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Saturday, May 28, 2022

Panama Regulates Cryptocurrency Operations and its use in Tax Payments

Panama’s Congress approved Thursday a law regulating the optional use of cryptocurrencies, even allowing the payment of taxes with these assets in the country, which is struggling to shake off the stigma of “tax haven”.

The new law, which has yet to be enacted by President Laurentino Cortizo to become effective, regulates the “use of cryptoassets as an expression of contractual freedom and monetary freedom in the Republic of Panama”, whose economy is dollarized.

According to this regulation, natural and legal persons in Panama may “freely agree to the use of cryptoassets” such as Bitcoin or Ethereum, among others, “as a means of payment for any legal civil or commercial operation”.

It also allows the country’s official bodies “to receive payments (…) for taxes, fees and other tax obligations in cryptoassets”. This is to be regulated by the Ministry of Economy and Finance and the Government Innovation Authority.

In September 2021, El Salvador became the first country in the world to authorize the use of bitcoin as legal tender, and established its acceptance in all businesses.

“The law seeks to give legal clarity to the optional use of cryptoassets in the Republic of Panama” and “create licenses to facilitate foreign and local investment of companies working in the cryptoassets sector”, explained Congressman Gabriel Silva, promoter of the law.

All this, Silva assures, “under the umbrella of FATF regulations and recommendations regarding money and asset laundering”. The Financial Action Task Force (FATF) is an intergovernmental entity based in France, which develops policies to prevent money laundering.

Panama is on the FATF’s “gray list” and is considered a “higher vigilance” country, working to improve its systems against money laundering and terrorist financing. It is also on the European Union’s list of “tax havens”.

This Central American country was involved in 2016 in the “Panama Papers” scandal, a journalistic investigation that revealed how personalities from around the world hid money through the Panamanian law firm Mossack Fonseca, and allegedly evaded taxes. The case will go to trial this year.

In 2021, law firms in Panama were also pointed out in the “Pandora’s Papers” investigation as facilitators for the formation of opaque companies where fortunes of well-known personalities were hidden.

Since the 2016 scandal, according to specialists, Panama has imposed greater requirements for the formation of companies or corporations, which allow the identification of the origin of the funds and their owners.

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