Panama Antes Up: AEOI Regulations Published

Peter Cotorceanu Blog, CRS, FATCA, OECD

The relationship between Panama and international tax transparency has proved a bit tumultuous over the past two years (or hadn’t you heard?). As a result, the country’s release of FATCA and OECD CRS regulations on 12 May (available here) prompted considerable curiosity (in me anyway) as to Panama’s chosen approach. Unfortunately, my poor Spanish hampers any detailed analysis of the new rules. Subject to a few specific comments below, though, nothing that I translated seems out of line with the global norms of AEOI implementation. Unsurprisingly, it seems that Panama took a safe approach. However, for any readers with Panamanian interests, you must of course review the regulations for yourself or speak to an advisor with local and Spanish-language expertise to confirm your obligations. (You might consider José Andrés Romero TEP (www.giin.tax), reachable at jose.romero@giin.tax). José is knowledgeable about all things FATCA and CRS. Indeed, this blog was written with José’s invaluable help.)

For basic organisational purposes, the key deadline dates are:

  • Start of CRS new account on-boarding: 1 July 2017. A mid-year start date is unusual but not unique. A few other countries have adopted the same approach (e.g., Australia, Canada, and New Zealand).
  • Completion of pre-existing high value individual account due diligence for CRS: 30 June 2018 (see article 19). Interestingly, identification of pre-existing individual accounts as high or lower value is to be determined based on values as of 31 December 2017, not earlier (see articles 2.3 and 2.4). Therefore, at least for accounts that fluctuate in value, it won’t be possible to know which set of pre-existing individual account due diligence rules to apply until 31 December this year. To avoid having to wait till 31 December to begin due diligence on pre-existing individual accounts, one can apply high-value account due diligence to all pre-existing individual accounts, both high and low value. That makes the value as of 31 December 2017 irrelevant. However, this is not an appealing option. High value pre-existing individual account due diligence is quite burdensome, requiring an annual “relationship manager” enquiry and, in some cases, a review of both electronic and paper records. A better alternative might be to apply new account due diligence to all pre-existing individual accounts. But that will require getting Self Certifications from existing customers, which is not always easy or even possible. The bottom line is that, unless a Financial Institution takes one of these alternative routes, it won’t be able to begin pre-existing individual account due diligence for accounts that fluctuate in value until 31 December 2017. That reduces from one year to six months the time to complete such due diligence. In addition, it creates a circularity problem. An account is not reportable until it is identified as such after application of due diligence rules. Therefore, unless one of the alternatives mentioned above is employed, no pre-existing individual account due diligence can be completed until 2018. That means that no pre-existing individual accounts would be reportable for 2017 (because due diligence wouldn’t have been completed till 2018.) But the first reportable year is 2017.  It would be odd indeed that new accounts opened on or after 1 July 2017 would be reportable for 2017, but no individual accounts opened before 1 July 2017 would. Regulatory mistake?
  • Completion of pre-existing lower value individual account due diligence for CRS: 30 June 2019 (see article 19). As noted above, a pre-existing lower value individual account is to be identified as such on December 31, 2017, not earlier (see article 2.4).
  • Completion of all pre-existing entity account due diligence for CRS: 31 December 2019 (see article 25).
  • CRS Reporting due for Depository Institutions and Specified Insurance Companies: 30 June for prior year’s tax period (i.e., first reporting deadline is 30 June 2018 for tax year 2017).
  • CRS Reporting due for Custodial Institutions and Investment Entities: 30 July for prior year’s tax period (i.e., first reporting deadline is 30 July 2018 for tax year 2017). It’s very unusual to have different reporting deadlines for different types of FIs. I understand that the Netherlands also takes this approach, but I don’t know of any other countries that do. I also find it a bit odd that 30 July, not 31 July, is the deadline for Custodial Institutions and Investment Entities. Did someone copy and paste the 30 June deadline for Depository Institutions and Specified Insurance Companies, change “June” to “July”, and forget to change “30” to “31”? That’s my guess—pure speculation, mind you.
  • Registration for Reporting Financial Institutions due 90 days after the effective date of the regulations, which was 12 May 2017. It’s not clear whether one should include 12 May in counting the 90 days, but to be safe, one should. In that case, the registration deadline is 9 August 2017.