IMPORTANT NOTICE
New Compliance Regulations for Panamanian Legal Entities
The Government of Panama enacted Law 52 of 2016 ("Law 52"), which establishes the requirement for all corporations, limited liability companies, and private interest foundations (the “Legal Entities”) to keep accounting records and supporting documentation.
Subsequently, the Government enacted Law 254 of 2021, (¨Law 254¨), which introduced amendments to Law 52 establishing additional accounting keeping requirements for Legal Entities.
Recently, the Executive Branch issued Executive Decree No. 177 of December 30, 2024 (the ¨Regulation¨), which regulates Law 52 as amended by Law 254 (the “Law”). The Regulation introduces new provisions that have an impact on the requirements imposed on Legal Entities regarding the obligation to keep accounting records and supporting documentation.
What is the object of the Regulation ?
The object of the Regulation is to expand on the obligation for all Legal Entities to report annually their financial situation, as well as the obligation of custody on the part of the resident agents, in accordance with the Law .
What is the scope of the Law and the Regulation ?
The provisions contained in the Law and the Regulation apply to all Legal Entities organized in accordance with the laws of the Republic of Panama, that do not carryout operations that are perfected, consummated or take effect in the Republic of Panama, as well as those that are dedicated exclusively to being asset holders within and/or outside the territory of Panama.
What Legal Entities are exempt from compliance with the obligations contained in the Law and the Regulation ?
The following Legal Entities are exempt from the obligations contained in the the Law and the Regulation:
- Those that are tax payers in the Republic of Panama.
- Those that are listed on a recognized local or international stock exchange.
- Those that are owned by an international, multilateral organization or of a State; and,
- Those that are shipowners or ship charterers exclusively registered under Panama's international Merchant Marine Service.
What are the categories of Legal Entities described in the Regulation and what documents must they deliver to the resident agent?
The Regulation describes the following categories of Legal Entities and the documents they must deliver to their resident agent:
- Panamanian Legal Entity.
Those Legal Entities that are dedicated exclusively to being asset holders within and/or outside the Republic of Panama, whose final beneficiaries reported to the Superintendence of Non Financial Subjects (the “Superintendence”) are exclusively Panamanian citizens.
In this case, the legal Entity must deliver annually to the resident agent, a sworn declaration certifying the following:
- That the legal entity is dedicated exclusively to being an asset holder within and/or outside the Republic of Panama; and,
- That the legal entity does not carryout operations or activities that generates taxable income in the Republic of Panama.
Notwithstanding the above, those Legal Entities whose final beneficiaries reported to the Superintendence are exclusively Panamanian citizens, which generate taxable income outside the Republic of Panama, must deliver annually to the resident agent, anyone of the following documents:
- A financial statement; or,
- A brief outline of the elements of the financial situation, the model of which is attached to the Regulation issued by a member of the board of directors or foundation council, as the case may be, the final beneficiary or a duly authorized representative of the latter.
2. Foreign Legal Entity.
Those Legal Entities that are dedicated exclusively to being asset holders within and/or outside the Republic of Panama and/or generate income, whose final beneficiaries reported to the Superintendence, result in at least one foreigner.
In this case, the legal entity must deliver annually to the resident agent any one of the following documents:
- A financial statement; or,
- A brief outline of the elements of the financial situation, the model of which is attached to the Regulation issued by a member of the board of directors or foundation council, as the case may be, the final beneficiary or a duly authorized representative of the latter.
3. Legal Entity without operations.
Those Legal Entities that regardless of whether the final beneficiary reported to the Superintendence is Panamanian or foreigner do not carryout any commercial activities, nor do they generate income within and/or outside the Republic of Panama, nor do they have assets within and/or outside the Republic of Panama.
In this case, the legal entity must deliver annually to the resident agent, a certification or sworn declaration that contains the following, to wit:
- That it has not carried out nor does it engage in any commercial activity, nor does it perform any type of operations;
- That it does not have income, nor does it perform activities that generate income within and/or outside the Republic of Panama; and,
- That it does not have assets within and/or outside the Republic of Panama.
Who issues the sworn declaration or certification required from the Legal Entities?
The certification or sworn declaration must be issued by a a member of the board of directors or foundation council, as the case may be, the final beneficiary or a duly authorized representative of the latter.
What are the obligations of the resident agent?
The resident agent must submit annually a sworn declaration to the Directorate General of Income (DGI), which includes a detailed list of those Legal Entities of which it has the information established in the Regulation.
The sworn declaration must include the name and the Taxpayer identification number (known by the Spanish acronym of RUC), as of January 1, 2025 the obligation to report to the DGI will be no later than June 15 of each year.
The presentation of this document will release the resident agent of the obligation of custody over the accounting records and supporting documentation.
The lack of presentation of the sworn declaration on the part of the resident agent could result in the penalties established in Law 254.
How long do the Legal Entities have to maintain accounting records and supporting documentation?
The Legal Entities must maintain accounting records and supporting documentation for a minimum period of five (5) years, either in physical or digital format, from the date of the respective incorporation or constitution and, in the event of dissolution, for a period of five (5) years after the registration of the instrument of dissolution in the Public Registry office in Panama.
What are the penalties for the Legal Entities in not complying with the obligations contained in the Law and the Regulation ?
Not complying with the obligations contained in the Law and the Regulation could result in the following penalties for the Legal Entities:
- Fines ranging from US$5,000.00 up to US$100,000.00.
- Suspension of corporate rights.
- Inability to register documents or receive certifications from the Public Registry office in Panama.
What is the obligation of the resident agent if the Legal Entities do not comply with the obligations contained in the Law and the Regulation ?
The resident agent is required to resign from his position if the Legal Entities they represent fail to comply with the obligations contained in the Law and the Regulation.