Panama signed the international legal framework to implement the Common Reporting Standard and country-by-country reporting.

Panama signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (the Convention) on October 27, 2016.

The Organisation for Economic Co-operation and Development (OECD) and the Council of Europe developed the Convention in 1988. In 2011, it was amended by protocol to open it up to all countries and to align it with the international standard on the exchange of information on request. The revised Convention has been signed by 106 jurisdictions.

The Convention provides a basis for several forms of mutual administrative assistance in tax matters, including:

— Exchange of information, which may be on request, automatic¹ or spontaneous and will apply to any foreseeably relevant information for the administration or enforcement of domestic laws concerning covered taxes
— Simultaneous tax examinations
— Tax examinations abroad
— Tax recovery
— Service documents

The Convention also serves as a possible international legal framework to implement the standard for the automatic exchange of information in tax matters (the Standard), including the Model Competent Authority Agreement (Model CAA) and the Common Reporting Standard, which contains the reporting and due diligence requirements for the automatic exchange of information for financial accounts.² It also provides a possible international legal framework to implement the Multilateral Competent Authority Agreement for the automatic exchange of country-by-country reports (CbCr), developed by the OECD as part of the Base Erosion and Profit Shifting (BEPS) project. Panama will need to enter into mutual agreements with other parties to the Convention in order to implement the standards provided by these frameworks.

The Convention expands the obligations for the exchange of information upon request and not the automatic exchange of information. Additionally, with the signing of the Convention, Panama's treaty network is expanded to the 105 jurisdictions that have joined the Convention.

Panama will continue to exchange financial information automatically only with those countries with which Panama enters into a competent authority agreement.

Panama's Cabinet Council still has to approve the Convention and Panama's National Assembly must ratify it. No date has been communicated as to when this could occur. Once approved, the ratification instrument will be deposited with the Secretary General of the OECD for three months. The Convention will enter into force in Panama on the first day of the month following the expiration of that three-month period.

At this moment in time, Panama has not made public whether it will reserve the right not to provide some assistance as provided in the Convention. A follow-up Tax Alert will be issued containing this information.

———————————————

———————————————
ENDNOTES

¹ The Convention conditions the automatic exchange of information to the subscription of a mutual agreement — e.g., Model CCA, CRS and CbCr.

² See Tax Alert 2014-1450. The Model Competent Authority Agreement serves as a model for intergovernmental agreements and the CRS contains the reporting and due diligence standard that underpins the automatic exchange of information of financial accounts.