27th September 2019
Despite being most famous as tax haven for the super-rich, Panama has been changing its ways of late. Just a few weeks ago, we wrote about how the country had teamed up with France, one of the leading global powers in the fight against tax fraud by signing a landmark bilateral deal.
Since then, there have been further steps taken to bring the country in line with international standards, with radical legislation proposed in parliament last week. The fact that Panama is fighting evasion so strongly should be evidence that compliance shouldn’t be an afterthought when placing workers abroad. So – while the country strengthens tax laws – what do recruiters need to know?
Panama strengthens tax laws
The new legislation will allow authorities to target a much wider section of tax evaders. Essentially, it is an amendment to the Law 70, introduced on January 31st, 2019, which itself criminalised tax evasion for the very first time in the country.
This law specified that individuals or directors of companies who evade tax of $300,000 or more can be imprisoned for a period of two to four years, and must repay an amount equal to or greater than the tax evaded. Prosecution may be waived when the tax is repaid, alongside any interest, surcharge, or penalties.
The amendment would enable errant taxpayers to enter into an agreement with authorities for payment of the outstanding tax only once – and mean that repeat offenders would have no choice other than to go to jail.
Panama tax reforms
While Panama strengthens tax laws, recruiters should bear in mind that is certainly not the first step the country has taken to toughen up on tax and compliance. A number of actions have been taken in order to prevent the country becoming a permanent fixture on many regulatory blacklists around the world.
In fact, way back in October 2016, Panama became the 105th jurisdiction to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Developed by the OECD and the Council of Europe in 1988 and amended by Protocol in 2010, the Convention regulates the exchange of information between states regarding tax matters. Furthermore, the bilateral deal with France was a significant illustration of heightened international co-operation from the Central American nation.
Contractors need to be aware
Currently, even in some of the most infamous tax havens in the world, there have been record tax collections, historic laws, and strong measures taken to crack down on fraud. While Panama strengthens tax laws, others have also been following suit, with Switzerland and Ireland both boosting compliance in recent months. Agencies looking to place contractor’s abroad need to be aware that there are very few countries that can be considered a ‘soft touch’ on tax these days.
Unfortunately, with the complex state of international legislation, compliance is easier said than done. Wherever you place workers – it is likely becoming harder to follow regulations. However, with the right help, you can remove the administrative headache around this, and fully focus on your business. Contact us today.