EDGE Magazine | Q3 2011


W


with countries members of the OECD. ith the beginning of the


government of President Ricardo Martinelli in 2009, the Republic of Panama started a specific economic strategy aimed to remove Panama from the gray list of tax havens of the Organization for Economic Co- operation and Development (OECD). This strategy was to make efforts to


attract more international investments, and this, added to the expansion of the Canal has given Panama the biggest economic growth in the region.


Panama compromised OECD to sign a minimum of 12 Agreements to avoid International Double Taxation and to make changes in its legislation that will allow exchange of tax information


Double taxation occurs when a taxpayer is taxed twice for the same asset or income. This happens when taxing jurisdictions overlap and a transaction, asset, or income amount is subject to taxation in both jurisdictions.


International Double Taxation Agreements are a way for 2 countries to solve these issues, with one country giving its taxation rights to the other in order to maintain prosperous commercial transactions between them. These agreements allow taxpayers to pay taxes in their country of residence, enjoying exemption from taxation in the other country. In other cases of international double


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taxation, a business or individual is taxed in the country in which a gain arises.


These agreements are also a way of avoiding tax evasion, with international cooperation and the exchange of information.


Panama has a fiscal system based on territoriality. According to Panama's fiscal legislation, only income derived from within Panamanian borders is taxed. Therefore, some may conclude that these International Double Taxation Agreements will not bring any economical benefit to Panama.


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