The Republic of Panama declared on July 15, 2016 its intention to sign the Convention on mutual administrative assistance in tax matters. It means that another popular offshore jurisdiction is close to joining the emerging global tax information exchange system.
It is known that Panama for a long time has been demonstrating very “conservative” policy with respect to international tax transparency. As a consequence, it still has very small network of bilateral tax treaties in force: only 14 agreements for avoidance of double taxation and 8 tax information exchange agreements. However, the country’s accession to the OECD Convention can fundamentally change the situation.
The said Convention is the multilateral instrument covering almost all forms of tax cooperation for countering tax evasion. It was developed jointly by the OECD and the Council of Europe in 1988 and after modification made in 2010 it was opened to all countries for signing. For today the renewed Convention has been ratified by more than 80 countries.
In the meantime, this is not about Panama’s participation in the notorious “automatic” exchange because the main form of legal assistance under the Convention is exchange of information on request. The automatic exchange will only be possible in case if Panama assumes a commitment under the Multilateral Competent Authority Agreement (MCAA) in accordance with the Common Reporting Standard (CRS).