International Company Formation_news
Panama, July 22, 2021. Morgan & Morgan is pleased to announce that, for the sixth consecutive year, the firm´s Private Wealth Law practice group earned a top ranking (Band 1) in the 2021 Chambers Hight Net Worth Guide, a prestigious publication aimed at the international private wealth market and a key reference point of the world´s leading firms in terms of service excellence and reputation.
“Chambers quotes an important institutional client saying: “ I don´t think there is a law firm as excellent as them in Panama. If we have something in Panama, we always go to Morgan & Morgan. They are knowledgeable, they provide an excellent service to clients and they are good to work together with.”
Six of Morgan & Morgan’s attorneys were also distinguished with top rankings as Notable Practitioners in the above-mentioned guide:
Roberto Lewis Morgan, partner, (Band 1) is head of the practice and has a depth of expertise in wealth preservation and succession matters, including private foundations and corporate vehicles. A client commented to Chambers that he “is someone with a fantastic reputation. He is very good creating structures for clients and he is very, very clever” and is “the go-to lawyer for foundation matters.”
Raul Castro, partner, (Band 2) is an advisor to the Panamanian government regarding international tax matters, CRS and FATCA implementation. One market insider says to Chambers “He is a smart attorney with a very good insight into international matters. He is good at handling complex matters and is always coming up with creative solutions for clients.”
Luis Manzanares, partner, (Band 2) has substantial experience in wealth preservation matters, including tax and succession planning advice on investment funds, trusts, and private interest foundations. “Very knowledgeable on foreign trust issues. He is a very client-oriented and great to work with.” says one client to Chambers.
Luis Miguel Hincapie, partner, (Band 3) is regularly assisting the firm´s South American clientele, and oversees the firm´s business strategy in Asia with a special interest in China. “He has a lot of expertise on international matters, which makes him a great asset to have on your side. He can handle very sophisticated matters,” said one client to Chambers.
Fernando Boyd, partner, (Up and Coming) is recognized for his knowledge of Panamanian Corporate Law and has ample experience in the creation and administration of complex multi-client and multi-jurisdictional structures. “He is an awesome lawyer. He is very responsive, very on top of details and definitely somebody to watch,” said one client to Chambers.
Laura Barrios, senior associate, (Associates to Watch) is considered one of Panama´s most knowledgeable tax treaty and CRS and FATCA reporting expert in the region. “She is very smart and responsive. She is very knowledgeable on Panamanian legislation and guidance for private clients. A fantastic attorney.” says one client to Chambers.
Morgan & Morgan has a seasoned team of lawyers with vast experience in traditional wealth protection and management structures such as discretionary and non-discretionary trusts, private interest foundations and corporations. More than five years ago, the firm started a new practice led by a group of young lawyers with vast knowledge in modern and tax compliant structures tailored for high net worth individuals and families.
More information on this recognition is available here.
Fanny Evans, Senior Associate, Morgan & Morgan
What is the CTA?
The CTA was enacted on January 1st, 2021 as part of the National Defense Authorization Act to prevent the use of companies to evade anti-money laundering rules or to hide other illegal activities. Under the CTA companies will be required to report information regarding its beneficial owners with a beneficial ownership registry maintained by the United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
When is the effective date for the CTA and regulations?
The CTA will become effective on the date that its regulations are prescribed and issued by the Secretary of the United States Treasury, which shall be promulgated within one year after the enactment of the Act- that date being January 2022.
Who must report?
Entities required to report are called “reporting companies” under the CTA. A reporting company is broadly defined under the CTA as a corporation, limited liability company or other similar entity that is created under state law or formed under laws of a foreign jurisdiction and registered to do business in the United States. It is unclear whether a similar entity includes partnerships or trusts, and it is expected that the regulations will provide some clarity in this regard.
Who is exempt from reporting?
The CTA contains the exclusion of categories of entities from the definition of reporting company. An entity that falls into one of these categories will not be required to submit beneficial ownership information to FinCEN. To review the list of the exclusions CLICK HERE.
Who is considered a beneficial owner?
An individual who exercises substantial control over the company or who owns or control at least 25% of the company, and applicants, defined as anyone who files an application to form the company or register a foreign company in the United States. The CTA does not explain what constitutes “substantial control” and it is expected that the regulations will provide some clarity in this regard.
What information on the beneficial owner will be reported?
- Full legal name,
- Date of birth,
- Current residential or business street address, and
- A unique identification number, which can be from a non-expired US passport, non-expired US or state government ID, non-expired driver’s license, or a valid foreign passport.
Every reporting corporation must file a report within one year of the beneficial ownership information changing. Changes that trigger this report include (i) a change in substantial control of the reporting company, (ii) a change in contact details for a beneficial owner or applicant, and (iii) beneficial ownership exceeding or dropping below 25%.
Who has access to the FinCEN database?
The information collected in the FinCEN database will not be publicly available; but will be available to federal agencies engaged in national security, intelligence, or law enforcement activity, state or local law enforcement if authorized by a court.
Financial institutions may also receive this information with the consent of the reporting company.
What are the deadlines to report?
a) Any reporting company that is existing at the time regulations are effective must file the report within two years of the effective date of the regulations.
b) Any reporting company created after the effective date of the regulations must file the report while forming the corporation.
What are the sanctions?
Any person who willfully provides, or attempts to provide, false or fraudulent beneficial ownership information, including a false or fraudulent identifying photograph or document, or fails to file complete or file accurate reports or fails to provide updated reports will face penalties of up to $10,000 (accruing at $500 per day that the report is outstanding) and/or imprisonment for up to two years.
Disclosing or using beneficial ownership information without authorization is also subject to a $500 per day penalty and a penalty of up to $250,000 and/or 5 years imprisonment.
For more information, we suggest you contact a suitable attorney in the United States.
The information contained herein should not be interpreted, accepted, construed, or used and is not provided as legal advice and should not be treated as a substitute for legal consultations with a professional. It is merely a summary of the Corporate Transparency Act recently issued in The United States. Please note that the legislation referred to herein may be modified.
Following the introduction in the British Virgin Islands (BVI) of the Economic Substance (Companies and Limited Partnerships) Act, 2018 (ESA), which became effective on January 1st, 2019, some questioned the sustainability of BVI’s position as a leading international financial centre.
While we cannot underestimate those concerns, we believe that there is also evidence that ESA will not have a negative impact on the BVI. In fact, it will help to curb any irrational fears that may have been detrimental to businesses, families, investors, and professionals using BVI vehicles in the recent times.
Although the economic substance reporting period has not concluded, my recent research supports the premise that despite introduction of this new legislation, BVI’s legal system and corporate services platform will remain stronger than other jurisdictions for international business activity.
You may be asking how can we be so positive? It is because for years we have witnessed the BVI maintain the crucial “philosophy” of a financial centre that is necessary for its success.
This philosophy is composed of human capital, technology, and the ability of regulators to make effective new laws with the support of highly sophisticated service providers. This means that any issues arising from rapidly evolving financial markets or instructions given by the European Union and the OECD in their efforts to enhance tax transparency can be dealt more efficiently. Expertise, talent, and technology are the key driving forces for the world’s leading financial centres.
Over the last decade BVI has had various changes in its legislation that have impacted the financial industry positively such as:(1) maintaining beneficial owner’s due diligence in its territory, (2) the private registry of beneficial owners (BOSS), (3) mandatory filing of company’s register of directors (ROD), (4) maintaining accounting records and underlying documentation and, (5) reporting obligations on ESA just to name a few in no particular order. Some of these changes have been more challenging than others but they all have one thing in common: BVI´s successful “philosophy”.
By reading the ESA and the Rules issued by the International Tax Authority you can tell that the regulator consulted professionals from law firms, trust companies and corporate service providers of the highest caliber with presence in the BVI when drafting the legislation. Whereas, in other jurisdictions it seems that they just decided to play safe and please the requests of the European Union overlooking what their financial industry needs to, not only survive, but grow.
We have reviewed the law and guidance notes on the economic substance of various jurisdictions and concluded that the ESA has provisions that makes it practical and convenient. We will give you three important and clear examples. The first, is the treatment of the companies that serve as holding businesses under the ESA. BVI took a straightforward approach by only placing its interest on the pure equity holding companies which are subject to a reduced substance test that can be met through the company´s registered agent; instead of having different categories of holding businesses as it is in other jurisdictions. This has allowed us at Morgan & Morgan to develop suitable solutions for our clients.
The second example is the treatment of the financial periods. ESA has two financial periods depending if the company was incorporated before or after the implementation date of the ESA. Therefore, just by looking at the incorporation date of the company you can tell its financial period. This method is valuable for a corporate service provider because it may have positive impact in their workload when reporting and advising clients. Furthermore, this approach makes simpler the management of a portfolio of companies for a corporate service provider rather than having the financial period defined by the company´s fiscal year, as it is very likely that will be different for all the companies they represent.
The third example is the reporting period. In some jurisdictions the reporting period is 6 months and in others 9 months; but all jurisdictions have in common that the reporting period is counted from the end of the financial period or fiscal year. Unlike other jurisdictions, in the BVI all companies incorporated before the ESA effective date have the same financial period and therefore the same reporting period. This makes easy to manage the annual reporting obligations for a high volume of companies.
Now, let´s talk about the technical side of ESA. BVI tied the ESA with their Beneficial Ownership Secure Search System Act, 2017 (the “BOSS Act”). Same as in other jurisdictions, annual reporting is mandatory, but it is so easy to do that this should not scare clients away. The BVI government partnered with the same auditing firm that developed the BOSS system to create the system for ESA, called BOSSes. At Morgan & Morgan we developed a similar system that facilitates clients providing us with the information on their companies and also makes it easier for us to report to the competent authority because we both are up to the same level of technology. It is difficult for corporate services providers to convince clients to comply with economic substance legislation in jurisdictions where the reports are to be submitted manually. BVI knows that its stability and future prosperity is inextricably tied to the efficient and safe use of digital technologies.
In June 2020, the BVI Financial Services Commission published its Statistical Bulletin. We were pleased to read that at said date the Registry of Corporate Affairs has the impressive total of 375,832 companies that have placed their confidence in the BVI philosophy. This figure and the past decade show us BVI is very aware that it has a financial sector that is becoming increasingly complex. With a more discerning and savvier clientele, and the competition among financial centres is heating up, the BVI is ready to prevail as one of the world´s premier jurisdictions.
For more information on these topics, please contact:
Morgan & Morgan
April 9, 2020.
At Morgan & Morgan we continue to look for ways to provide our services and continuity to the flow of information on changes in legislation in the different jurisdictions we have presence.
In light of the above, we are pleased to announce the launch of our podcast “Morgan Updates”.
This effort will feature key points on the latest legislations and developments relevant to our offshore jurisdictions.
In this first episode we will update you on the BVI Economic Substance Act (ESA), such as:
• All BVI companies are now required to comply with ESA, the BVI government has not extended the deadline.
• Key obligations to BVI companies you need to understand
• All BVI companies are obliged to file an annual report to the BVI competent authority this year
• We will guide you through the process so you can comply with the obligations
• We have worked on different and suitable solutions for your vehicles
Please contact at [email protected] so we can begin this process or to resolve any doubt or enquiries you may have.
Panama, December 16, 2019. Morgan & Morgan repeated as a leading Panamanian firm in The Legal 500 – Latin America Guide. Banking and Finance, Corporate and M&A, Dispute Resolution, Intellectual Property, Offshore and Shipping earned the top-tier rankings.
In addition, five lawyers of the firm received recommendations:
In order to comply with the international guidelines regarding corporate transparency, the government of Panama enacted Law 52 of October 27, 2016 in the Official Gazette, which establishes the obligation for Panamanian companies and other entities to maintain accounting records, financial records and supporting documentation of all transactions that took place during the last five (5) years, so that their financial status can be easily determined with reasonable accuracy.
The corresponding records and documentation should be sufficient to demonstrate and evidence the transactions executed by the company accurately.
To whom does this Law apply?
Law 52 was regulated by Executive Decree No. 258 of September 13, 2018 and is applicable to legal entities that do not carry out operations to be completed or that will not have effects within the Republic of Panama.
Legal Entities are any corporation, limited liability companies, any other legal entity for commercial purposes and private interest foundation, incorporated and in force in accordance with the laws of the Republic of Panama
Regulations established in the Law
Accounting records must be held by the Resident Agent; otherwise, the clients are obliged to provide to the Resident Agent the physical address where they are held and the name and contact information of the person in charge of keeping these documents in custody. Additionally, if there is a change of address for any reason, the client must inform the Resident Agent of the new address within the next fifteen (15) days.
If the information is not kept by the Resident Agent, it must be delivered to it within the next fifteen (15) days counted as of the date on which this information is requested.
Additionally, Resident Agents are required to keep a copy of the records of shares and shareholders of the companies under their administration.
The Resident Agent will be obliged to resign as such in the event that the legal entity fail to provide the accounting records within the aforementioned period of fifteen (15) days, a new Resident Agent may not be registered until the grounds that gave rise to the sanction are remedied.
Such information regarding where the accounting records are held are relevant to Article 5 of Law 52, as:
The physical address where the accounting records are held and the name of the person who keeps the accounting records and supporting documentation.
The records must be prepared and endorsed by a Certified Public Accountant of the Republic of Panama.
Legal entities that fail to comply with the obligations established in Law 52 will be subject by the competent authorities to a fine of $1,000.00 and a penalty of $100.00 for each day of noncompliance.
Karla Pinilla, CPA
Morgan & Morgan
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.
Once again, Latin Lawyer 250 recommended Morgan & Morgan as the largest firm in Panama. “A large headcount and an established presence in the market gives Morgan & Morgan the manpower and experience required to guide some of Panama’s most significant transactions”, states the guide.
This 2018 edition looks at each jurisdiction firm by firm and presents a complete analysis of most recent developments, practices and leading professionals field by field.
Partners Juan David Morgan Jr., Francisco Linares, Enrique De Alba, Jazmina Rovi, Inocencio Galindo, Francisco Arias, Ramon Varela, Roberto Lewis, Raul Castro, Ricardo Aleman, Albalira Montufar, Maria Teresa Mendoza, Mercedes Arauz de Grimaldo, Enrique Jimenez and Jose Carrizo, received mentions as key players.
For the second consecutive year, Morgan & Morgan was recognized as a leading firm-Band #1 in the second edition of Chambers & Partners High Net Worth Guide – Private Wealth Law section, a publication aimed at the international private wealth market and a key reference point of the world´s leading firms in terms of service excellence and reputation. The editorial also highlighted the work of MMG Trust (Panama) S.A., a company of the Morgan & Morgan Group that provides trust services.
“I really appreciate the fantastic support they offer in setting up structures for family planning. They’re very efficient, they’re knowledgeable and give the support that we have needed, and I really appreciate the sense of co-operation that they give to us”, a client says to Chambers.
Furthermore, partner Roberto Lewis received a special distinction as a “notable practitioner” with his experience focusing on wealth preservation and distribution matters including trust creation and administration, corporate vehicles and foundations.
This recognition sets a remarkably high precedent, and marks an internationally-recognised achievement of excellence in promoting professional ethics as well as the soundness business practices both locally and internationally.
The complete guide is available here.
MMG China, a member of Morgan & Morgan Group, was one of the main sponsors of the sixth China Offshore Summit held in Shanghai with the purpose of educate Chinese financial intermediaries on the effective use of tax planning and asset management tools available in the offshore industry.
The event had the participation of over 400 corporate services providers and trust experts from the most important business centers worldwide including Mr. Alexis Medina, Senior Associate of Morgan & Morgan, Panama office.
Morgan & Morgan became one of the first Panamanian law firms established in the Asia Pacific region (Beijing, Shanghai and Singapore) focusing on the needs of individuals and institutional clients looking for offshore and company formation services, meeting the international standards of the changing world.