These amendments were approved in order to make adjustments to the legislation on international tax transparency, prevention of money laundering, financing of terrorism and financing of the proliferation of weapons of mass destruction.

In order to make adjustments to the legislation on international tax transparency, the prevention of money laundering, the financing of terrorism and the financing of the proliferation of weapons of mass destruction, Law No. 254 of November 11, 2021 has been recently approved (hereinafter “Law No. 254”) amending, among other regulations, Law No. 52 of October 27, 2016 (hereinafter “Law No. 52”), which established the obligation to keep records accounts for all legal persons, whether or not they operate in the Republic of Panama or abroad. The subject of “accounting documents” having raised many questions among our customers, we share below the answers to the most frequently asked questions. Frequently Asked Questions:

What is an accounting document?

Law No. 254 defines accounting records as those that clearly and precisely indicate the operations of the legal entity, its assets, liabilities and equity, as well as those that serve to always determine the financial situation with precision. reasonable and allow the preparation of financial statements. statements.

What are the main changes to Law No. 52 introduced by Law No. 254?

Law No. 254 establishes an annual obligation for legal persons to provide their resident agent, as of April 30, with the accounting books or a copy of the accounting books for the financial year ending on December 31 of the previous year.

Where can the original accounting documents of legal entities be kept?

Accounting records and supporting documents may be kept in any place inside or outside the Republic of Panama.

What are the obligations of legal persons who keep their original accounting documents outside of Panama?

Legal persons are required to declare annually to the Resident Agent, in writing, the name and contact details of the person who keeps the accounting and supporting documents in his custody and the address where they are kept.

In the event of a change in the person holding the accounting and supporting documents in its custody, the legal person must immediately inform its Resident Agent of the name and contact details of the new custodian and the physical address where they are kept.

Which companies are exempted from complying with the annual obligation to provide accounting records or a copy of accounting records to the resident agent?

• Those listed on a recognized local or international stock exchange
• Those who belong to an international, multilateral organization or to a State
• Owners or charterers of vessels registered exclusively for international service in the merchant navy of the Republic of Panama

Nevertheless, the aforementioned entities must keep under their control the original accounting documents and supporting documents. In the event of a request from the competent authority, the legal person will be required to deliver its accounting entries within 20 working days of the request made by the Resident Agent.

What type of accounting documents must be kept by legal persons exclusively dedicated to the holding of assets?

Legal persons that are exclusively dedicated to holding assets, whatever their nature, must provide information demonstrating the value of the assets held, the income derived from these assets and the liabilities related to these assets. In the opinion of the General Revenue Department, “holding companies” must provide their balance sheet since this document reflects the value of their assets as well as their income and liabilities.

What type of accounting records must be kept by legal persons engaged in the sale and purchase of credit securities and commercial securities of a public nature or issued by the government or municipalities, as well as private, issued by individuals or commercial companies, profit from their resale or from any other means of commercial speculation?

Legal persons carrying out the activities described above must provide a depositary account statement or a general balance sheet of the company.

What type of accounting records must be kept by legal persons that carry out commercial acts outside the Republic of Panama?

Legal persons that carry out commercial acts outside the Republic of Panama must provide a journal and register.

What is the delivery deadline for accounting documents or copies of accounting documents for legal entities incorporated before the date of entry into force of Law No. 254 (12 November 2021)?

Legal persons incorporated before November 12, 2021 will have a period of six months, counted from the said date (for example until May 12, 2022), to submit their accounting documents or a copy of them to their Agent Resident, to be kept at the Offices of the Resident Agent in the Republic of Panama.

What obligations does Law No. 254 establish for the reactivation of legal persons suspended before the date of entry into force of Law No. 254 (November 12, 2021) with regard to accounting records?

To be reactivated, legal persons suspended from the public registry of Panama before November 12, 2021 must provide their resident agent with their accounting records or copies of their accounting records, to be kept at the offices of the resident agent of the Republic of Panama. . and, depending on the cause of the suspension, comply with the reactivation process established by law.

What measures must be taken into consideration for changes of resident agent of legal persons in accordance with Law No. 254?

To change resident agent, legal entities must provide their new resident agent, prior to registration of their appointment in the Public Registry of Panama, with accounting records and supporting documents or copies of accounting records and supporting documents, which whatever the case. , to be kept at the offices of the new Resident Agent in the Republic of Panama.

What measures should be taken into consideration for the dissolution of legal persons according to Law No. 254?

To dissolve a legal person, its accounting books and supporting documents or copies of accounting books and supporting documents, whatever the case, relating to the five years preceding the registration of the dissolution, must be kept by the Resident Agent and be easily available for at least a period of five years, from the registration of the dissolution in the Public Registry of Panama.

Are there penalties for legal persons in the event of non-compliance with Law No. 254?

Yes, Law No. 254 provides the following penalties for legal persons in case of non-compliance:

• Fine of five thousand Dollars (5,000.00 US$) to one million Dollars (1,000,000.00 US$), imposed by the General Revenue Department, taking into account the seriousness of the offence, its recurrence and the extent of the damage
• The suspension of corporate rights in the Public Registry of Panama of legal persons who do not provide the information required in accordance with the provisions of this law, its rules and regulations
• The General Directorate of Revenue is empowered to order the Public Registry the forced administrative liquidation of a legal person, provided that said entity has been suspended by the Public Registry and has not been reactivated within a period of 1 year, counted from from registration. of its suspension in the Public Registry of Panama.

It is important for our clients to keep in mind that the deadline to send us a copy of their accounting documents is approaching and will expire on May 12, 2022.