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Recent changes in Panama
Through Law 254 of November 11, 2021 (the “Law”), Panama introduced the obligation for legal entities incorporated therein, in particular those that do not carry out operations within the Republic of Panama, such as those that are exclusively dedicated to to be holders of assets outside of Panamanian territory, to keep accounting records of their commercial or economic activities, as well as to maintain the corresponding supporting documentation, so that the Resident Agents can then prepare financial statements and communicate them to the Directorate General Income of Panama (DGI).
What is meant by accounting records, supporting documentation and financial statements?
In this sense, the Law establishes the obligation of the legal entity to maintain said documents for a minimum period of 5 years. This requirement has been enforceable since 2016 when Law 52 was enacted, which was later supplemented by the aforementioned Law 254.
On the other hand, said information must be shared with the Resident Agents on a certain date depending on when the obligated legal person has been incorporated, below the detail:
Sanctions for possible non-compliance
The sanctions are divided into two, those applicable to legal persons and those applicable to the Resident Agent.
Figures exempt from complying with the report
Situation of legal persons holding assets (real estate / bank accounts / shares of other companies, etc.)
In this sense, legal entities that are simply passive holders of assets and that are not engaged in any commercial activity, will see their accounting records and the supporting documentation to be provided simplified, requiring that the accounting record be a simple report that in It simply reflects the value, income and liabilities of said assets, and it does not require to be signed by a CPA.
Some final considerations
Although the Law that establishes the preparation of the accounting records, their supporting documentation and the preparation of the financial statements for their subsequent communication to the Panamanian government entity has already been approved, some details of how the process will be implemented are still pending. considering that to date said Law has not been regulated.
Comunicación de Beneficiarios Finales
In this sense, Panama approved on March 20, 2020, Law 129 by which the Private and Unique System of Final Beneficiaries of Legal Persons is created, transferring the custody of the information on the identity of the Final Beneficiaries of legal persons. to the Superintendency of Non-Financial Subjects (SSNF). Before the Law was adopted, there was already an obligation on the part of the Resident Agents to identify the Final Beneficiaries of all the entities for which they provided their services, but said information remained in the private sphere of the Resident Agent and was not communicated to an entity governmental such as the Superintendency.
Although the regulations were already approved a couple of years ago, they have not yet been regulated, so the implementation of said communication to date has not been effective.
What is meant by Final Beneficiary according to the regulations
The law mentions that the people who:
Information to be provided by the Resident Agent to the SSNF
Basically, the Resident Agent is required to provide the following information on the Final Beneficiaries, which it should already keep in its records in accordance with its due diligence policies:
Confidentiality of the information provided to the SSNF
One of the pillars of the approved standard is the confidentiality and proper use of the information provided to the SSNF.
In this sense, it establishes that access to information will be strictly restricted to the Registered Agent and the SSNF, with the possibility of being provided to the competent authority (in this case, the Financial Analysis Unit, the Public Ministry, the Ministry of Economy and Finance, the Superintendency of Banks, the Superintendence of the Securities Market) whenever a formal request is submitted for specific cases of money laundering, financing of terrorism or assistance under international agreements signed by Panama.
Likewise, it is established that a third party may not have access to the information due to a legal dispute.
Deadlines for communication and applicable sanctions in the event of a possible breach
Said information must be fed into the system by the Registered Agent within a maximum term of 30 business days following the constitution of the legal entity, the appointment of a new resident agent, or from the time there is any change in the information. previously registered.
Failure to comply with said communication may result in fines ranging from USD 1,000 to USD 500,000 for the Resident Agent, for each legal entity for which the communication has been breached, as well as the suspension of corporate rights and the liquidation of the person. entity that has not complied with the aforementioned communication.
In conclusion, although Panama has updated its regulations to comply with international requirements regarding transparency, which has meant a loss of confidentiality for those who decide to settle in said jurisdiction, through said update, efforts have been made to safeguard what the information provided as much as possible.
In short, even though the aforementioned laws have been approved, as well as several others aimed at obtaining international approval and complying with the requirements, many times this issue has not been valued in fact, since Panama continues to be a part of today from some of the so-called gray or black lists drawn up by international organizations and jurisdictions.
Recent changes in Belize
Obtaining a tax identification number for legal entities
Given the requirement of Belize that the companies incorporated there report year after year the activities they carry out, a report that became required as of 2021 in order to define if the activities are relevant and thus establish if substance is required in the jurisdiction. or not (to learn more about the substance report required in Belize, you can visit the following link https://insight-trust.com/substance-in-belice/ ), and considering that in said report a number was required as mandatory information identification (TIN), the obligation to obtain a TIN previously arose.
With the appearance of this requirement, each legal entity that is incorporated or is incorporated in Belize must obtain a TIN as an essential requirement, regardless of whether it pays taxes in the jurisdiction or not.
Additionally, the requirement to obtain a TIN was a step prior to the requirement to file a tax return or Tax Return, of which we will comment on some of the details below.
Tax declaration or Tax Return
Through amendments made by the Government of Belize to the Business Companies Act (the “Act”), the application of a business tax to companies with fiscal residence in Belize was included, as well as the requirement to file tax returns. for all companies established there.
What kind of companies will have to file the tax return and which of them are subject to business tax?
a. Companies incorporated in Belize that have tax residence in another country (as long as it is not included in the list of non-cooperative countries drawn up by the European Union) or that do not have a permanent establishment there;
b. Companies incorporated in Belize that qualify as Pure Equity Holdings or Holding Companies in general, that is, companies that are holders of shares of other companies or that only have assets such as bank accounts, real estate, ships, aircraft, etc.
Deadlines for filing the tax return
Depending on when they have been incorporated, the deadlines will be as follows:
CLARIFICATION: It is important to clarify that in fact these deadlines are not being met, due to the impossibility of the jurisdiction to implement the updates and changes on time.
How is the tax return filed?
Tax returns are filed through Form BT290 approved and prepared by Belize, and it is an essential requirement to have a TIN in the jurisdiction.
DISCLAIMER: In fact there are many companies incorporated in Belize that have applied for their TIN and yet have not obtained it yet. There is a delay in the jurisdiction in this aspect, and for this reason, compliance with the requirements imposed by this new regulation is becoming impossible to carry out.
Tax rates applicable to companies carrying out substantial activities
To learn about the regulatory updates implemented by other jurisdictions, you can visit the following links:
Nevis – https://insight-trust.com/tax-changes-in-nevis/
BVI – https://insight-trust.com/substance-in-bvi/
In short, the world in general is modifying its rules in order to accelerate fiscal transparency that is often not justified or has more than purely tax collection motives. However, and regarding this matter, offshore jurisdictions have also accompanied this process, but trying to maintain their attractiveness as jurisdictions that are convenient when thinking about estate planning, both business and family.
Insight Trust has a team trained in matters related to offshore jurisdictions and the regulations applicable to them. To request more information, a more personalized recommendation, a meeting with one of our advisors or a quote, contact info@insight-trust. com
Comparative table – Requirements of some offshore jurisdictions
Register of Directors
Communication of final beneficiaries
Obtaining Tax Identification Number in the jurisdiction
NO (with the exception of relevant activities)
NO (with the exception of relevant activities)
NO (with the exception of relevant activities)
Yes in all the cases)
Communication of intellectual property