Panama, January 16, 2020. Morgan & Morgan is pleased to announce the recent hiring of Ms. Maria Eugenia Crespo and Mr. Miguel A. Arias, as associates of the Corporate Law team of the firm.
Before joining Morgan & Morgan, Ms. Crespo was engaged in her own legal initiative, 4UR-RIGHTS PANAMA, which focused on providing affordable legal support to victims of fraud and other criminal conduct, while also providing commercial and administrative advice to clients in different matters. Before that, she worked in London as international associate for the former Director of Legal Affairs to Interpol handling matters related to international arbitration, data protection, tax and customs regulation. In addition, Ms. Crespo has experience in criminal, civil and maritime proceedings. She obtained an LL.B. (Summa Cum Laude) from the School of Law of Universidad Santa Maria La Antigua in Panama, an LL.M. in Banking and International Finance Law from the University College London, United Kingdom and a Master in Corporate Governance (Pro Bono distinction) from Stanford University, California, USA. Ms. Crespo is admitted to practice law in Panama. Ms. Crespo currently serves as external legal counsel for the Minister of Private Investment of the Republic of Panama.
Moreover, Mr. Arias joins the firm as an international associate. He worked as an International Law Clerk in the Latin American Corporate Law and International Arbitration Departments of the major US law firm Holland & Knight LLP (Miami, Florida). During this time, Mr. Arias advised clients on corporate matters, such as mergers and acquisitions, some involving cross-border components, as well as on litigation, and international arbitration matters. He obtained a B.A. in Business Administration – International Business and Legal Studies (with Honors) from Loyola University, New Orleans, U.S.A; and a Juris Doctor with an emphasis on business innovation, law, and technology at the University of Miami, Florida, U.S.A. Mr. Arias is admitted to practice law in the State of Florida, U.S.A.
These recruitments come to strengthen the usual personalized and skilled services provided by Morgan & Morgan and reaffirms our position as Panama´s leading corporate law firm.
January 13, 2020
For a long time, we have heard in different social media, for various reasons, some more positive than others, information related to Turnkey Contracts and the State indebtedness resulting from the Partial Payment Accounts (in Spanish, “Cuentas de Pago Parcial”) and Certificates of No Objection (in Spanish, “Certificados de No Objeción”). Do you know what these legal concepts that have been used to finance the largest State projects in the last two government administrations are? Let’s get today into a few lines, because in the words of Rudyard Kipling “You learn more by what people talk to each other or by what it is understood, than by asking questions.”
- What is a Turnkey Contract?
Turnkey Contracts are regulated by Law 22 of 2006, as amended from time to time, concerning public procurement. This same law defines this type of contracts as: “the one in which the contractor undertakes before the State to perform different services, that must include as a general rule, studies, designs, supplies and execution of a project for a determined global price by the bidder entity, in accordance with the provisions of the contract and of the tender documents”. These contracts may also include the equipment, operation of the project or any other provision within the contractor’s obligations. In addition, the contractor must have its own financing for the project.
Consequently, the contractor accepts responsibility of the project delivery (taking over construction risk) but in addition to the operation, in the sense that the mandate must include as the term says, “turnkey”, the project delivery ready to be put into operation by the State (for the purposes of this article I will refer to the State in general terms, without specifying or differentiating between Central Government, decentralized entities and public companies), which has carried out the correspondent bid.
The greatest responsibility assumed by the State in this type of contracts is the supervision of the construction of the respective project and payment to the contractor.
- What is a Partial Payment Account or a Certificate of No Objection?
First, is that both terms refer to the same type of legal instrument and have only been interchangeably used depending on the entity that issued them. For reference, the Ministry of Public Works, the Social Security Fund, Empresa de Transmisión Eléctrica, S.A. and the National Institute of Culture have named it as “Partial Payment Accounts”; nevertheless; the Ministry of Health and the Metro de Panamá have named it as “Certificate of No Objection.” Therefore, from now on, we will call them the “Payment Documents”. Having clarified the above, the Payment Documents have been regulated through regulations and/or procedures adopted and promulgated by the respective entities as well as in the Turnkey Contracts. There is no law that regulates them.
In general terms, the main characteristics of the Payment Documents are:
- Once each Payment Document has been issued, it constitutes an autonomous, independent, unconditional and irrevocable obligation of the contracting entity for the amount expressed therein and is payable on the date indicated in the document without the possibility that once issued, the entity can make tax reductions, fines, penalties, compensations, deductions, claims or other withholdings.
- The contracting entity may only deduct or compensate amounts from the Payment Documents to be issued.
- Once the Payment Document is issued by the entity and endorsed by the General Comptroller of the Republic, contains the net amount to pay.
- Having issued and endorsed the Payment Document, the contracting entity will only have the resource to initiate corresponding legal proceedings against the respective contractor or the guarantor for taxes, fines, penalties, compensations, deductions, claims or other withholdings; and
- Payment Documents must be paid on the date indicated on them, even in the case of early termination, suspension or administrative resolution of the Turnkey Contract, regardless of the cause or claims between the contracting entity, the contractor and/or the bonding company, with respect to any matter related or not to the project and regardless of whether the project has been completed.
In accordance with the information published by the Ministry of Economy and Finance and on the website datosabiertos.gob.pa as of October 31st, 2019, there were Payment Documents that sum up the amount of US$834,770,000 (payable between October 2019 and until the year 2022) as detailed by contracting entity and by the respective project, on the website of the Ministry of Economy and Finance (www.mef.gob.pa) and www.datosabiertos.gob.pa.
- Why are Payment Documents attractive in financing?
Two important facts mentioned in previous answers: in Turnkey Contracts the contractor must have its own financing for the project and the inherent characteristics of the Payment Documents. Based on these two factors, the Payment Documents, as mean of payment for the contracting entities, turn the Turnkey Contracts into a way of securing and conserving the interest of financial entities in relevant State projects.
Financial institutions acquire the Payment Documents at a discount and the contractors assign these Payment Documents to the financial entities. The financial institutions are certain of the payment from the State on the date set forth in the Payment Document regardless of what happened with the respective work or project.
In case of non-payment by a contracting entity, provided that it is part of the Central Government of a Payment Document, there is always the possibility of suing the State, municipality or any other decentralized, autonomous or semi-autonomous entity, under the procedure established in the articles 1047 and 1048 of the Judicial Code.
- What does the issuance of Payment Documents represent for the State?
The Payment Documents do not represent a financial indebtedness to the State, that is, they are not shown in their finances as in the case of bonds issuance. The Payment Documents are accounts payable as a result of investment expenses, which are also of long duration and therefore, must be covered by subsequent general State budgets (the general budget of the State is approved annually).
Based on the foregoing, and since everything must be shown in the annual general state budget, the Ministry of Economy and Finance, for example, per each Turnkey Contract, must: (i) give its no objection to the conditions related to the dates and payment amounts of the work, as well as its duration and the total amount, prior to the call for bid; and (ii) once the bid has been awarded to a contractor, funding proposal must be delivered which will be subject to its review, negotiation and subsequent approval.
- How does the Social Tax Responsibility Law affect?
Law 34 of June 5, 2008 on Social Tax Responsibility, as amended from time to time, aims to establish rules, principles and methodologies to consolidate tax discipline in the financial management of the Public Sector. Said law and the General State Budget Law, refer to the term “Non-Financial Public Sector”, as the group of all the entities of the General Government (composed by the National Assembly, the General Comptroller of the Republic, the different ministries, the Judicial Authority, the Public Ministry and the Electoral Court) and Non-Financial Public Companies (industrial or commercial units owned by the Government that sell public goods and services on a large scale, and that are constituted as stock capital companies or of other type of legal status such as: the Colon Free Zone, the Panama Maritime Authority or the National Charity Lottery). The “Non-Financial Public Sector” differs from the total Public Sector which includes public financial institutions, deposit collectors, Empresa de Transmisión Eléctrica, S.A., Empresa Nacional de Autopistas, S.A., Aeropuerto Internacional Tocumen, S.A. and the Panama Canal Authority.
Article 10 of the Social Tax Responsibility Law provides that the annual laws of the General State Budget and the budget execution shall be subject to the guidelines of this law. In addition, it is set forth that the Gross Domestic Product of the reference shall be calculated by the National Statistics Institute of the General Comptroller of the Republic. The maximum limit of the Tax Balance deficit of the Non-Financial Public Sector will be of 3.50% of the Gross Domestic Product for fiscal year 2019, of 2.75% for fiscal year 2020, of 2.50% for fiscal year 2021 and 2.0% as of fiscal year 2023.
In addition, Article 13 of Executive Decree No. 52 dated June 3rd, 2019, which regulates the Social Tax Responsibility Law, establishes that the investment expenses to be made under the modalities of turnkey projects and of deferred payment projects in a tax term may not exceed 20% of the total investment expenses of the Non-Financial Public Sector in the respective fiscal period.
The use of this type of legal instruments as a form of payment allows contracting public entities to obtain greater efficiency in the financing of projects and to manage their annual budgets based on an agreed payment schedule. To the extent that the limits of the Social Tax Responsibility Law are met and complied, without requesting continuous waivers to these limits, they are still an efficient way to handle accounts payable debt due to the investment expenses necessary to keep public services at appropriate levels of services to the requirements of the population.
Kharla Aizpurua Olmos
Partner, Morgan & Morgan
Panama, January 7, 2020. Partners Jose Carrizo, Inocencio Galindo, Aristides Anguizola, and associate Analissa Carles contributed with the Chambers & Partners Insolvency Guide-Trends & Developments, providing their professional insights into Panama’s legal insolvency restructuring market.
The online Panama chapter is available here.
Or a PDF version is available to download here.
Panama, January 7, 2020. For the fifth consecutive year, Morgan & Morgan has contributed with Doing Business 2020, a publication that summarizes regulations that enhance business activity across 190 economies.
The following attorneys of the firm received a “Certificate of Appreciation” for their valuable contribution:
The report, which was published by the World Bank Group, is is available for download here.
Panama, January 6, 2020. Morgan & Morgan is pleased to announce the promotion of Aristides Anguizola to the partnership of the firm. The designation of Mr. Anguizola comes to reinforce the firm´s already robust Corporate Law team.
Mr. Anguizola has concentrated his practice in mining and has significant experience providing legal support for mineral exploration and mine development and finance. He is often involved advising clients in transactions related to corporate and commercial, project finance and development, mergers and acquisitions, banking law, capital markets, and regulatory work.
With almost ten years of experience as a corporate lawyer, Mr. Anguizola has acted as co-counsel on complex mega-projects such as Cobre Panama, the most significant private sector investment in the country; Metro de Panama, the most important public infrastructure project under development in Panama; and Metro Bus, the public bus rapid system for Panama City. Recently, he was part of the team that advised the Ministry of Public Works on the drafting and approval of the new law for public-private partnerships (PPPs).
Before joining Morgan & Morgan, Mr. Anguizola gained experience as a summer associate in McConnell Valdes LLC, San Juan, Puerto Rico. He also worked as a summer associate in Greenberg Traurig LLP, Washington D.C., U.S.A., dealing with the Government Affairs Practice Group to lobby the U.S.-Panama Trade Promotion Agreement.
Mr. Anguizola contributed as a writer in some publications such as the Panama Chapter of Doing Business (a project of the World Bank Group), and the Panama Chapter of Chambers & Partners´ Insolvency and Mining guides.
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:
Panama, November 25, 2019. Partners Carlos Ernesto González Ramírez (Antitrust & Competition), Inocencio Galindo (Banking & Finance), and Francisco Arias (Corporate and M&A) have been included at LACCA Approved 2020, a selection of Latin American leading lawyers in specific areas of law.
Approved lawyers have been personally recommended by members of LACCA, who are all general counsel from the top multinationals and private companies across the region.
More information on http://laccanet.com/approved/.
Morgan & Morgan received top-tier rankings in the international directory IFLR1000, a guide that analyzes the work of lawyers in the financial and corporate transactional area.
In addition, five lawyers of the firm are listed as leading professionals:
- Aristides Anguizola – Rising Star
- Francisco Arias – Highly Regarded
- Carlos Ernesto González Ramírez – Highly Regarded
- Inocencio Galindo – Highly Regarded
Meet them at Here.
London, October 3, 2019. Luis G. Raven, partner in the Shipping and Admiralty Litigation Department of Morgan & Morgan, participated in The International Maritime Law Seminar (IMLS), an annual event that takes place in the City of London and seeks to provide in-depth analysis and discussion of current legal topics critical to the marine industry.
More than 250 maritime executives and attorneys attended the seminar presented under the moderation of representatives of more than 15 leading law firms from five different continents. Mr. Raven participated in the panel discussion titled “Issues and Solutions Arising from IMO 2020 ULSFO Requirements” and he focused on the steps being taken in Panama to guarantee MARPOL Annex VI’s implementation and enforcement.
With this new legal initiative, the taxpayers have the opportunity to clear tax debts without interests, surcharges and fines and to file forms past due without penalties.
Those managed by the Revenues General Directorate
What does the tax amnesty refer to?
- Condonation of:
Tax Amnesty Term
|If paid||Condonation %|
|by Nov 30||100%|
|By Dec 31st||95%|
|By Jan 31st||90%|
|By Feb 28th||85%|
Reports due to the DGI can be filed until Dec 31st, 2019 without triggering a fine:
- Donations Report
- NGO´s Report
- Form 03
- Form 40 on Retirement Fund
- Form F-41 insurance companies
- Form 42 interests certification
- Form 43 Purchases Report
- Credit Cards sales Report F-44
- F930 Transfer Pricing Report
- Remittances Abroad Report for SEM and Panama Pacifico Companies.
- Others which establish a fine for late filing
Apply with the payment of 25% of the debt and the remaining portion is cancelled no later than June30th of 2020 and the % of interests, surcharges and fines condoned depends on the month the payment arrangement is executed.
Use of the Benefit in the Law
The interested party must communicate his interest either in person, through a POA or by means of the eTax2.0.