NEW AMENDMENTS TO THE ACCOUNTING RECORDS LAW IN PANAMA (Law 254 of November 11, 2021)

What are the accounting records and their supporting documentation?

It is understood by accounting records the data that clearly and precisely indicate the operations, both accounting and financial, of the legal entity, its assets, liabilities, and equity that serves to determine its financial situation with reasonable accuracy at all times and allow the preparation of financial statements.

Supporting documentation are the contracts, invoices, receipts, and/or any other documents necessary to support the transactions carried out by a legal entity.

Who is required to keep accounting records and for how long?

All legal entities, either corporations or private interest foundations, that do not carry out operations  in Panama, as well as those that are dedicated exclusively to holding assets, inside or outside the territory of Panama.

Accounting records and supporting documentation must be kept for a minimum of five (5) years from the last day of the calendar year in which the transactions were performed.

What obligations do Panama corporations and private interest foundations have in this regard?

Legal entities, whether corporations or foundations, are required to provide the resident agent annually, as of April 30, the accounting records or a copy of the accounting records related to the fiscal period that ended on December 31 of the immediately preceding year.

They are also required to notify the resident agent in the event of any change in the person who maintains the accounting records or supporting documentation in his or her custody.

Finally, they are obliged to inform the resident agent in writing annually of the name and contact details of the person who maintains the accounting records and supporting documentation in their custody and the physical address where these are kept.

In what form should the accounting records and supporting documentation be presented?

-Legal entities that do not carry out acts of commerce or business and that are exclusively holders of assets:

Through information that demonstrates the value of the assets that are maintained, the income that is received from said assets and the liabilities related to those assets. It may be presented through a balance sheet.

-Legal persons that carry out acts of commerce:

Through a Journal and Ledger.

Who is exempt from providing accounting records to the resident agent?

• Legal entities listed on a recognized local or international stock exchange;
• Legal entities  that are owned by an international or multilateral organization or by a State;
• Legal entities that are owners or charterers of vessels registered exclusively under the international service of the Merchant Marine of Panama, and
• Legal entities that carry out commercial operations in Panama. 

What are the consequences for the legal person of not providing the accounting records and supporting documentation to the resident agent?

• Corporate rights are suspended
• It is impossible to register any act or change of the entity at the Public Registry, as well as obtaining any goodstanding certificates.
• A fine of US$5,000 to US$1,000,000.
• The resignation of the Resident Agent

In addition to the above, the amendment to the Accounting Records Law conditions the registration of any change of agent, dissolution and reactivation of Private Interest Companies and Foundations to the following:

1. Change of Resident Agent:

Affidavit by the resident agent of having received the accounting records and supporting documentation of the legal entity. Without this statement, the Public Registry will not record the change.

2. Dissolution:

Affidavit by the resident agent of having received the accounting records and supporting documentation of the legal person with respect to the five (5) years prior to the registration of the dissolution. Without this statement, the legal entity is not dissolved.

3. Reactivation:

Delivery of the accounting records or their copies to its resident agent to be kept in its office in Panama, as well as the payment of pending annual franchise taxes, surcharges, fines, and the fine for reactivation of US$1,000 described in paragraph 5 of Article 318-A of the Tax Code.