as well as records and documentation related to:

1. An entity’s assets and liabilities;
2. All sums of money received and expended and the matters in respect of which the receipt and expenditure take place;
3. All sales and purchases; and
4. All financial transactions.

The accounting records required by the Act shall be accurate and reliable. They shall explain and document all financial transactions so as to enable each financial transaction of the entity to be properly constructed and understood. Furthermore, such records shall provide the necessary information in order to determine the financial position of the entity with reasonable accuracy at any time, as well as to be able to be able to prepare its financial statements.

Action Required

All Belize companies must provide to its registered agent its accounting records by December 15, 2023. If a company fails to provide to its registered agent its accounting records, the registered agent shall notify the Belize Financial Services Commission and withdraw its services as registered agent.

The Act further provides for the maintenance and retention of accounting and financial records by entities for not less than five years following termination of the closure of an account, end of a transaction, termination of a business relationship, etc.

For any additional information, please contact your nearest ICAZA office or send a message to bd@icazalaw.com.

The Latin American Corporate Counsel Association (LACCA) has published its list of recommended lawyers in the 2021 edition of LACCA Approved, which recognizes Latin America’s leading private practitioners, as voted for by the region’s leading corporate counsel. We are pleased to announce that three of our lawyers have been recognized:

• Alexis Herrera Jr. – Corporate and M&A
• Javier José Vallarino – Labor Law

About LACCA

LACCA is a recognized association, part of Latin Lawyer, that brings together important private company lawyers to exchange and share ideas as well as best practices. Likewise, it aims to establish contacts among different lawyers in diverse areas of specialty throughout Latin America to offer a successful legal service of greater value to its clients.

Latin Lawyer and LACCA are part of Law Business Research Limited, an independent, multi award-winning publisher of research, data, and analysis on international business law and international legal markets.

The British Virgin Islands (BVI) Business Companies Act and Regulations were amended and became effective on 1 January 2023 to include the preparation and submission of a Financial Annual Return for each BVI company. The official annual return form, which must be submitted every year, was published on 2 March 2023 in the Gazette.

What are the new requirements according to this law?
From 1 January 2023, BVI companies must prepare and file an annual return with their registered agent containing specific financial information.

The return must be completed in a form (sample here) that includes an income statement and balance sheet for each company, which:
▪ Has no specific set of accounting policies or principles required.
▪ Can be done in any currency, and
▪ Does not need to be audited.

What does the company need to do to remain compliant?
All BVI companies must submit the annual return to their registered agent. The filing is private and shall be kept confidential by the registered agent (Icaza), meaning it is not publicly available. If a company doesn’t file its annual return within 30 days of the due date, registered agents must inform the Regulator. For a streamlined reporting process, we will send a link to all clients to facilitate the submission of the information in a secure form.

When should I file the form?
The annual return is due annually for financial periods starting on 1 January 2023. It must be filed within nine months after the company’s financial year-end (which in most cases is December 31ˢᵗ each year, unless the company has chosen a different financial period). Below, you may find the deadlines for the most common financial year ends:

Financial Year  →  First Deadline
January – December 2023 → 30 September 2024

July 2023 – June 2024 → 31 March 2025

What happens if the company does not file the annual return?
The following penalties will be imposed on companies that do not provide their annual returns:
1. US$300 for the first month.
2. US$200 for each subsequent month, up to a maximum of US$5,000.

If the maximum penalty is reached and the annual return is not filed, the Registrar may remove the company’s name from the Register.

Next Steps:
▪ Maintain financial records such as invoices, receipts, bank statements, etc., to prepare the annual return.
▪ We will soon notify you of the cost of this new obligation, which shall be included in our annual fees.
▪ Contact yexadiag@icazalaw.com, domingoad@icazalaw.com or your usual contact for assistance.

Icaza, González-Ruiz & Alemán has been recognized by Chambers Latin America 2024, which ranks the best lawyers and law firms in the region.

The firm has been highlighted in the areas of Intellectual Property as Band 2 and Banking & Finance in Band 3. The publication also ranked the following lawyers:

1. Gabriela Tejada de Britton – Intellectual Property – Band 1
2. Gabriel González-Ruiz
   1. Banking & Finance – Band 2
   2. Capital Markets – Band 3
3. Marisol Ellis – Dispute Resolution – Band 4
4. Alfredo Fonseca Zauner – Banking & Finance – Up and Coming

We thank our clients, who have allowed us to obtain this recognition and motivate us to continue to provide them with the highest quality of service.

Icaza, González-Ruiz & Alemán has been recognized by the prestigious publication Chambers High Net Worth 2023, which ranks the best lawyers and firms advising high-net-worth clients worldwide.

The firm has been highlighted among the best law firms in Private Wealth in Panama. In addition, our associate Domingo Díaz de la Guardia has been ranked as an “Associate to watch” for his outstanding work the area.

We thank our clients for this recognition, as they motivate us to continue working with the highest quality and excellence, and our staff for providing the best service to our clients.