Recent changes in Panama

Accounting Records

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?

• Accounting records those that clearly and precisely indicate the operations of the legal entity, its assets, liabilities and equity and allow the preparation of financial statements;
• Supporting documents those that support the transactions carried out by the legal entity.
• Financial statements the balance sheet, income statement, statement of equity position and their corresponding notes

Deadlines

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:

• Legal entities constituted before December 31, 2021, must deliver the documentation to the Resident Agent no later than October 31, 2022, so that later the Resident Agent can notify the DGI of Panama no later than December 31, 2022 ;
• Legal entities incorporated after December 31, 2021 must deliver the documentation to the Resident Agent by April 30, relating to the fiscal period that ended on December 31 of the immediately preceding year, so that the Resident Agent himself can then communicate said information. to the DGI of Panama no later than July 15 of each year.

Sanctions for possible non-compliance

The sanctions are divided into two, those applicable to legal persons and those applicable to the Resident Agent.

• Legal Entities, the fines can vary from USD 5,000 to USD 1MM. In addition to a possible suspension of corporate rights and the forced liquidation of the company.
• Resident Agent, the fines can vary from USD 5,000 to USD 5MM

Figures exempt from complying with the report

1. Legal entities listed on the stock exchange or internationally recognized;
2. Legal persons owned by international organizations or a State;
3. Legal entities that own or charter ships registered in the Merchant Marine of Panama.

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:

• Directly or indirectly, they own or control 25% or more of the shares or voting rights in the legal person;
• who owns, controls and/or exercises significant influence over the account relationship, contractual relationship and/or business; either,
• The natural person in whose name or benefit a transaction is carried out, which also includes natural persons who exercise ultimate control over a legal person.

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:

• Full name;
  Number of personal identification;
  Date of Birth;
  Nationality;
  Address;
  Date since you have the status of Final Beneficiary; Y,
  Main activity of the legal person.

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.