The Republic of Panama approved Law No. 254 of November 11^th, 2021, which introduces amendments to the rules on (1) exchange of tax information, (2) prevention of money laundering, (3) accounting records for legal entities, and (4) registration of beneficial owners of legal entities.

Among the most relevant changes introduced by this regulation are the following, namely:

1. Obligation of non-financial subjects to establish a financial and transactional profile for all their clients;
2. Verification of the economic activity carried out by the client, i.e., requesting documentation that supports or proves the economic activity carried out by the client;
3. The obligation to provide the resident agent with the accounting records and supporting information, either original or copy of this documentation, for safekeeping, within four (4) months following the expiration of each fiscal year (no later than April 30^th of each year);
4. Legal entities engaged in holding assets, whether real estate, bank/investment accounts, participation quotas, shares, among others, shall provide the resident agent with documentation indicating the value, the income generated, and the liabilities related to such assets, as accounting records. This information may be submitted in the form of a balance sheet of the legal entity for the previous fiscal period;
5. In case of dissolution of the legal entity, the client must provide the accounting records and supporting documentation of the last five (5) years prior to the dissolution registry. The client must previously submit these documents to GALA to proceed with the dissolution process;
6. Amendments to the rule that establishes the obligation for the resident agent to register all beneficial owners of legal entities in a private platform under the custody of the Superintendence of Non-Financial Entities of Panama (resident agent’s supervising entity). This information must be updated and provided to GALA as soon as possible.

 What is understood by accounting records?

It’s those documents that clearly and precisely indicate the operations, both accounting and financial, of the legal entity, its assets, liabilities, and equity, as well as those that serve to determine accuretely the financial situation of the entity and allow the preparation of financial statements.

 What is understood by supporting documentation according to Law No.52 of 2016?

Supporting documentation refers to that which includes contracts, invoices, receipts and/or any other documentation necessary to serve as evidence of the transactions carried out by a legal entity.

Entities exempted from delivering Accounting records to the resident agent.

1. Legal entities listed on a recognized local or international stock exchange;
2. Legal entities owned by an international or multilateral organization or by a foreign state;
3. Legal entities that are owners or charterers of vessels registered exclusively under the international service of the Panamanian Merchant Marine.

The exempted entities shall keep the original version of the accounting records and supporting information and will be obliged to deliver this documentation within twenty (20) working days following the request made by the resident agent due to a requirement made by the competent authority.

 Fines and penalties for non-compliance

 Registration of Beneficial Owner.

1. Fines from one thousand (US$.1,000.00) to fifty thousand (US$.50,000.00) for each legal person whose information is not registered or updated;
2. Daily progressive fines, which amount shall be equivalent to US$500.00 until the non-compliance is remedied, up to a term of six (6) months;
3. Suspension of the corporate rights of the legal entity;
4. Administrative compulsory liquidation of the legal entity.

 What are the penalties for the legal entity in case of failure to provide the original or copy of the accounting records and supporting information to the resident agent in a timely manner?

 The resident agent shall report such fact to the regulator and such non-compliance could result in:

1. Fines to the legal entity from US$5,000.00 to US$1,000,000.00;
2. Suspension of the corporate rights of the legal entity;
3. Impossibility to register any document in the Public Registry and to obtain certificates issued by said Registry;
4. The compulsory administrative liquidation of the legal entity;
5. The resident agent is obliged to resign to the legal person in default.

For any additional information or assistance please contact us at: +507-303-0303.