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Recycled Tax information

February 16, 2013 by 2 Comments

This is mostly a post I wrote in August 2010 but after a recent conversation with a friend I think it is worthy of repetition. This friend is trying to sell property and suddenly discovered that there is an outstanding tax obligation on the land.

People are told there is no tax on property in Panama, that is a flat out lie. You may have a property that is not taxed if the value is low and you may have an exoneration on improvements, or you may not. If you own or buy here you need to do your due diligence or you may find yourself with a surprise tax bill, penalties and interest when you try to sell your property. Panama does not notify you of tax obligations it is your obligation to uncover them. You an signup on the DIG website and uncover your obligations, LINK to DIG

Property taxes: Panama does have property taxes, but it offers exemptions on new construction. The term of the exemption changes regularly but for some time it was twenty years on any new home construction. Now it is less and depends upon the value of the construction, the higher the value the shorter the exoneration. However you must file the correct paperwork with the correct agencies or you will have no exoneration. Your lawyer can help with this.

In addition, up to $30,000 of land is tax free. If you have a lot with a recorded purchase price of less than $30,000 it is tax free. If it is more than $30,000 there is a progressive tax schedule for the land up to 2.1% of the value.

Taxable Amount Rate percentage (%) Accumulated (US$)
Under US$30,000 zero
US$30,001 to US$50,000 1.75%
US$50,001 to US$75,000 1.95%
Over US$75,000 2.1%

Improvements, your house, are taxable from dollar one, unless you have an exoneration.

The information below is relevant as tax time for US Citizens approaches.

Income taxes: Panama does have an income tax. The most relevant portion to many expats is that income earned outside of Panama is tax exempt. You can run an internet business from your home and not pay one penny of income tax legally if your revenue is from outside of Panama.

Many countries in this world do not tax their citizens if they move to another country. The United States is an exception, US citizens are supposed to file and pay regardless of where they live. Still many people call Panama a tax haven, there are a few reasons why Panama can fit that title. However if you are from the US, you still need to file and pay US income taxes.

There is one big loophole in favor of US taxpayers who live outside of the US and work outside of the US. It is the Foreign Earned Income Exclusion.

“The foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction are based on foreign earned income. For this purpose, foreign earned income is income you receive for services you perform in a foreign country during a period your tax home is in a foreign country and during which you meet either the bona fide residence test or the physical presence test.

Earned income is pay for personal services performed, such as wages, salaries,or professional fees. The list that follows classifies many types of income into three categories. The column headed Variable Income lists income that may fall into either the earned income category, the unearned income category, or partly into both.” IRS

For details read IRS Publication 54

If you qualify by working in Panama, meet the residency test or physical presence test you have a nice tax benefit, legally.

“You must be either:

A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,

A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or

A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.”

Many CPA who do not work in the area of international taxation are not familiar with this exemption and if you work in Panama it is worth spending the time to read the rules. This alone might make being her a tax haven for you.


Filed Under: Government, Taxes

Open letter to new immigrants, you are welcome here but …

November 10, 2012 by 11 Comments

I want to be the first to say to the huddled masses who want to leave the United States after the Obama victory that you are welcome to join us in Boquete Panama. It might be helpful to understand some differences between the United States and Panama. Since I have no interest in selling you anything, you might find my perspective a contrast to the many people hustling Panama online. This post is intentionally negative, but it is also intentionally a contrast.

Panama is not part of the United States. I feel compelled to say that because I have read so many comments and questions on various Yahoo groups from people who are looking to immigrate here with families and find work in Panama. You will need a passport to enter Panama. Although English is widely spoken among educated Panamanians, the official language here is Spanish and you will need to speak Spanish to get a job or function efficiently almost anyplace outside of immigrant enclaves like Boquete.

As an American passport holder you can enter Panama as a tourist for six months and recycle that entry in one day by visiting Costa Rica. That policy can be changed and has been as little as 30 days in the past for tourists. Tourists cannot legally work in Panama. If you work as a tourist and are caught you will be fined and possibly deported. Tourists and retirees cannot work here without a work permit from the government and tourists and people with retirement visas cannot legally get work permits.

The laws are different here,  the government can create or change laws in days and they are in force as soon as recorded. Recent events have shown, when a law is very unpopular the people attempt to shut the country down until the law is repealed, they have succeeded several times recently.

Immigrants often learn the legal system is of no value to them, there are many corrupt lawyers and forget a malpractice suit, a lawyer will not sue another lawyer. Even if you can find one to file a lawsuit, he with the most wealth or best political connections will likely prevail in the lawsuit.

Many people buy property here. Too often people buy Right of Possession (ROP) property, only to discover others have claims on the land. The buyers might discover they own nothing but a document after a legal battle. You need a lawyer to make an intelligent purchase and need to hope the lawyer is honest. Just because the lawyer speaks English does not make them honest. You can buy titled property safely, most of the time but need to check on liens, tax liabilities etc before buying. There are no escrow services here and although I have heard of people selling title insurance I have never actually seen anyone benefit from Panama title insurance.

We have many English-speaking carpetbaggers here. Some of these people fled their criminal past in other countries and came to Panama because the laws on White Collar crimes like fraud are weak at best. You can buy a house from the honest Gringo and find out he never owned it. You will have little recourse and may have lost your investment.

If you are from the USA you will find your money is good here. The currency of Panama is the Balboa, but the Balboa only exists as coins, the paper currency here is the US dollar. That is convenient,  but if you believe the dollar is doomed, so is the Balboa. Unless the government decides to really upset the economy and change the currency; which they could do.

Domestic and farm labor is available and appears to be very inexpensive. However the labor laws in Panama are 99% skewed to the worker. An employee has Social Security of which you must pay a percentage. Employees are legally entitled to a month vacation each year and you need to pay decimo, a 13th month of wages each year. In essence an employee works eleven months and is paid for thirteen. You also need to pay severance after ninety days of employment, terminating an employee can be expensive . If you hire someone for $2 an hour, the real cost is closer to $2.80 without factoring in severance.

If you are fleeing socialism, it is here already. In Panama the government owns the canal, a couple of banks, half of Cable & Wireless, a telephone company, a part of the electric utility, the Colon Free Trade Zone, part of the coast to coast oil pipeline and probably a lot more. Social Security provides not only a meager retirement income but medical care also. Your medicare, medicaid and with some exceptions your health insurance will not work here. If you have Tricare you can get reimbursed, but most US health insurance does not work here in Panama.

Despite any rumors to the contrary we have taxes in Panama. There is a 7% VAT on most purchases other than food, medicine and agricultural goods. There are import duties on almost everything and transporting goods from overseas is expensive. There are property taxes and although there are some exonerations, you need to be sure you actually have them or your tax bills will grow with penalties and interest. The liability might first be discovered when you try to sell your property. If you do work, there are also income taxes and Social Security taxes.

You can start a business and as long as you do not work in your own business unless you get a work permit. You can profit from your enterprise as a shareholder but if government inspectors find you working expect a hefty fine.

With all of the negative said, if you are careful and do not check your brains at the airport Panama is wonderful. Panama is a great place to live. I have been here more than six years and love it but it does require a reset of expectations and not everyone is willing to make the necessary changes. Too many people come and leave within two years, some with less than they had when they arrived, that is my reason for the splash of ice water.  This was a counterbalance to the sales pitches that are on most internet sites about Panama. Consider the changes you need to make to adjust to a new country, visit, rent and see if it for you before you sell your assets and buy your family a one way ticket.

 


Filed Under: Contrasts, Featured, General Interest, Government, Immigration, Legal, Opinion, Taxes

Lessons for property buyers

August 8, 2012 by 16 Comments

“If we can learn from the mistakes of others rather than repeating them, we are wiser for their  experience”

If not for a post on BoqueteNing offering a slice of Eden, in still another urbanization, I probably would not have written this, Caveat Emptor check list. This is a advisory to people who plan to retire into a subdivision or just buy land  in Panama. This is not a complete list so I would ask anyone who wishes to add to it in comments.

(Please do not consider this anything negative about the Eden project.  I know nothing about the project. I am only using it as an example of a marketing piece.)

Those who chose to purchase property in a subdivision (urbanization) do so for various reasons. For some it is a sense of security, for others the sense of common community and each subdivision has other competitive virtues. If we buy into a subdivision we are paying a premium for those elements.

I am extracting this one line from the Eden post, “* There are covenants designed to protect the community without over regulation.”

As the residents of another urbanization are learning without those covenants beginning  filed with the Registrario Publico and attached to the Finca there are no protections. If the covenants say there can only be residential development and define the regualtions defining that development those will hold up only if the documents are recorded, if not they are just marketing material. Remember the highest and best use of a property might change and you do not want the lot next to yours to become the neighborhood mini super.

One more caveat emptor, not only in Panama but anyplace in the world, deed restrictions are a legal contract but unless tied to the property and legally recorded they only effect the people who signed them.  If you buy into any subdivision, anyplace, for the specific enhancements marketed by the developers be sure that the restrictive covenants for which you paid a premium are legally enforceable.

Some other questions to ask the developer and be sure the answers are in the contract.

1. Do I contract for utilities directly or are you reselling utilities. If utilities are being resold find out how much more they are going to cost you . Most urbanizations are classified as commercial businesses and if they are reselling utilities they are in the utility business. I pay about $40 a month for electricity, friends in various subdivisions pay $100 – $200 a month.

2. Who owns the water concession. Many of us do not consider water source ownership in a property purchase but none of us can live without water and in Panama all water is owned by the government, rights are conceded to someone. Boquete has balkanized water sources and none of the District is on the National Aqueduct, IDAAN. Who owns your water rights effects availability, maintenance and costs. We on Jaramillo had to fight to gain our water concession for the community and after years, ownership is still unresolved.

3. Who owns the common areas. You might have clear title to your lot, but what about the street in front of your house. If it is in an urbanization, it is a private road, not public. Who is going to maintain it? If a sequester is placed on the owner you might lose your right to access or egress from your own home.

4. Is there a home owners association legally constituted as a “persona judicial” of some type? If not you need to be sure there is and that it has clear bylaws that put the home owners, not the developers, in the drivers seat. That association should, in an ideal world get title to common areas.

5. What are the recorded prices of your lot. Lots recorded at a value of more that $30,000 have property taxes due three times a year. No one is going to send you a bill but if you are ignorant and do not pay the taxes you will have a big, unpleasant surprise at some time in the future.

6. Is your home exonerated on property taxes and for how long. Regardless of the marketing, unless the paperwork is done property and accepted by the tax people at Catastro, you will owe taxes.

7. Is the title on your lot secure. Was it actually subdivided legally, given a Finca number and free of any liens. Panama lacks title insurance, so it is buyer beware and your responsibility on any land purchase, not just a lot in a subdivision to research title.

8. Was a geologic survey done on subdivision property. Request to see it and the ANAM environmental impact study and have someone, not the developer, explain them to you. If neither was done, look someplace else.

9. One more thing not found in Panama is an escrow service. Every Real Estate transaction should have at least two lawyers, yours and theirs, never  take the suggestion that you use just their lawyer to save you some money. You need someone to watch out for your interests.

This is just a short list of due diligence needs that many of us take for granted if we come from a developed country. Panama is a rapidly developing country and although it has a law to cover all occasions those laws are not always followed nor enforced. It is easier to walk away before you make your investment than after.


Filed Under: Constuction, Government, Survival Kit Items, Taxes, Utilities Tagged With: , , ,

Agricultural Tax Exoneration, redux

July 20, 2012 by 3 Comments

Back in April I wrote about trying to extend my agricultural tax exoneration. link    In June I returned to the Ministry of Finance (MEF),  with Mayra and her sister Dina, a new, fresh out of law school lawyer. I wanted  to be sure all the ducks were lined up to resubmit in July.

MEF provided a list of needed documents and the said bring them all back in late July to get the job done.

Here is the list of steps from April.

1. Visiting MIDA in Boquete to get a list of things I needed.
2. Going to the Registar Publico in David to buy copies of the records on both the corporation and the finca. Pay and return the following day.
3. Going to Catastro to get paperwork from ANATI that the land in titled to the corporation. Free but return the next day.
4. Taking all of that, a copy of my visa and passport to MIDA in David where they provided a slip of paper to take with the pile of papers to MIDA in Boquete.
5. Scheduling and having and inspection in Boquete, wait a few days depending on availability of an inspector.
6. Having the entire pile of papers with the inspection report, signed and stamped put back into my hands to take back to MIDA in David. Return the following day for the Director’s signature.

7. The final step go to MEF, the Ministry of Finance in David where they decided they not only needed the signed, stamped document from MIDA but also the originals from ANATI, the Registro Publico and a document from a lawyer since the property is in the name of a SA not me.

8. The funcionario at MEF, logged in to the system and said, oops, too early you need to wait until the month of expiration, one in July, one in August and you need all fresh documents at that time. The signed, sealed and delivered documents all have a shelf life of no more than thirty days.

The updated list added one more document,  a power of attorney from the corporation signed by the president and authorizing me to make the request for the corporation.

I went to see my lawyer in Boquete, Julio Espinosa, to ask for the power of attorney.  I had no idea how to draft one that MEF would accept. Julio being more thorough than most,  contacted MEF himself to confirm what was needed . They added still another document, a solicitation from an attorney also requesting the exoneration.

Julio advised me to  have the power of attorney and copies of the  documents from the registrar notarized in Boquete. I assured him that I was told the registrar documents did not need to be notarized. I did get my signature on the power of attorney notarized in the Municipo in Boquete .

Julio also suggested he be the one to take the pile of paper to MEF.  I resisted because I thought I had it all together. I wanted to do it myself so I understood the procedure.  He then said that since he would be in David anyhow he would meet me at MEF.

We arrived and Julio and turned out to be correct. Suddenly late in July meant July 31, not July 19 for one of the two properties. Then after plowing through the documents we were told the photocopies of the documents from the Registrario  Publico needed to be notarized, Julio was correct,  so we went off to the notary.

In Panama notaries are a different animal than in the US. In Panama being a notary is a very profitable political appointment. Apparently it is traditional, whether legal or not, for the Notaries to purchase their five year positions from the government. There are various notaries with different authorities, the one in the office of the Junta Communial in Boquete is limited, but she can notarize signatures and copies, and some transactions under $5000. She exists because Boquete as a district does not have a real Notary.  If she cannot handle the transaction you need to go to David where there are at least two notary offices, one across from Cable and Wireless and the other next door to the Registario Publico. We chose the later, and joined the throngs inside. It took about thirty minutes to have the copies we provided stamped and signed, the cost $5 a copy.

Back to MEF to resubmit the documents on one finca and get all the official stamps. Then we hit ALTO again.  This functionario, not the same one who sent us to the notary, another, said, “I am not sure the official notarized copies will be accepted in Panama City, I will call to check.”  She vanished for a while and came back saying, yes they will work.  Who knows, the person in Panama City she spoke to might not be the one who gets the pile of papers, so they may still come back marked return to sender,  address unknown; Elvis please sign the refrain.

I did glean one useful factoid. The last government was reluctant to provide an exoneration on small farms, it took great effort to get the signature of the Director of MIDA five years ago. This time the Director of MIDA had no issues at all. At MEF I was told this government wants all agricultural land exonerated.  In fact it was suggested I do still one more segregation to remove more land from the tax rolls. Who am I to argue with that offer, so soon I will write about the experiences  that will emerge from this new endeavor. For now you can join me in smelling the coffee that might turn out to be a little less expensive with lower taxes.

Boquete Panama Coffee

Five years ago, I had the segregation, division of the property and the exoneration done by an attorney. This time I tried to do it myself and learned that using an attorney is both necessary and less expensive than doing it yourself, if you consider trips to David, frustration and time as having value.

The lesson learned is that the bureaucracy here is overwhelming and inconsistent. Even if your language skills are excellent and you have a legal education, navigation of the paper piles may be hazardous to your health.


Filed Under: Featured, Government, Survival Kit Items, Taxes Tagged With: , ,

ObamaCare what is the impact on you?

July 2, 2012 by 31 Comments

I am from a generation that lived without the need for health insurance. I remember when a doctor’s visit was affordable. I remember when hospitalization did not bankrupt a family. I remember when health care in the US was priced as it is in Panama now. Those memories are distant, because it is no longer that way in the US, and, even in Panama it is changing rapidly.

Years ago, in a land far away, I had a small business. I also had four children, and a wife with a health problem. As a small business owner, I wanted to provide health insurance for my employees; and, as the head of a family, I wanted to provide for my wife and children. Under the laws of the great State of Arizona, our company, at that time, was considered a small business; so small that no insurance company would insure anyone if they had a pre-existing condition. We needed to become part of a larger risk pool. We ended up paying a monthly fee (on top of insurance premiums) to an employee leasing company so that we could be part of their much larger pool. If not for this larger pool, we would have been uninsured in a country that provides healthcare for the poor, the elderly, government employees, and the military, but not for the small businesses and individuals that pay the taxes to cover all of those above.

That has now all changed.  If you are an American citizen, or a resident of the United States, you will be affected by the PATIENT PROTECTION AND AFFORDABLE CARE ACT OF 2010. Whether you agree with the law or not, the US Supreme Court has upheld the law against constructional challenge (surprising many, including myself. I believed, as did the Court, that the individual mandate was a stretch of the Commerce Clause. I never thought of the argument that won the day: it is within the taxing authority of the government. It seems, in retrospect, that if the government can tax for Medicare and Social Security, it can join the rest of the world for health care.

I have read the law, all 974 pages and admit that some of it is cryptic enough that I am sure portions will be back in court over and over. If you want to read the act as passed it is available for download as a PDF file at http://housedocs.house.gov/energycommerce/ppacacon.pdf .

Grab a bottle of rum and prepare to need it.  The law is long, tedious, and in parts indecipherable, due to references to other laws on the books.

For those who object to the law, I would like to quote few items, and provoke some thought. This law may upset people because they are being forced to purchase insurance. It will however benefit many who cannot now obtain insurance. By forcing all to have insurance the pool of those insured will include more young healthy people, as well as people who really need insurance because of health issues.

According the the World Health Organization 2000 report the US had not the best healthcare in the world as propaganda might make you believe, but was number thirty-seventh in overall system performance and found to be the most expensive. WHO Report this is a PDF download.

According to a 2009 Article in Business Week, 62% of personal Bankruptcies in the US in 2007 were Health Care related, Business Week . The cost of healthcare and health insurance has grown to be a massive cost for the entire country. When an indigent person goes to a hospital and cannot pay for services the hospital needs to find the money someplace: higher bills for you, more taxes to subsidize the indigent. If you have health insurance in the US, you can read insurance statements and see the difference between what you would have paid and what the insurance company rate was — vastly different numbers.

This law will shift some of that burden. Under this law people pay for insurance based upon ability to pay, the government is subsidizing with some tax credits based on income. Under this law hospitals will get paid by insurance for bills that were un-collectable.  Maybe in time this will slow the increasing costs of insurance and healthcare.

For this who think Mitt Romney will remove the law, he cannot unless Congress also votes to rescind it and I hope they do not. It was Mitt’s Medical Reform in Massachusetts that helped to create a model Federal law possible; he understands that affordable healthcare is essential.

“The Massachusetts health care insurance reform law, St. 2006, c.58,[1][2], enacted in 2006, mandates that nearly every resident of Massachusetts obtain a state-government-regulated minimum level of healthcare insurance coverage and provides free health care insurance for residents earning less than 150% of the federal poverty level (FPL).[3] The law was amended significantly in 2008 and twice in 2010 and major revisions related to health care industry price controls were introduced in the Massachusetts legislature in May 2012 with expectation that some version of these controls will pass by July 2012.” http://en.wikipedia.org/wiki/Massachusetts_health_care_reform

Blue Cross of Oregon has posted a good summary of how the new law will impact some areas. LINK . This summary shows how this law will help people. The law itself may not be perfect but most people who are negative about the law, will benefit from the law. Stop believing the thirty second sound bites, read the law.

Under this Federal act many of the same elements are covered.

People who could not buy health insurance before can.

SEC. 1101 ø42 U.S.C. 18001. IMMEDIATE ACCESS TO INSURANCE FOR UNINSURED INDIVIDUALS WITH A PREEXISTING CONDITION.

(a) IN GENERAL.—Not later than 90 days after the date of enactment of this Act, the Secretary shall establish a temporary high risk health insurance pool program to provide health insurance coverage for eligible individuals during the period beginning on the date on which such program is established and ending on January 1, 2014.

Pre-exisitng conditions are no longer a bar for obtaining coverage.

‘‘SEC. 2704 ø42 U.S.C. 300gg–3¿. PROHIBITION OF PREEXISTING CONDI- TION EXCLUSIONS OR OTHER DISCRIMINATION BASED ON HEALTH STATUS.

‘‘(a) IN GENERAL.—A group health plan and a health insurance issuer offering group or individual health insurance coverage may not impose any preexisting condition exclusion with respect to such plan or coverage.’’; and …

The law does not require you to leave your current insurer.

SEC. 1251 ø42 U.S.C. 18011¿. PRESERVATION OF RIGHT TO MAINTAIN EXISTING COVERAGE.

(a) NO CHANGES TO EXISTING COVERAGE.—
(1) IN GENERAL.—Nothing in this Act (or an amendment made by this Act) shall be construed to require that an indi- vidual terminate coverage under a group health plan or health insurance coverage in which such individual was enrolled on the date of enactment of this Act.

An insurance company can no longer cancel a customer when they have a claim.

‘‘SEC. 2712 ø42 U.S.C. 300gg–12¿. PROHIBITION ON RESCISSIONS.
‘‘A group health plan and a health insurance issuer offering group or individual health insurance coverage shall not rescind such plan or coverage with respect to an enrollee once the enrollee is covered under such plan or coverage involved, except that this section shall not apply to a covered individual who has performed an act or practice that constitutes fraud or makes an intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage. Such plan or coverage may not be cancelled except with prior notice to the enrollee, and only as permitted under section 2702(c) or 2742(b).

So what does Obama care do? It makes health care affordable to those who could not afford it but were not so poor that they already received it free. In the past the poor had Medicaid or some State equivalent.  The working might have had insurance from their job and those who were not part of a large group, or healthy had to pay the increasingly unaffordable costs of medical care in the US. The US has now joined the rest of the developed world in providing a path for it’s citizens to have affordable healthcare.

For Expats, this is how you will be affected.

Section 1501

‘‘(f) MINIMUM ESSENTIAL COVERAGE.—For purposes of this section—

‘‘(1) IN GENERAL.—The term ‘minimum essential coverage’ means any of the following:

‘‘(A) GOVERNMENT SPONSORED PROGRAMS.—Coverage under—

‘‘(i) the Medicare program under part A of title XVIII of the Social Security Act,

‘‘(ii) the Medicaid program under title XIX of the Social Security Act,

‘‘(iii) the CHIP program under title XXI of the Social Security Act,

‘‘(iv) the TRICARE for Life program,

‘‘(v) the veteran’s health care program under chap- ter 17 of title 38, United States Code, or

‘‘(vi) a health plan under section 2504(e) of title 22, United States Code (relating to Peace Corps volunteers).
‘‘(B) EMPLOYER-SPONSORED PLAN.—Coverage under an eligible employer-sponsored plan.

‘‘(C) PLANS IN THE INDIVIDUAL MARKET.—Coverage under a health plan offered in the individual market within a State.

‘‘(D) GRANDFATHERED HEALTH PLAN.—Coverage under a grandfathered health plan.

‘‘(E) OTHER COVERAGE.—Such other health benefits coverage, such as a State health benefits risk pool, as the Secretary of Health and Human Services, in coordination with the Secretary, recognizes for purposes of this sub- section.

and this section relevant to those who live out of the Uniied States.

Section 1501

‘‘(4) INDIVIDUALS RESIDING OUTSIDE UNITED STATES OR RESIDENTS OF TERRITORIES.—Any applicable individual shall be treated as having minimum essential coverage for any month—

‘‘(A) if such month occurs during any period described in subparagraph (A) or (B) of section 911(d)(1) which is applicable to the individual, or

‘‘(B) if such individual is a bona fide resident of any possession of the United States (as determined under sec- tion 937(a)) for such month.

Section 911(d)(1) is part of the Internal Revenue Code

“(d) Definitions and special rules

For purposes of this section—
(1) Qualified individual

The term “qualified individual” means an individual whose tax home is in a foreign country and who is—
(A) a citizen of the United States and establishes to the satisfaction of the Secretary that he has been a bona fide resident of a foreign country or countries for an uninterrupted period which includes an entire taxable year, or
(B) a citizen or resident of the United States and who, during any period of 12 consecutive months, is present in a foreign country or countries during at least 330 full days in such period”
I was asked about the provision requiring a RFI chip implant, I cannot find any such provision in the law. If it is there please provide a section.
I urge Americans to realize that health care in the United States is currently run by the insurance companies. This law will require those insurance companies to provide better service to the population and will regulate how much they can charge for services.
It is a comprimise law, although the idea is repugnant  to many Americans it would probably cost us all less if there was one insurance pool like medicare and one government agency running things.  Alas without understanding that Capitalism is defined by profits not service, people in the the US blindly follow the need to allow the insurance companies to grow and profit at their expense. Too many people are against this law without understanding the need.  Most opposed to the law will benefit in both the long and short run.
For much more information on the law and how it will impact you read. http://www.healthcare.gov/index.html
If you live in Panama you might wish the law extended here so that you could buy health insurance here from all those companies that will not insure you now.
The Clintons tried in 2003 to do what would have been better, but as in all things governmental it took seven more years, another  President and rolling over to the interests of those lobbies that will profit from the new law. Clinton Proposal Link

 


Filed Under: Featured, Government, Health Care, Survival Kit Items, Taxes Tagged With: , ,

Playing Monopoly in Panama

April 24, 2012 by 1 Comment

I wrote about working on renewing my five year agricultural exoneration for my Boquete farms. I have been working on this for weeks, yesterday I hit the last step and was told to return to GO, not to collect $200, wait three months and start all over.

My experiences with the Ministry of Finance (MEF) have always been similar to wading through cold molasses and I expected the same on this process. I started early, April for exonerations that expire in July and August thinking, incorrectly, that they would need months to transmit the pile of papers to the Capital for processing; wrong.

These are the steps again

1. Visiting MIDA in Boquete to get a list of things I needed.
2. Going to the Registar Publico in David to buy copies of the records on both the corporation and the finca. Pay and return the following day.
3. Going to Catastro to get paperwork from ANATI that the land in titled to the corporation. Free but return the next day.
4. Taking all of that, a copy of my visa and passport to MIDA in David where they provided a slip of paper to take with the pile of papers to MIDA in Boquete.
5. Scheduling and having and inspection in Boquete, wait a few days depending on availability of an inspector.
6. Having the entire pile of papers with the inspection report, signed and stamped put back into my hands to take back to MIDA in David. Return the following day for the Director’s signature.

7. The final step go to MEF, the Ministry of Finance in David where they decided they not only needed the signed, stamped document from MIDA but also the originals from ANATI, the Registro Publico and a document from a lawyer since the property is in the name of a SA no me.

8. The funcionario at MEF, logged in to the system and said, oops, too early you need to wait until the month of expiration, one in July, one in August and you need all fresh documents at that time. The signed, sealed and delivered documents all have a shelf life of no more than thirty days.

It was a time consuming, expensive lesson in Panamas bureaucracy. The only only upside is I now know all the steps and can hop through them faster next time an you, if you need to do this do not need to learn the hard way, I did it for you.

 

 


Filed Under: Featured, Government, Taxes Tagged With: , ,

Being a farmer in Panama

April 19, 2012 by 3 Comments

I am not a farmer, however to gain a tax exoneration, I am a farmer. I am now growing citrus, coffee and some vegetables on my finca. It is probable I will gain more from the tax exoneration then I will from the sales revenue, so it is worth the effort.

Last week I went to the MIDA (Ministry of Agriculture) nursery in Concepcion Bugaba. I purchased two hundred coffee plants at $0.35 each and ten Avocado trees for $1.50 each; more crops.

MIDA Bugaba

Coffee plants

Yesterday the MIDA inspector, a delightful woman from the Boquete office came to the farm. She inspected advised and suggested I have a MIDA coffee expert visit. She also suggested I provide some soil samples to IDIAP, they have an office adjoining MIDA in Boquete.

We returned to MIDA with samples and she prepared my paperwork for my next trip to David. So far the steps for this exoneration included.

1. Visiting MIDA in Boquete to get a list of things I needed
2. Going to the Registar Publico in David to buy copies of the records on both the corporation and the finca.
3. Going to Catastro to get paperwork from ANATI that the land in titled to the corporation
4. taking all of that, a copy of my visa and passport to MIDA in David where they provided a slip of paper to take with the pile of papers to MIDA in Boquete.
5. Scheduling and having and inspection in Boquete.
6. Having the entire pile of papers with the inspection report, signed and stamped put back into my hands to take back to MIDA in David.
7. NEXT?? When I know I will share.

My goal now besides exoneration is to increase my coffee crop over the next two years. It is almost one year from blossom to the cup and last year was a disaster. If the weather gods are kind this year might be better. The new plants will produce in 3-4 years but I many older plants that have done well in the past.

Who knows maybe I will have some Fina Ferdabella coffee to sell next year at this time.


Filed Under: Featured, Government, Taxes Tagged With: , ,

Agricultural Tax Exoneration

April 2, 2012 by 2 Comments

This post might be a curiosity to most but of interest to a few. One of the partial truths told by Real Estate promotors is that Panama has no property taxes. It is a partial truth because if your land does not host a condominium the first $30,000 valuation is tax free, the rest is taxable. In addition if you make improvements, build a house, there may be a an exoneration for up to twenty years.

This is not about the houses but about the land. If you have a farm with no house and a value of up to $150,000 there is also a five year rolling tax exoneration.

Picking Coffee Boquete Panama
I call it rolling because you need to reapply each five years. My anniversary is in August and knowing the speed of the government I started the process a week ago.

This the pile of papers you need:
1. Copy of your cedula or passport
2. If a pensionado a copy of your carnet
3. If your property is owned by a corporation a document from the Registro Publico showing you are authorized to act for the corporation. We discovered that the document must be current, $30.
4. A copy of the property registration to you or your corporation from the Registro Publico, within the past year, $30
5. A Certification from Catastro and Anati that the property is in good standing and is owned by your or the corporation. Free!
6. A letter and a copy signed by the authorized representative of the corporation or you if the land is in your name to Director of MIDA in David requesting the exoneration.

We now have the pile of papers and they need to be delivered to MIDA this week. MIDA will then order an inspection of the property to be sure it is really a farm.

Once that is done we wait for the next steps in the paper trail. Hopefully the exoneration will be issued before August. I am still six years into another exoneration request for a house. Things move slowly.


Filed Under: Featured, Government, Taxes Tagged With: , ,

A perception of corruption

March 29, 2012 by 9 Comments

Recently I have been stuck in the mud, not on a road, but about a road and my unwillingness to pay for road repairs on a public road; actually two roads. Both roads are on Jaramillo, one is bad, the other is worse. Both are being repaired by MOP the Ministry of Public Works, in both cases the expat community is subsidizing the work; not the government or me.

Road Repairs on Jaramillo Boquete Panama

Road Repairs on Jaramillo Boquete Panama

For years the roads up Jaramillo have been failing, one literally slipping off the mountain another turning back into the cow path it once was. The problems on the slipping road started before the guarantee from the road builder ended; they never fixed it. Then MOP continued to allow things to slip away. Recently I noticed work has begun on one dangerous curve, I thought, about time. Only later did I get an email explaining the funds for the repairs were provided by expats who felt it was an investment in safety. I perceive it as an investment in corruption.

The other road, far worse was once paved and five years ago was the best road up Jaramillo. It was paved by a payoff by developers who wanted to sell lots on Jaramillo, they left and the road was left to fall into decay thereafter.

Panama is not the only country in the world that is perceived to have a problem with corruption. In 2010 Transparency International which does an annual survey on perceptions of corruption rated Panama as 73, tied with Bulgaria, El Salvador, Vanuata and Trinidad & Tobago; the US was at 22 and Canada at 6 of a total of 178 countries. In 2011 the US, Canada and Panama have all slipped, the US at 24, Panama at 86, Canada 10.

The difference here and with others low on the list is that people see corruption first hand. Corruption in developing countries is equal opportunity and at all levels. Much of the corruption in the developed world is legal, therefore not perceived as corruption. Buying a politician or ten with legal campaign contributions is just as corrupt, but legal, as paying an incentive to get a road fixed, settling a speeding ticket on the spot or “motivating” a government employee to move your folder to the top of the pile.

Corruption is endemic in government world wide, it is illegal capitalism. I did not support it in the US, although I did experience it and I will not support it in Panama. If stopped for a traffic violation, I take the ticket and when approached to subsidize a road repair done by government employees, using government materials and government equipment I said no.

It is certainly possible that there is no corruption involved in our road repairs, I know the person who is authorizing the repairs is of the wrong political party and has little budget this year. It is entirely realistic to believe all the money collected is going to the purpose intended. Still I view that is the role of government to make these repairs and amazingly where there are not “deep pocketed” expats to lean on, the jobs still get done. I therefore “perceive” corruption.

The problem with yielding to the temptation of getting things done with a little grease is that the wheels squeak more often once greased once and more grease needs to be applied when it is known it is available.

Some argue, extranjeros do not pay taxes here, that is wrong. We pay more in taxes than most locals. Some of us pay property taxes, all of us pay taxes every time we buy anything in a store or fill up in a gas station. Many of us hire locals and pay Social Security taxes and more.

In my perception of the world, I pay taxes to support governments, I actually pay in two countries, the US, in my opinion is far more corrupt than Panama. I just never bought a politician. I get back very little in either country for my legal “contribution” but taxes are inevitable. Subsiding government functions and functionaries with donations here or there, is not on my agenda.


Filed Under: Featured, Government, Legal, Taxes

US Taxpayers, FATCA and Social Security

March 25, 2012 by 5 Comments

A question was posted on BoqueteNing.com about whether FATCA will require banks to withhold 30% of Social Security Deposits made to Banks in Panama that as not signatories to FATCA. Steven Mopsick, the tax attorney who spoke in Boquete earlier this year did some investigation on this and here is the information from him.

Hello to Lee and all  my friends in Boquete:

I finally heard back from my contacts in the IRS National Office on the question of whether payments to recipients of Social Security benefits living abroad will be subject to 30% FATCA withholding.  In other words, is there withholding on  people who are now receiving their Social Security checks by either direct deposit to a foreign bank, (as in a bank in Boquete)  or getting the checks mailed directly to them?

I knew the answer was “no,” but I wasn’t sure of the legal authority for it.

The proposed FATCA Regulations say, at §1.1471-2(a) “….. a withholding agent must withhold 30 percent of any withholdable payment made after December 31, 2013, to a payee that is” a Foreign Financial Institution (FFI.)

Since the payee on Social Security checks is the person receiving the benefit and not an FFI, no withholding is required.

Best regards,

Steve Mopsick
Federal Tax Attorney
Not admitted in California
Practice Limited to Matters before the
Internal Revenue Service
United States Treasury Department
United States Tax Court

On the Web | Steve’s Blog | LinkedIn |  Twitter
3600 American River Drive, Suite 220
Sacramento, California 95864
t 916-550-5363 f 916-550-5059

Steve@mopsicktaxlaw.com

 


Filed Under: Government, Taxes
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