Panama Retaliates against Sanctions Launched by 20 European, Latin American and Asian Nations

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The list follows initial sanctions against Panama by the European Union - EU and the Organization of Economic Cooperation and Development (OECD) by including the Isthmus in a "black list" of non-cooperative low-tax jurisdictions and levying penalties on transactions by Panama nationals.

A joint resolution was released by the ministers of Foreign Relations, Economy, and Trade of Panama with a list of countries which discriminate against Panama entities, in order to protect economic and commercial interests of the Isthmus.

The initial list has 20 jurisdictions in Latin America, Europe and Asia is the first step in an evaluation of self-defense actions towards countries
which apply discriminatory or restrictive economic sanctions against the Republic of Panama, as established by Law 48 of October 26, 2016, on Economic Retorsion or countermeasures. Retorsion is a term used in international law for an act perpetrated by one nation upon another in retaliation for a similar act perpetrated by the other nation. The typical methods of retorsion are the use of comparably severe measures against citizens of the foreign nation found within the borders of the retaliating nation.

Several of the European countries already had launched initial sanctions against Panama by including the Isthmus in a "black list" of non-cooperative low-tax jurisdictions of European Union - EU and the Organization of Economic Cooperation and Development (OECD) and levying penalties on transactions by Panama nationals. This is in effect a trade war started by these countries despite the fact that in the last 10 years the Panamanian government and private sectors have invested millions of dollars in staff and hardware for know-your-customer systems and tax information exchange mechanisms.

Companies and individuals from these 20 countries are now subject to administrative measures to be determined. Current law would allow their exclusion from competing in government procurement bids held by the Panama Canal and the Government of Panama. Brazilian and French companies such as Odebrecht and Alstom, respectively, are known as frequent bidders in multi-million dollar Panama government procurement competitions.

The countries included in the list and their respective anti-Panama laws are:

- Brazil, Normative Instruction 1037/10 of June 4, 2010,

- Chile, Decree 628/2003 of December 3, 2003 and Article 41-H of the Income Tax Law,

- Colombia, Decree 074 of Januar 23, 2013,

- Ecuador, Resolution NAC-DGERCGC-433 of August 9, 2013,

- El Salvador, General Orientation Guidelines DG-001-2017 of September 28, 2017,

- Peru, Supreme Decree 45-2001 EF of March 20, 2001,

- Uruguay, Executive Power Decree 40/017 of February 13, 2017, and Resolution 1315/2017 of March 14, 2017,

- Venezuela, Administrative Providence SNAT/2004/0232 in GO 37,294 of April 26, 2004,

- Croatia, Article 31 of Corporate Tax Law,

- Slovenia, Article 8 of Corporate Tax Law,

- Estonia, Subsection 10(3) of Corporate Tax Law and Low-Tax List of April 18, 2014,

- France, Decree of April 8, 2016

- Greece, Law 4172 of July 23, 2013 and Law 2905 of December 31, 2015,

- Lithuania, Ministry of Finance Order 344 of December 22, 2001, and Chapters VI and VII of Corporate Tax Law,

- Poland, Ministry of Development and Finance Order of May 17, 2017,

- Portugal, Decree 345-A 2016 of December 30, 2016,

- Cameroon, Article 8-b-1 of General Tax Code,

- Georgia, Decree 615 of December 29, 2016, and Decree 132 of May 30, 2013,

- Russia, Ministry of Finance Decree 108 of November 13, 2017, Federal Tax Service Letter MMV-7-17-117 of March 1, 2016, and Foreign Controlled Corporations Rules, and

- Serbia, Corporate Tax Law Regulations in GO 122 of December 26, 2012.

Investors from these countries planning to do business with the government of Panama should contact local counsel in order to seek alternatives for procurement transactions. Entities which have as clients Panama private businesses are not affected by the measures.

The full text of the Resolution is available from the author or the Gazette website.

ABOUT THE AUTHOR: Alvaro Aguilar-Alfu
Alvaro Aguilar is an attorney specialized in asset protection, foreign investment, mergers & acquisitions and other Business Law matters. The author is a member of Lombardi Aguilar Group, a Panama law firm with experience in intellectual property, licensing, business, administrative and commercial law.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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