Weekly Offshore Panama News – Jan. 3, 2014




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Welcome to the Panama Weekly Offshore Roundup and Happy New Year! Only a few days into 2014 and already there are large headlines being brewed in Panama, with social changes, tax alterations, potential strikes, and a fast approaching election. Whatever else happens in Panama in 2014, it certainly won’t be dull!

This week we cover: Panama Canal builders potentially halting expansion, Panama as a medical destination, Panama’s swift return to locally-sourced taxation, and the new minimum wage hike.

Welcome to 2014!

 

Panamanians Get a Raise

The President of Panama has declared that, from the first day of 2014, all Panamanian workers in the so-called Region 1 of the country will experience an effective wage hike of 27%. This has been greeted with relief by workers in a country with a formerly low minimum wage, although business leaders are concerned about its impact on employment figures and inflation. With the decree already in effect, its political resonance may carry Mr Martinelli’s party through the next election.

“Last week, President Ricardo Martinelli announced that as of January 1, 2014, workers will now earn a minimum of $624 a month in Region 1 of the country, or a 27 percent increase. Workers in the rest of the country will earn $488, or $58 more a month.
Meanwhile, the National Business Council expressed its concern that the decision will increase operating costs that will translate to inflated costs for the consumer.

The new minimum wage will be effective for the next two years.”

Source: The Panama Digest

 

Cabinet Council Repeals Controversial Articles Embedded in Law 120

A controversial and heavily disputed article has been repealed by Panamanian lawmakers, following its passing on Monday. Law 120 had contained heavily buried references to changing the tax code of Panama, to enable Panamanian officials to levy fees and taxation on income earned abroad. The sneaked in tax reform has been seen as immensely damaging to Panama’s reputation as a financial haven, with politicians hastily beating a retreat from such a short sighted piece of legislation. The financial whiplash from a number of corporations and interest groups has already led to the resignation of a number of minor Finance and Legal ministers and aides.

“The Special Cabinet Council held this Thursday, January 2, adopted a resolution by which authorizes the Minister of Finance to present to the National Assembly, the bill repealing Articles 2 and 3 of Act No. 120 of 2013, which introduced changes to the Tax Code.

The project will be presented on Monday, January 6, when the National Assembly session restart your regular period.

“With this step the Government reaffirms its historic commitment to the principle of territoriality in the source for the purpose of calculating the income tax applies to both natural and legal persons operating within the country,” says the note by the Secretariat of Communication State.

Earlier, Security Minister Jose Raul Mulino, announced that a Special Cabinet Council will take to change the law, then that would qualify as outrageous, controversial tax reform.”

Source: La Prensa

 

Panama Canal Builders Threaten Halt to Expansion

The Panamanian Government is currently in negotiations with the Spanish consortium responsible for constructing the Panama Canal expansion, with the group providing 21 days notice before halting construction. Grupo Unidos de Canal, the builder, have currently gone over the $1.6 billion dollar budget, leading to a confrontation with their benefactor – the Panamanian Government. The issue over who pays the excess fee has negatively impacted the company, seeing shares plunge 8%. Panama is sticking firmly to its originally negotiated price, meaning there may be more twists and turns to this story by its resolution.

“The cost of the expansion has overrun by $1.6bn (£1bn) and the Spanish-led consortium has threatened to halt work unless the money is paid. The president said: “I will go to Spain and Italy to demand these governments take moral responsibility.”

Work began on the expansion in 2009. Construction is due to be completed in June 2015, nine months behind schedule with the overall cost of the project now expected to be $5.2bn. Spanish builder Sacyr, the leader of the consortium known as the Grupo Unidos por el Canal (GUPC), has given 21 days’ notice to resolve the dispute.”

Source: BBC

 

Panama Administration Will Continue Local Source Taxation

The present administration has been left licking its wounds after attempts to covertly impose an internationally-sourced tax on foreigners and Panamanians was thwarted. Worldwide taxation is widely seen as being disastrous to Panamanian and international corporations, with the country attracting plaudits for its simpler tax coding in the past. The strong public reaction to the now defunct article 694 has led to renewed calls to have such future legislation struck from consideration in future sessions.

“The Panama Administration accepted its mistake in trying to impose worldwide taxation instead of the local-source taxation system in place under Article 694 of the Tax Code of 1957.

The President Ricardo Martinelli blamed current Revenue Authority (ANIP) administrator Luis Cucalon for the passage of Law 120 of 2013, while Vice-Minister Luis E. Camacho assumed responsibility and current Minister of Economy Frank De Lima (author of restrictions to bearer shares on behalf of the OECD) said more consultations were necessary. The fact remains that several dozen legislators of the government Cambio Democratico party approved the law in its 3rd reading and failed to predict the onslaught of public opinion opposing this change to the Tax Code.”

Source: MyPanamaLawyer

 

The Secret Formula to Medical Care Abroad – Panama

An undercover report on the standard of medical care in Panama finds the country to have…. an impeccable national health system! While there are a number of potential complications inherent in medical tourism, the author of the piece states that Panama offers “quality care abroad that is no different than quality care in the USA.”

“Originally, I had intended to write about the “dirty secrets of medical tourism”. Nevertheless, the more time I have spent here, the more I have come to realize that quality care abroad is no different than quality care in the USA. While medical treatment abroad is categorically cheaper than in the USA (duh….); my time in Panama helped me realize that it is also ten-fold more challenging and complicated to deliver medical care in emerging nations that offer “cheap care”. To this end, PRICE is only one aspect of the “secret-formula: for choosing a treatment destination and providers of medical services abroad.”

Source: Traveling 4 Health

 

Free Downloadable Ebook – Panama Business Handbook

Put together by our legal team at POLS, the Panama Business Handbook is part of a series of ebooks written on topics relevant to our readers. We are aiming to provide expats and investors with the information they need, for free! Our main focus this week is successfully starting, owning and running a business in Panama – especially if you’re new to the way of doing business here.

They include such titles as –

We have packed each ebook with detail, providing you with the introductory legal assistance you need for potentially making the decision to make Panama your base of operations. Follow the links above to download your ebooks now!

About Manoj Chatlani


Manoj Chatlani is a Senior Partner at POLS Attorneys, a full-service law firm in Panama City, Panama. Specializing in offshore services, including asset protection, estate planning, offshore banking, and offshore corporations, as well as Panama immigration and real estate transactions, Panama Offshore Legal Services offers clients a streamlined solution to all their Panama legal needs. Manoj is a Panamanian lawyer and holds a law degree from USMA and earned a Masters in Communication Law and Panama Tax law.

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