Panama: Accounting Records | Law 52 of 2016
Quijano & Associates informs you that the Panamanian Government has enacted Law 52 of the 27th of October, 2016stipulating that any corporation, limited liability company, private interest foundation and any other legal entity for commercial purposes, constituted under the laws of the Republic of Panama; and engaging in activities and operations that take place or have effects outside of the national territory shall be required to conduct accounting records and keep supporting documentation evidencing such records.
According to this law, it is understood that accounting records are the complete data describing clearly and precisely the commercial operations of the legal entity, its assets and liabilities, as well as its patrimony, and which enable to determine its financial situation and to prepare its financial statements.
The supporting documentation of said records includes whatever may be required as evidence of the transactions conducted by the legal entity, including contracts, invoices, receipts and other documents.
The accounting records and supporting documentation of their contents must be kept in the offices of the legal entity’s resident agent within the territory of the Republic or in any other place either within or outside the Republic of Panama as the legal entity’s governing bodies may determine. Said records must be kept available during five (5) years at least, to be counted (i) as from the 31st of December of the year when the transactions related to those records were carried out or (ii) as from the 31st of December of the year when the legal entity ceased its operations.
In the event that the accounting records and supporting documentation are kept in a place that is not the office of the resident agent, the legal entity shall be required to provide the following information to its resident agent:
1) The physical address of the place where the accounting records and supporting documentation thereof are being kept; and
2) The name of the person acting as their custodian, together with the information required to contact said person.
The law stipulates that the legal entity is bound to inform its resident agent in writing about any change in said address or the person to be contacted, within a term of fifteen (15) business days to be counted as from the date of such change.
In the event that the General Directorate of Income Tax of the Ministry of Economy and Finance of the Republic of Panama, through the resident agent, requests the legal entity that is keeping its accounting records and supporting documentation outside of the Republic of Panama, to provide them to its resident agent, said legal entity shall be under the obligation to do so within a term of fifteen (15) business days to be counted as from the date of such requirement.
In the event that this obligation is not complied with, the resident agent shall be bound to resign in writing and to record said resignation in the Public Registry of Panama within a term of ten (10) business days to be counted as from the day after the date of expiry of the term granted to the legal entity to comply and provide such accounting records and supporting documentation to its resident agent.
The General Directorate of Income Tax of the Ministry of Economy and Finance shall impose a fine of one thousand U.S. dollars (US$1,000.00) to the legal entity that does not comply with these obligation plus one hundred U.S. dollars (US$100.00) per day until the failure to comply has been rectified.
On the other hand, upon an order issued by the General Directorate of Income Tax of the Ministry of Economy and Finance, the Public Registry of Panama shall suspend the corporate rights of the legal entity that fails to settle its annual franchise tax during three (3) consecutive years. However, a legal entity in such a situation may be reactivated within a period of two (2) years upon payment of a fine of one thousand U.S. dollars (U.S.$1,000.00). If the legal entity is not reactivated within said period of time, it shall be dissolved in discharge of ordinary duty.
Quijano & Associates seizes this opportunity to inform that, through its subsidiary Sterling Tax Consultants, it is fully prepared to provide support and assistance to its clients in any accounting, financial and fiscal matters.
This law shall be in force and effect as from the 1st of January 2017.
