Executive Decree No. 238 of June 10, 2019
REQUIREMENTS TO APPLY FOR PERMANENT RESIDENCY FOR EXECUTIVES OF MULTINATIONAL HEADQUARTERS OFFICES (“SEM” for its acronym in Spanish).
As of June 11th, 2019, the requirements to apply for the Permanent Resident Permit for Executives of SEM companies who i) continue working at a SEM company, and ii) no longer work for a SEM company.Read more
Executive Decree No. 249 of June 10, 2019
PROCEDURE AND REQUIREMENTS TO APPLY FOR PERMANENT RESIDENCY FOR FOREIGNERS WHO HAVE OBTAINED RENEWAL OF THEIR PROVISIONAL RESIDENCE PERMITS OF 10 YEARS AND 6 YEARS ARE ESTABLISHED.
As of June 13th 2019, the date on which this Executive Decree became effective, the procedure and requirements for applying to the Permanent Residency for foreigners who have obtained their 10 or 6-year Provisional Residence Permits are established.Read more
Executive Decree No. 237 of June 10, 2019
EXECUTIVE DECREE NO. 182 OF MAY 28th 2019, THROUGH WHICH THE TEMPORARY RESIDENCE PERMIT AS EMPLOYEE OF AVIATION COMPANIES WAS CREATED, IS MODIFIED.
As of June 11th 2019, the current Executive Decree for the Subcategory of Temporary Resident as Employee of Aviation Companies located in the Republic of Panama, is modified.Read more
As of May 28th, 2019, five (5) Executive Decrees were enacted to modify rules related to the granting of residence and work permits. The main changes are the following:
NATIONAL IMMIGRATION AUTHORITY.
- Stay Visa for citizens of the United States of America:
A new category of Stay Visa is created for citizens of the United States of America, for reasons of studies, investment, temporary or technical work, or labor transfer. It will be granted for a term of one (1) year, extendable annually up to five (5) more times.
- Temporary Resident as Employee of Aviation Companies:
The category of Temporary Resident is modified for Employees of Aviation Companies based in the Republic of Panama, who will be granted a residence permit for two (2) years, extendable for the same term, until completing a total period of six (6) years.
MINISTRY OF LABOR
- Work Permit for Permanent Residents:
A new category of work permit is created for permanent residents, which will be granted for a term of three (3) years, extendable for the same term.
- Work Permit for Foreigners married to a national:
It will be now granted for two (2) years the first time and the extension for three (3) years each time. Previously, it was granted for a term of one (1) year, extendable for one (1) year each time.
- Work Permit for Foreigners, within ten percent of the ordinary personnel:
It will now be granted for a term of two (2) years, extendable for the same time. Previously it was granted for a term of one (1) year, extendable for one (1) year each time.
- Work Permit for Expert or Technicians, within fifteen percent of the specialized personnel:
It will now be granted for a term of two (2) years, extendable for the same time. Previously, it was granted for a term of one (1) year, extendable for one (1) year each time until completing five years.
- Work Permit Marrakech Agreement:
The minimum number of workers that a company must have of less than ten (10) workers is established. The company must have a minimum of three (3) Panamanian workers and may only have as a foreigner the worker applying for the work permit.
- Work Permit for Professional Foreigner:
It will now be granted the term of two (2) years, the first time, and the extensions for three (3) years each time. You can apply for this work permit with a temporary ID card; that is, even by not having the resolution of approval of residence permit.
Naim Musa, Managing Director, Morgan & Morgan, Belize office
Pursuant to the International Business Companies (Intellectual Property Asset Prohibition) Regulations, 2019 and related legislation, companies incorporated under the International Business Companies Act of Belize (IBCs) shall not acquire, hold own or deal with any Intellectual Property Asset as follows:
• IBCs incorporated on or before 16 October 2017 shall not acquire, hold own or deal with any Intellectual Property Asset unless that asset is approved by the Belize International Financial Services Commission for holding IP assets up to 30 June 2021. After 30 June 2021 all Intellectual Property Assets must be disposed.
• IBCs incorporated on or after 17 October 2017 shall not acquire, hold own or deal with any Intellectual Property Asset.
Under law, “Intellectual Property Asset” means any intellectual property right in intangible assets, including but not limited to copyright, patents, trademarks, brand, and technical know-how, from which identifiable income accrues to the business (such income being separately identifiable from any income generated from any tangible asset in which the right subsists).
This law is currently in effect and we would encourage that clients take such necessary steps to dispose of all Intellectual Property Assets from any IBCs or, if applicable, seek necessary administrative approval for the holding of same. Failure to do so may result in penalties and fines.
You may forward any questions on this legislative amendment to our Belize office at email@example.com.
Fanny Evans, associate at Morgan & Morgan
The Bahamas has passed legislation requiring that certain legal entities carrying on relevant activities have to demonstrate adequate economic substance in said jurisdiction. The beneficial owners of any company or limited partnership incorporated, registered or continued in The Bahamas should be aware of this legislation and consider how they may be affected.
The Commercial Entities (Substance Requirements) Act, 2018 (“CESRA”) came into force on December 31st, 2018. It addresses the concerns of the European Union’s (“EU”) Inter-governmental Code of Conduct Group (Business Taxation) guidance for determining substance when considering whether a tax measure is harmful or ‘fair’ and the Organization for Economic Cooperation and Development’s (OECD) Base Erosion Profit Shifting (BEPS) Project.
What is the effect?
CESRA imposes economic substance requirements on all legal entities carrying on “relevant activities”.
The relevant activities are:
1) banking business
2) insurance business
3) fund management business
4) finance and leasing business
5) headquarters business
6) shipping business
7) distribution and service centre business
8) intellectual property business
9) any holding company engaged or where one or more of its subsidiaries is engaged in one of the activities listed above (1) to (8).
A company engaged in a relevant activity is, henceforth, called an “included entity”.
How can an included entity demonstrate substantial economic presence?
It must carry on core income generating activities (CIGA) in The Bahamas and the entity must be directed and managed within The Bahamas.
Firstly, it is the primary responsibility of an included entity to demonstrate that it conducts CIGA in The Bahamas proportionate to its business activities. This can be proven by having, for example, the following:
- an adequate amount of annual operating expenditure;
- an adequate level of qualified full-time employees;
- an adequate number of physical offices.
An included entity is prohibited from outsourcing any of its core income generating activities to an entity or person outside of The Bahamas; but it may outsource such activities to a service provider within The Bahamas. The included entity shall be able to demonstrate adequate supervision of the outsourced activity.
Second, an included entity will be deemed to demonstrate management and control in The Bahamas if it satisfies the following criteria:
- an adequate number of meetings of the board of directors are conducted in The Bahamas given the level of decision making required;
- there is a quorum of the board of directors physically present within The Bahamas during the meetings of the board of directors;
- strategic decisions of the included entity made at the meetings of the board of directors must be recorded in the minutes of the meetings;
- all included entity records and minutes are be kept in The Bahamas; and
- the board of directors, as a whole, has the necessary knowledge and expertise to discharge its duties.
Here we must highlight some of the permissions granted by CESRA with respect to the directors and the employees that may be positive for an included entity. One is that despite the fact that employees must be residents in The Bahamas, there is no residency requirement for board members, who only need to be physically in The Bahamas whenever a board meeting is required. No number of board meetings that must be held in The Bahamas is prescribed in CESRA. Also, CESRA is not prescriptive in stipulating which employees should attend the board meetings, this will be at the determination of the company.
What is a non-included entity?
A non-included entity is one that is:
- a tax resident in another jurisdiction and centrally managed outside of The Bahamas, even if it conducts a relevant activity;
- not engaged in a relevant activity itself or by any of its subsidiaries;
- owned by residents and centrally managed in The Bahamas, even if it conducts a relevant activity.
What are the obligations for a non-included entity?
Companies which do not carry on a relevant activity are not subject to the economic substance requirements but are subject to annual reporting obligations and will be required to register as such. An example is a holding company that is not an included entity. This passive holding company is not required to have substantial economic presence in The Bahamas but will have to comply with the annual reporting obligations.
How an entity claims to be tax resident in another jurisdiction?
As per the Guidelines, the tax residency test may be satisfied by the entity providing the following documents to the Ministry of Finance of The Bahamas:
- tax identification number issued by a foreign jurisdiction;
- tax resident certificate issued by a foreign jurisdiction;
- official receipt or statement issued by a foreign tax authority;
- certification by the entity that the majority of meetings of the Board of Directors or controlling persons took place in a foreign jurisdiction;
- the ordinary residence of the majority of the Board of Directors or controlling persons.
This certification of foreign tax residence must be filed by the entity as part of its annual filing requirements.
What are the penalties?
An administrative penalty of $150,000 for failing to comply with the requirements of CESRA with a possible further administrative penalty of $300,000 and in certain circumstances the entity concerned being struck off of the Registrar of Companies.
What is next?
All companies will need to undertake an internal review to confirm whether they conduct a relevant activity. With our guidance, they can determine what measures, if any, they should take in order to achieve compliance. In most cases, we believe that compliance will not be a convoluted matter.
What is the time period for compliance with CESRA?
Included entities incorporated prior to the 31st December, 2018 have six (6) months from January 1st, 2019 to comply. Newly incorporated entities must comply immediately. Whilst this may be an alarmingly short period of time, we believe this period can be extended or will not be enforced immediately as many questions regarding the legislation still abound.
We will leave, in our opinion, the best news for the end because we assume that after having read the above, the most important question to answer is:
Are these efforts being welcomed by the EU?
The EU has confirmed that The Bahamas has not been included on the EU’s updated list of non-cooperative jurisdictions for tax purposes (known as the EU blacklist), which was published on 12th March, 2019.
The Bahamas presented the necessary structural changes that were required; another milestone in its tax transparency regime that sends a message to the international business community that The Bahamas is open for legitimate business. The Bahamas is a premier International Financial Centre conducting business with reputable jurisdictions and financial markets. Because they have demonstrated it consistently, it is safe to say that The Bahamas will continue doing what it takes to remain as a well-regulated compliant and competitive jurisdiction.
The information contained herein is not intended to be read, accepted or used and is not provided as legal or tax advice and should not be treated as a substitute for legal and tax consultations with a professional. It is merely a summary of the latest regulations in The Bahamas that, as well as in many other jurisdictions, are being modified regularly in agreement with the OECD and the EU.
One of the biggest challenges that micro, small and medium enterprises face when trying to settle in and achieve success as profitable businesses is to obtain capital and sources of financing. Sometimes, the most common sources of financial resources – such as bank loans, private equity and public offerings of securities – are beyond the reach of these companies and, consequently, many innovative ideas that could result in booming business for the national economy and for the creation of jobs are not developed.
Another crowdfunding format is the equity crowdfunding model whereby investors provide capital and receive shares or another capital instrument that gives them the right to receive a percentage of the income generated by the business they are financing. There is also the debt-based crowdfunding model, in which investors lend funds on a temporary basis, waiting for the repayment of their investment in a certain period. In these cases, investors usually require that they be paid an interest on the borrowed capital, but models have arisen in which the participants have not demanded any consideration except the return of the amounts given in loan.
Our securities legislation requires that those securities that are going to be publicly offered in the Republic of Panama be registered first with the Superintendence of the Securities Market (hereinafter the “SMV”). The process of registering securities before the SMV consumes time and resources that micro, small and medium enterprises usually do not have. The current regulations include offers of securities that are exempt from registration with the SMV but they only allow the offer of unregistered securities to a small number of people or institutional investors and, thus, these registration exemptions do not work for crowdfunding initiatives whose purpose is to collect small sums of money from a large number of people. In order for crowdfunding to be possible without having to comply with the registration formalities, a new exemption from the obligation to register securities would have to be adopted.
The second regulatory challenge faced by crowdfunding in the Republic of Panama is that, under the Securities Act and the agreements adopted by the SMV, the operator of the Internet site that serves as a platform to facilitate the collection of financial resources have the obligation to obtain an investment adviser license, broker-dealer firm license or stock exchange license. The management of requesting and obtaining these licenses, as well as their subsequent operation, also requires investment of a lot of time and resources that, given the objective of a crowdfunding site to serve as a mere intermediary between entrepreneurs and investors, may not have to be incurred for crowdfunding purposes.
Article 128 of the Securities Act establishes the following: “Public offer or sales of securities to be made by an issuer or an affiliate or by an offerer in the Republic of Panama shall be registered in the Superintendence, unless they are exempted from such registration in accordance with the provisions of this Decree Law and its regulations. An offer or sale made to persons domiciled in the Republic of Panama shall be deemed to be an offer made in the Republic of Panama, regardless of whether it is made from the Republic of Panama or from abroad, unless the Superintendence determines otherwise.”
Paragraph 2 of article 129 establishes that “there are exempted from registration with the SMV offers of securities made by an issuer or an affiliated thereof, or by an offerer of said issuer or affiliate to no more than twenty-five persons altogether, or any such number of persons which the Superintendence may determine and which, within a period of one year, do not have as a result the sale of such securities to more than 10 persons, or any other number of persons which the Superintendence may determine.”
Article 3 of Agreement 1-2001 establishes that the following legal persons qualify as “institutional investors”: (i) banks, insurance companies, reinsurance companies, investment companies registered with the SMV, investment trusts managed by companies with trust licenses, retirement and pensions funds regulated by Law 10 of April 16, 1993, and broker-dealer firms; (ii) legal persons domiciled in the Republic of Panama, with regular operations managing investments for at least two years before the date the offer and/or sale is, which own a patrimony consisting of no less than One Million Dollars (US$1,000,000.00), according to the last audited financial statements and whose principal officers, or in their absence, the majority of Directors and Officers must have at least two years of experience in regular investment management; and (iii) Sovereign States and public entities that by their nature are authorized to make investments.
Therefore, in relation to the exemption of the obligation to register securities before the SMV, it is proposed that public offers of securities, whether of fixed or variable income (and the resale of such securities in the secondary market) that comply with characteristics similar to the following be considered exempt from registration: (i) the securities that are offered by the issuer through an Internet crowdfunding platform duly notified to the SMV (hereinafter, a “Crowdfunding Site”); (ii) the amount of capital that the issuer wishes to collect (the “Requested Capital”) shall be expressed on the Crowdfunding Site, as well as the amount of securities to be offered, its price and the proportion of total capital represented by each security; (iii) the issuer shall establish a period of time during which potential investors may express their willingness and commitment to purchase the securities (the “Commitment Period”); (iv) the securities shall be issued and the issuer shall receive the funds only when the target is met, that potential investors have expressed, within the Commitment Period, their commitment to purchase securities for an amount at least equivalent to the Requested Capital (the “Minimum Target”); (v) individuals or legal entities with an annual income of less than US$100,000.00 may invest no more than 10% of their income within a period of twelve (12) months; (vi) individuals or legal entities with an annual income of more than US$100,000.00 may invest no more than 15% of their income up to a maximum amount of US$100,000.00 within a period of twelve (12) months; (vii) any issuer that has placed securities on the basis of an exempt crowdfunding offer, by reason of having complied with all the requirements, may carry out additional crowdfunding offers; (viii) an offer of securities under the proposed exemption, if adopted, would not prohibit the issuer from making other offers, sales or transactions exempt from registration as established in Article 129 of the Securities Act (for example, the offers of securities that an issuer carries out under a crowdfunding exemption are excluded from the computation of the investors referred to in numeral 2 of Article 129 on private placements); and (ix) issuers that offer securities under a crowdfunding exception could, in any case, try to obtain financing through other sources of funding, such as bank loans and venture capital.
Notwithstanding the foregoing and with the interest of protecting the investing public, the issuers that offer securities based on a registration exemption such as the above, or similar, must be subject to compliance with the provisions of articles 246 and 248 of the Securities Act in relation to the prohibition of incurring, during the process of offering and placing the exempt securities, in fraudulent or misleading acts, in the making of false statements about a material fact or omitting to disclose a material fact.
In addition to an exemption from the obligation to register securities with the SMV, in order for crowdfunding to work as an accessible measure of financing, it is also required that operators of Crowdfunding Sites are exempt from obtaining an investment adviser license, broker-dealer firm license or stock exchange license. For the purposes of the foregoing, it is proposed that operators of Crowdfunding Sites that meet the following requirements be considered exempt from obtaining the above licenses: (i) notify the SMV of the operation of a Crowdfunding Site within five (5) business days following the launching of the Crowdfunding Site; (ii) not recommend, qualify or otherwise provide investment advisory services in relation to the securities offered through its platform; (iii) obtain the information required by Law 23 of 2015 and its regulations from potential issuers of securities; and (iv) adopt terms and conditions under which (a) the operator of the Crowdfunding Site is prohibited and, if it is a legal entity, its shareholders, directors, officers and employees, to purchase securities offered through the Crowdfunding Site, (b) the issuers of securities undertake to issue the securities in case the Minimum Target is met within the Commitment Period, and (c) the persons who wish to invest through the Crowdfunding Sites recognize that the expressions of willingness to purchase securities during a Commitment Period constitute promises to purchase the securities and pay their price in case the Minimum Target is met but granting those persons who have expressed interest in acquiring the securities the possibility of not having to purchase the securities if they communicate their wish to opt out in the financing within a set period of time before the Commitment Period expires.
The exemptions proposed in this document to encourage crowdfunding in the Republic of Panama are based on similar standards adopted in other jurisdictions. On April 5, 2012, the former president of the United States of America, Barack Obama, signed the so-called “Jumpstart Our Business Startups Act,” also known as the “JOBS Act,” which was a law promulgated with the intention of motivating the financing of small businesses in that country and resulted in the adoption of exemptions similar to those suggested here in the securities regulatory framework of the United States of America. This year, Argentina enacted Law 27,349, which, in its Title II, creates the figure of “crowdfunding systems”.
In other words, certain jurisdictions are adopting new rules so that crowdfunding is a real and accessible source for raising capital and financing for micro, small and medium enterprises. The Republic of Panama cannot be left behind in this aspect and the time is still favorable for us to take the necessary actions and measures in order to adopt rules that can help promote crowdfunding not only to our local entrepreneurs but also to attract those foreigners innovators that do not have this possibility of financing in their respective jurisdictions. Being short in this attempt may even cause our local talent to turn to other countries that have rules that encourage and facilitate crowdfunding in order to obtain funds to develop their ideas and, most likely, end up implementing them in the territory of those same jurisdictions who had the vision of accommodating this figure to help them launch their businesses in the beginning.
Mr. Vidal has over 10 years of experience advising domestic and foreign clients in complex transactions related to mergers and acquisitions, project finance, finance, securities regulation, banking law, insurance law, public bids, government contracts, financial leasing, ports, among others. He has also participated and led transactions from several industries such as insurance, ports, construction, energy, real estate, banking, securities, restaurants, hotels and retail.
On the other hand, and with more than 15 years of experience, Mrs. Aizpurua Olmos mainly advises clients in domestic and cross-border financing transactions. She has been involved on matters pertaining to syndicated lending, project finance, governmental infrastructure projects (including transportation and energy), securitization and public offerings.
With more than 10 years of experience, Mr. Raven advises in all aspects of maritime dispute resolution and claims including collision, cargo, oil spill pollution, charter party disputes, and ship mortgage executions, among others. His client portfolio includes shipowners, P&I Clubs, charterers, hull and cargo underwriters, banks and other shipping interests.
These promotions come to strengthen the usual personalized and skilled services provided by Morgan & Morgan and reaffirms our position as Panama´s leading firm.
Panama, January 2, 2019. Partners Inocencio Galindo (Banking and Finance), Francisco Arias (Corporate / M&A), Carlos Ernesto Gonzalez Ramirez (Antitrust) and Mercedes Arauz de Grimaldo (Labor) have been recognized at LACCA Approved 2019, a selection of Latin American leading lawyers in specific areas of law.
Approved lawyers have been personally recommended by members of the Latin American Corporate Counsel Association, who are all top general counsel from the top multinationals and private companies across the region.
More information on http://laccanet.com/approved/
Morgan & Morgan and five attorneys of the firm recognized by the IFLR1000 Financial and Corporate guide 2019
Panama, January 4, 2019. Morgan & Morgan received top-tier rankings in the IFLR1000´s 2019 Financial and Corporate guide in the categories Financial and Corporate and Project Development.
In addition, five (5) lawyers of the firm are listed as leading professionals in their areas of practice:
• Francisco Arias
• Carlos Ernesto Gonzalez Ramirez
• Inocencio Galindo
• Ramón Varela
• Aristides Anguizola
The IFLR1000 rankings are the result of a 6-month, in depth research project by IFLR 1000 independent editorial team who consider three main criteria: transactional evidence, peer feedback, and client feedback.
In recent days, was held the seminar “The Maritime Arbitration in Panama CECOMAP, The New Alternative”, an event organized by the Center for Conciliation, Mediation and Maritime Arbitration of Panama (“Cecomap”) and the China Maritime Arbitration Commission (“CMAC”), with the collaboration of the Chamber of Commerce, Industries and Agriculture of Panama.
The activity covered important subjects for the Panamanian and international maritime sector, and in the same highlighted the exhibitions of Mr. Francisco Linares and Mr. Juan David Morgan, Jr., partners of the Maritime Services Unit of Morgan & Morgan.
The event also served as a framework for the signing of the mutual collaboration agreement for maritime arbitration between the Republic of Panama and the People’s Republic of China, to promote the use of arbitration and mediation in maritime contracts and exchange services between both countries.
Partner Jose Carrizo, head of the Litigation and Dispute Resolution practice group of the firm, contributed with the Panama chapter of Enforcement of Foreign Judgments Guide 2019, a publication of Law Business Research Ltd.
Topics covered include: treaties, regulations and conventions, limitation periods, types of enforceable order, competent courts, defenses, judicial requirements and procedures, significance of the enforcing jurisdiction’s public policy to the enforcement of foreign judgments, awards and enforcement process.
The eBook version is available online here or feel free to download the PDF version here.