Tax Residency and the dreaded Double Taxation. Wondering what it is and why should you care?

There is a lot of talk about Tax Residency, but what exactly is it? and why should
a citizen of the world be interested in being clear about this concept? In this article
we will explore in detail the answers to these and other questions surrounding the subject.

Fiscal residence does not have a specific definition; however, it is understood that it is a
status that is acquired by significant presence within a State among others.
criteria, which means that a person, whether an individual or a company, can be
taxable person At this point, we consider it a priority to clarify that the tax residency
is not necessarily linked to nationality, as a person may have one
nationality but have tax resident status in another country.

However, the status of tax resident of a State acquires greater value when at
tax residents are required to pay tax on their income in that State, but
at the same time they must pay taxes in their country of origin, this is considered a
double taxation, which significantly affects their earnings.

Understanding the criteria used to determine tax residency is crucial for
individuals and companies operating in different countries, as this allows you to access
to the use of double taxation avoidance treaties, among other tax reliefs that in the form of
unilaterally granted by some jurisdictions, resulting in taxes being paid
in only one country at a time and therefore resulting in fairer taxation
for the citizens of the world, which is why this is an issue that should be of interest to those who are
citizens of the world.

It is important to note that each country has its own rules for determining tax
residence, however, in the case of Panama, the Fiscal Code, developed in turn by the
Executive Decree 983 of 2013, contemplates those criteria to be evaluated for
determine residency for tax purposes. In this regard, we will first refer to the
individuals, who, in order to prove their tax resident status, must demonstrate that they
effectively have a home in the country, as well as their center of
economic and family interests.

As far as companies are concerned, it is understood that they acquire their
tax resident status by having the presence of executives, whether residents in
Panama or traveling, to attend meetings related to decision making that may affect the
impact the direction and management of the business, it also acquires relevance for the
the holding of offices for the development of any economic activity in addition to the
fact of having contracted personnel for the development of its activities.
The tax authority, known in Panama as the General Revenue Directorate, is the
entity in charge of the recognition of the Tax Residency status through the
issuance of a certificate, which is valid for 1 year.

This implies that the interested party must present his formal petition through the representation of a lawyer, state the reasons for which he is considered a resident and provide evidence that has the validity required by national laws. It is extremely important to note that the
the application with a lack of supporting documents and evidence of the proper quality
may lead to the refusal of recognition of resident status and trigger
tedious reconsideration processes to the same authority or appeal to the Administrative
Tax Court.

Understanding tax residency as a tool for avoiding double taxation is
essential for any individual or company operating at the international level, but in the same
way it is important to have the appropriate advice for a correct management before the
tax authority as we have previously explained.

If you have doubts as to whether your situation applies for Tax Residency recognition or whether
requires the support of an expert to start this process, LAC TAX is your best

Note: For more information write to


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