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Panama | Accounting records requirements for legal entities

Accounting records requirements (Panama) | The Law 52 of 2016, which establishes the obligation to keep accounting records for certain legal entities, through Law 254 of November 11, 2021, introduced important amendments for legal entities that do not carry out operations that are perfected or consumed or have their effects within the Republic of Panama, as well as for legal entities that are exclusively engaged in holding assets, incorporating the obligation to keep accounting records and supporting documentation. 

In order to clarify the main terms included in accordance with the provisions of this law, we will review the concepts of legal entities, accounting records, and supporting documentation as follows:

Legal entities: Any corporation, limited liability entity, or of any other type, as well as a private interest foundation, constituted in accordance with the laws of the Republic of Panama. 

Accounting Records Requirements: those that clearly and precisely indicate the operations of the legal entity, its assets, liabilities, and equity, as well as those that serve to determine the financial situation with reasonable accuracy at all times and allow the preparation of financial statements. 

Supporting documentation: those that include contracts, invoices, receipts, and/or any other documentation necessary to support the transactions carried out by a legal entity. 

Panama | Accounting records requirements

Having reviewed these concepts, the law establishes that the accounting records must be prepared as follows: 

  • Legal entities which do not carry out commercial activities and are exclusively dedicated to being asset holders, whatever their class, must provide information that demonstrates the value of the assets they hold, the income received from said assets, and the liabilities related to those assets.
     
  • For legal entities which carry out commercial activities, outside the Republic of Panama and any other person not covered by the previous point, a journal and a ledger must be provided.

Through this law, the following details have also been modified: 

  • In cases where the accounting records and supporting documentation are kept in any other place different from the resident agent’s office, inside or outside of Panama, the legal entities will be obliged to report annually, in writing, to the resident agent the name, contact details of the person who maintains custody of the accounting records and supporting documentation in their custody and the physical address where they are kept. 

The resident agent must submit an annual declaration to the Panama Tax Authority (DGI), including a list of the legal entities for which they provide resident agent services, those who have or have not complied with the requested information, and confirmation of whether the accounting records and supporting documentation are kept in any other place other than the resident agent office, inside or outside the Panamanian territory.

  • The legal entity must immediately inform in writing to the resident agent if there is a change in the person who maintains the custody of accounting records and supporting documentation, providing the name and contact information, and the physical address where they are kept.                                                                                     
  • After one year of incorporation, legal entities will be obliged to provide the resident agent annually, on April 30, the accounting records or a copy of the accounting records and supporting documentation, related to the fiscal period that ended on December 31 of the immediately preceding year.
  • For legal entities existing before November 12, 2021, a period of six months is granted to deliver the accounting records or a copy of the accounting records to the resident agent, that is, before May 12, 2022
  • In the event of any change in the person who maintains the custody of accounting records and supporting documentation, the legal entity is required to immediately inform in writing the resident agent, providing the name and contact information, and the physical address where those records are kept.

We remind you that the obligation to maintain accounting records and supporting documentation for legal entities that do not carry out operations that are perfected or consumed in the Republic of Panama was established through Law 52 of 2016; Therefore, the information must be provided in the established time if request by the resident agent. 

PENALTIES (Accounting records requirements): 

  • Penalties from B/ .5,000.00 to B/ .1,000,000.00 are established for legal entities that fail to deliver the information required in this law; The previous penalty was B/ .1,000.00 and B/ .100.00 for each day that elapses without the cause being corrected. The DGI may order the Public Registry of Panama, the suspension of corporate rights that fail to comply with the information required by this law. In addition, it is empowered to order the Public Registry of Panama, the forced administrative liquidation of the legal entity. 
  • Additionally, there will be penalties for the resident agent who does not comply with the obligations established in this law, with fines from B/.5,000.00 to
    B/ .100,000.00. 

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