The New OECD Report On CBI/RBI And Tax Residence

Author:Mr Ricardo Cambra La Duke
Profession:CLD Legal
 
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Last year I wrote an article related to tax residence in Panama. On such article I mentioned that the OECD would be closing loopholes and forcing countries and subsequently Banks, to do more due diligence on their clients to determine where is a client tax resident. A year and a few months after I stated this, the OECD comes out with a report whereby they indicate "residence and citizenship by investment (CBI/RBI) schemes allow individuals to obtain citizenship or residence rights through local investments or against a flat fee for perfectly legitimate reasons, they can also be potentially misused to hide their assets offshore by escaping reporting under the OECD/G20 Common Reporting Standard (CRS)". Consequently, the OECD has listed several jurisdictions that have these programs and that "potentially pose a high-risk to the integrity of CRS." It was only a matter of time.

Among the countries listed as potentially posing a high-risk to the integrity of CRS is Panama. However, in my opinion, the assessment of the OECD is incorrect. The latter on its report claims that schemes that are potentially high-risk are those that give a taxpayer access to a low personal income tax rate of less than 10% on offshore financial assets and do not require significant physical presence of at least 90 days in the jurisdiction offering the CBI/RBI scheme.

In the case of the Republic of Panama, the residency schemes the OECD lists as "potentially posing a high risk", namely the Friendly Nations Visa, Economic Solvency Visa and the Reforestation Investor Visa do not provide tax residence status, but merely a permanent residence status from the immigration point of view.

To achieve tax residence in the Republic of Panama, natural persons must comply with one of two elements (one would inevitably lead to the other) and apply for a certificate of tax residence:

Remain in the national territory of the Republic of Panama for more than 183 calendar or alternate days in a fiscal year or the year immediately preceding; Establish in the Republic of Panama the center of vital interest; In my opinion, if the criteria of the OECD is to consider a jurisdiction with residency programs "potentially posing a high risk" if such jurisdiction offers "low personal income tax rate of less than 10% on offshore financial assets and do not require significant physical presence of at...

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