New tax obligations in Panama

[Moderator_03]

The following originates in a German newsletter.
Your resident agent or lawyer has probably already told you about it months ago, if not contact them to make sure you are complying with the law

 

News Flash: New Tax Obligations in Panama

In June of this year through Resolution No. 201-4393 the Panamanian tax office established the obligation for all corporations and foundations in Panama to update their information in the etax system. Originally the deadline given by the tax office was until July 31, after allowing several extensions, yesterday a new resolution was published approving another extension until October 31, 2022. 

In order to perform the update required by the Law your foundation/corporation must be registered in the etax system and must have a NIT in order to be able to access the system. The data that must be updated in the system are the contact details of the resident agent, the entity’s accountant, the type of economic activity that the company is executing (or if it only acts as a “holding” to maintain assets in Panama), category of fiscal obligations, legal representative, etc. 

Failure to comply with this new obligation or any other tax non-compliance in Panama may result in a fine and suspension of the entity. Corporations/foundations that have not updated their data may incur penalties such as: a) a fine of US$ 100 to US$ 500 (Art. 290 CF-art3) b) may not file tax returns c) may be disqualified from obtaining a certificate of good standing (necessary to sell real estate held by the corporation/foundation). 

The Resident Agent

The Law in Panama requires all corporations and foundations in Panama to have a resident agent (lawyer or law firm in Panama). The main function of the resident agent is to serve as a liaison between your corporation/foundation and the Panamanian Government. Additionally as a resident agent we are authorized to pay the Annual Franchise Tax, which is the annual tax that your corporation/foundation registered in Panama must pay. The payment deadline is at the end of June for all legal entities incorporated between January and June, and at the end of December for those corporations/foundations that were created between July and December. 

Compliance for Corporations in Panama 

All corporations in Panama must file an annual income tax return within 90 days after the ending of the fiscal year (March 31). In case a corporation does not carry out any economic activity in Panama, it must file a tax return with “no activity”. Panama operates a territorial tax system, under which residents and non-residents are taxed only on Panamanian source income. Income that does not arise in Panama or is not derived from a Panamanian source is not taxable in Panama. We recommend to declare “offshore” income in Panama even if you do not pay taxes so that the Panamanian tax authorities know the lawful origin of your income and do not presume that it is from criminal activities.

The income obtained by a Panamanian corporation is taxed at a single tax rate of 25% on net income (feel free to contact us for a detailed legal consultation on the Panamanian tax system). Income tax payments can be made in three installments due in June, September and December, together with a final tax payment made at the time of filing the annual income tax return. Interest and surcharges are automatically imposed on late payments. This also applies to late filing of the annual income tax return. 

It is mandatory that the accounting records and a copy of the income tax return must be sent to the resident agent in Panama. Otherwise, you must provide your resident agent with the detailed contact details of the accountant in Panama who maintains the entity's records and documentation.