Criminalization of Tax Evasion in Panama
On January 31 of 2019 it was enacted Law 70, which typifies the fiscal evasion as a criminal offence in the Republic of Panama and, simultaneously, as a crime that precedes to money laundering (the “Law”).[1]
Main changes
The Law establishes a new provision in the Criminal Code (Article 254-A) that penalizes with a sentence of two (2) up to four (4) years, to whoever, personally or through a third party, receives, posses, deposits, negotiates, transfers or converts monies, titles, securities, goods and other financial resources, with knowledge that these come from wrongdoings against the National Treasure, with the purposes of hiding, covering or disguising their unlawful origin, or assists to avoid the legal consequences of said punishable offences. If this crime has been committed, through one or more legal entities, the penalty can be of up to three (3) times the amount of the tax defrauded.
Additionally, the Law incorporates a new Chapter on Offences against the National Treasure (Articles 288-G to 288-J), establishing the following offences in connection with tax crimes:
Two (2) up to four (4) years who on its own or a third-party benefit, with intent, incurs in tax fraud against the National Treasure, and affects the right evaluation of a tax obligation in order to stop paying, wholly or partly, the corresponding taxes.
Two (2) up to four (4) years and fines of one (1) to three (3) times the tax defrauded, for who fraudulently obtains an exoneration, devolution, enjoyment or exploitation of inadequate fiscal benefits.
Fines of at least the defrauded amount of the tax and up to double its value, when a legal entity is used in any of the conducts typified by the Law, or it has benefitted from these.
The sanctions provided for the typified conducts are applicable when the amount defrauded of the tax in a fiscal period is equal or higher than three hundred thousand American dollars (US$300,000.00), not including, fines, surcharges and interests. The Tax Authority will have jurisdiction for the cases that are inferior to this amount. On the other hand, whoever pays unconditionally the total amount of the tax defrauded before the first instance sentence, will be exonerated from the sanction. In that sense, the person who pays during the investigation phase, will be free of all criminal prosecution for tax fraud crime.
·The Law also amends the provisions of the Law 23 of 2015 on measures to prevent money laundering.[2]
In particular, the Law establishes that the obligated financial subjects, the non-obligated financial subjects, and the activities carried out by professionals’ subject to supervision (such as lawyers, certified public accounts and public notaries), are bound to report directly to the Financial Analysis for Preventing Money Laundering and Terrorism Financing Unit of any person suspicious of being related with a money laundering crime, financing of terrorism, or financing the proliferation of weapons of mass destruction, regardless of the amount.
In conclusion
With this Law, Panama takes a step towards complying with the recommendations of the report of mutual evaluation of the Financial Action Task Force (GAFI) in matters of reception of funds and other assets linked with tax crimes committed abroad.[3]
According with GAFI, the fact the tax crimes are not typified as crimes determinant of money laundering, has an impact in the level of risk in the allocation of assets coming from illicit acts committed abroad.[4] Furthermore, the idea of the system is that the financial institutions, activities, and non-financial professions, that could potentially have access to persons suspicious of committing a tax crime, recognize, evaluate and take an efficient action to mitigate risks of money laundering and financing of terrorism.
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