S.I. No. 25/2012 - Double Taxation Relief (Taxes on Income and Capital Gains) (Republic of Panama) Order 2012.

1. With reference to Article 2

Tolls, duties or similar payments made in relation to the passage of vessels on the Panama Canal are not taxes to which this Convention applies.

2. With reference to paragraph 1 of Article 4

For the purposes of the Convention a person shall be deemed to be a resident of Panama where the person is subject to taxation in Panama, which requires the filing of a tax return for a fiscal year, and is either—

(

a

) an individual who is present in Panama for more than 183 days in that fiscal year; or

(

b

) a person, other than an individual, where that person has its place of effective management in Panama for that fiscal year.

3. With reference to Article 5

For the purposes of determining the duration of activities under paragraph 3 (

b

), the period during which activities are carried on in a Contracting State by an enterprise associated with another enterprise shall be aggregated with the period during which activities are carried on by the enterprise with which it is associated if the first-mentioned activities are connected with the activities carried on in that State by the last-mentioned enterprise, provided that any period during which two or more associated enterprises are carrying on concurrent activities is counted only once. An enterprise shall be deemed to be associated with another enterprise if one is controlled directly or indirectly by the other, or if both are controlled directly or indirectly by a third person or persons.

4. With reference to Article 10

Notwithstanding any other provision of this Convention, where a company which is a resident of a Contracting State has a permanent establishment in the other Contracting State, the profits taxable under paragraph 1 of article 7 may not be subject to an additional tax in that other State if the place of effective management of the company is located in the first-mentioned State.

5. With reference to paragraph 3 of Article 12

It is understood that the term “royalties” does not include payments in respect of any rental of aircraft.

6. With reference to Article 17

Notwithstanding the provisions of paragraph 1, payments that are not periodic in nature made to a resident of a Contracting State directly or indirectly in connection with a pension or other similar remuneration or a pension fund, or a retirement fund derived from a pension fund, in respect of past employment in the other Contracting State may also be taxed in that other Contracting State.

7. With reference to Article 25

(

a

) It is understood that the competent authority of the requested State shall provide upon request by the competent authority of the requesting State information for the purposes referred to in Article 25.

(

b

) It is understood that information will only be requested once the requesting Contracting State has exhausted all regular sources of information available under the internal taxation procedure.

(

c

) It is understood that the standard of “foreseeable relevance” is intended to provide for exchange of information in tax matters to the widest possible extent and, at the same time, to clarify that the Contracting States are not at liberty to engage in “fishing expeditions” or to request information that is unlikely to be relevant to the tax affairs of a given taxpayer.

(

d

) It is understood that the tax authorities of the requesting State shall provide the following information to the tax authorities of the requested State when making a request for information under Article 25 of the Convention

(i) the name and, to the extent known, the address of the person(s) under examination or investigation and, if available, other particulars facilitating that persons identification, such as date of birth, marital status, tax identification number;

(ii) the period of time for which the information is requested;

(iii) a statement of the information sought including its nature and the form in which the requesting State wishes to receive the information from the requested State;

(iv) the tax purpose for which the information is sought;

(v) grounds for believing that the information requested is held in the requested State or is in the possession or control of a person within the jurisdiction of the requested State;

(vi) to the extent known, the name and address of any person believed to be in possession of the requested information;

(vii) a statement that the requesting State has pursued all means available in its own territory to obtain the information, except those that would give rise to disproportionate difficulties.

(

e

) It is further understood that Article 25 of the Convention shall not commit the Contracting States to exchange information on an automatic or a spontaneous basis.

(

f

) It is understood that in the case of an exchange of information, the administrative procedural rules regarding taxpayers’ rights provided for in the requested Contracting State remain applicable before the information is transmitted to the requesting Contracting State. It is further understood that this provision aims at guaranteeing the taxpayer a fair procedure and not at preventing or unduly delaying the exchange of information process.

IN WITNESS WHEREOF

the undersigned, duly authorised thereto, have signed this Protocol.

Done in duplicate this 28th day of November, 2011 in the English and Spanish languages, both texts being equally authentic. In case of any divergence, the English text shall prevail.

For Ireland: For Panama

Eamon Gilmore Roberto C. Henríquez

GIVEN under the Official Seal of the Government,

24 January 2012.

ENDA KENNY,

Taoiseach.

EXPLANATORY NOTE.

(This note is not part of the Instrument and does not purport to be a legal interpretation.)

This Order gives the force of law to the Convention between Ireland and the Republic of Panama for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, which is set out in the Schedule to the Order. The effect of the Convention is summarised below.

This Convention with the Republic of Panama, which was signed 28th day of November 2011, is comprehensive in scope and is based on the OECD Model Convention.

The taxes covered by the Convention are, for Ireland, Income Tax, Universal Social Charge, Corporation Tax and Capital Gains Tax: for the Republic of Panama, the Income Tax provided in the Fiscal Code, Book IV, Title I, and its related decrees and regulations.

The Convention provides for the allocation of taxing rights between Ireland and the Republic of Panama and for the granting of relief from double taxation with regard to items of income and capital gains which, under the laws of Ireland and the laws of the Republic of Panama may under the terms of the Convention be taxed in both countries.

Where both countries continue to have taxing rights, for example in the case of certain interest, dividends and royalties, business profits arising through a permanent establishment which a person resident in one country has in the other country, or in the case of capital gains arising from the disposal of immovable property, the Convention provides that the country of residence of the recipient of the income or gain will give relief against its tax on the income or gains for the tax paid in the other country on the same income or gains. Irish direct investors (i.e. Irish companies holding 5% or more of the voting power of the paying company) in receipt of dividends from a Panamanian company are granted credit for the tax paid by the Panamanian company on the profits out of which the dividends are paid (known as credit for underlying tax).

Where source State taxation of dividends, interest or royalties applies, this is restricted to 5% of the gross amount of the dividend, interest or royalties. Exemption from source State taxation of interest include interest beneficially owned by a Contracting State or the Central Bank of a Contracting State, interest in respect of sales on credit of merchandise or equipment or payments made to a pension fund established in the other Contracting State to provide benefits under pension arrangements recognised for tax purposes in that other Contracting State.

The Convention also provides for safeguarding nationals and enterprises of one country against discriminatory taxation in the other country, for consultation between the competent authorities of the two countries for the purpose of resolving any doubts or difficulties arising as to the interpretation or application of the Convention and for the exchange of such information between these authorities as is forseeably relevant for carrying out the provisions of the Convention or of the domestic law of either country in relation to the taxes of every kind.

The Convention will enter into force when each country notifies the other of the completion of its procedures for bringing the Convention into force. It will thereupon have effect in both countries for tax periods in the following year.

Notice of the making of this Statutory Instrument was published in

“Iris Oifigiúil” of

27

th January

, 2012.

WHEREAS it is enacted by section 826(1) (as substituted by

section 35

of the

Finance Act 2007

(No. 11 of 2007)) of the

Taxes Consolidation Act 1997

(No. 39 of 1997) that where the Government by order declare that arrangements specified in the order have been made with the government of any territory outside the State in relation to affording relief from double taxation in respect of income tax, corporation tax in respect of income and chargeable gains, capital gains tax or any taxes of a similar character imposed by the laws of the State or by the laws of that territory and, in the case of taxes of any kind or description imposed by the laws of the State or the laws of that territory, in relation to exchanging information for the purposes of the prevention and detection of tax evasion or granting relief from taxation under the laws of that territory to persons who are resident in the State for the purposes of tax, and that it is expedient that those arrangements should have the force of law, and that the order so made is referred to in Part 1 of Schedule 24A of the

Taxes Consolidation Act 1997

, then, subject to section 826 of that Act, the arrangements shall, notwithstanding any enactment, have the force of law as if such order were an Act of the Oireachtas on and from the date of the insertion of a reference to the order into Part 1 of Schedule 24A;

AND WHEREAS it is further enacted by

section 826

(6) of the

Taxes Consolidation Act 1997

that where such an order is proposed to be made, a draft of the order shall be laid before Dáil Éireann and the order shall not be made until a resolution approving of the draft has been passed by Dáil Éireann;

AND WHEREAS a draft of the following Order has been laid before Dáil Éireann and a resolution approving of the draft has been passed by Dáil Éireann;

NOW, the Government, in exercise of the powers conferred on them by

section 826

(1) (as substituted by

section 35

of the

Finance Act 2007

) of the

Taxes Consolidation Act 1997

, hereby order as follows