New Panamanian accounting requirements for offshore companies

By Rosa Restrepo TEP, ARIFA Corporate Services

Panama's taxation system is territorial inasmuch as, generally speaking, only income earned from Panamanian sources or with respect to assets located in Panama is taxed.

However, in the interests of transparency, on October 27, Panama enacted Law 52 of 2016. It establishes the obligation to keep accounting records and underlying documentation for any corporation, limited liability company, private interest foundation and any other legal entity for commercial purposes, constituted under the laws of Panama whose activities and operations are conducted outside the country ("offshore companies").

New obligations under Law 52 of 2016

1. Legal entities whose operations are conducted outside Panama are to keep accounting records and supporting documentation, which must be available for no less than five years.
2. The accounting records and supporting documentation must be kept at the office of the resident agent in Panama, or at any other place determined by its board of directors or administrators.
3. If the accounting records and supporting documentation are not kept at the resident agent's office in Panama, the following must be provided in writing: 1) the physical address where accounting records and supporting documentation are maintained; and 2) the name and contact details of the person who keeps them in their custody.
4. The resident agent must also be informed in writing of any changes in the physical address or contact information, within a period of no more than 15 working days, counted from the date on which the change was approved.
5. Whenever the accounting records and supporting documentation are not kept at the resident agent's office in Panama, and following a formal request from a competent authority, the entity must provide such documents to its resident agent within 15 days. If said request is not fulfilled, the resident agent must file its resignation with the public registry.
6. A copy of the register of shareholders must be kept by the resident agent in Panama.

Definition of "accounting records and supporting documentation"

Under Law 52/2016, accounting records constitute the data describing the commercial operations of the legal entity, its assets and liabilities, as well as its patrimony, which determine its financial situation and how to prepare its financial statements.

Law 52/2016 does not impose an obligation to produce or file periodical financial statements but companies must keep sufficient records to provide transparency regarding their activities and their financial situation at any particular point in time. Records and underlying documents should include accounts in relation to monies received or spent, sales and purchases of goods and the assets and liabilities of a company.

Fines

Any legal entity that does not comply with the obligations established under the provisions of this Law, will be sanctioned by the competent authority in the following manner:

1. Fine of USD1,000, and
2. Fine of USD100 for every day that passes without remedying the cause of the breach.

Other sources

• Official Gazette of Panama
• Deloitte
• Patton, Moreno & Asvat International Lawyers (via Mondaq)