AUTOMATIC EXCHANGE OF INFORMATION
On October 20th the Government of the Republic of Panama, in its constant efforts to comply with international regulations in terms of tax transparency, approved the law which creates the regulatory frame for the implementation of the exchange of tax information, establishing the obligations and the corresponding controls for supervision and compliance.
Additionally, on October 27th, Panama signed the Convention on Mutual Administrative Assistance in Tax Matters of the Organization for Economic Cooperation and Development (OECD) which provides for the exchange of information regarding foreign tax-payers with other Governments, in order to boost transparency and fight tax evasion. Signing the Convention is an essential part of the efforts to apply as soon as possible the regulations related to automatic exchange of tax information, developed by the OECD and the G20, and at the same time reaffirms Panama commitment to take the necessary measures in order to comply with international expectations in the fight against tax evasion.Panama is committed to perform the first exchange of information in 2018.
The legislative council approved the law which introduces the obligation for maintaining accounting records for legal entities that do not perform operations that are perfected, consummated, or take effect within the Republic of Panama. This law enters into force on January 1st 2017.
Accounting records and supporting documentation must be made available for a period of no less than five years. This information must be kept in the offices of the legal entity’s resident agent or in any other place as determined by its management. In case that the information is not maintained in the offices of the resident agent, the following information must be provided in writing:
- Physical address where the accounting records and supporting documentation are being held;
- Name and contact information of the person that maintains the records under their custody.
Additionally, the resident agent must be informed of any change in the physical address or contact information within a period of no more than 15 business days from the day in which the change was approved.
If a legal entity does not comply with its obligations related to the accounting records, it will be subject to an initial penalty of USD$1,000 and additionally USD$100 for each day it continues not complying with the law.
The Suspension of a Legal Entity’s Corporate Rights and Dissolution
According to Law 52, The Public Registry will suspend all of the corporate rights of legal entities that:
- Do not designate a resident agent for a period more than 90 days after the resignation, removal, or termination of its prior resident agent.
- Maintain a non-payment status of its annual license fee for a period of three consecutive years.
- Non-payment status of any penalty or fine that has been imposed and duly executed upon the request of a competent authority.
Once the suspension is registered, a dissolution period of two (2) years will commence. Once the term of 2 years has expired without reactivation then the Public Registry will proceed with the definitive cancellation of the legal entity.
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