In accordance with Law No. 52 of 2016, all legal entities that operate outside the Republic of Panama and those that exclusively operate as asset holders, inside or outside of Panama territory are required to maintain accounting records along with supporting documentation for at least 5 years.
*Legal entities refer to corporations, limited liability companies, and private interest foundations
This was recently amended with the introduction of Law No. 254 of 11th Nov 2021 which has additional requirements regarding accounting records retention. Below is a quick rundown of the amendment in the form of commonly asked questions to help you better grasp the situation.
1. What is the latest amendment about?
All legal entities must submit their accounting records to the corresponding registered agents within 4 months after the end of each fiscal year. In other words, the timeline for this is no later than April 30 of each year.
For companies incorporated before 31st Dec 2021, they have to submit the accounting records to their designated registered agent within 10 months or in other words, by 31st Oct 2022.
The registered agent is responsible for the retention of such accounting records in a confidential manner, and will only disclose them when prompted by relevant authorities in the Republic of Panama.
2. What are considered accounting records according to Law No. 52?
Accounting records are simply documents that adequately and precisely reflect your company’s financial and accounting situation at all times.
This includes journals, ledgers, etc.
Supporting documents are those that can support the transactions carried out by a legal person which include contracts, invoices, receipts, and/or any other relevant documentation.
Also, note that requirements for the components that make up the accounting records may differ depending on the type of business. As such, we’ve provided a quick rundown on what accounting records may look like in different cases for your reference.
A. Your company operates exclusively in holding assets (i.e real estate, shares, participation quotas, etc.)
- Value of the assets,
- Income from such assets, and
- The liabilities of such assets.
B. Your company engages in the purchasing and selling of negotiable instruments and public/private securities via personal funding
- Accounting statement of the Custodian
- The balance sheet of your company
Note: A company engaged in the purchase and sale of negotiable instruments, public/private securities, with 3rd party funds, must be licensed by the Securities regulator of Panama before conducting its activities.
This means the company must have real physical presence in Panama and further obtain all the necessary permits to operate locally, including keeping accounting according to local regulations.
C. Your company carries out commercial acts outside of the Republic of Panama
- A journal/a ledger
* For an accurate depiction of your company’s reporting obligations, we recommend that you seek professional legal counseling.
3. What are the exemption cases?
Your company is exempted from the obligation to provide accounting records to the registered agent under the following cases:
- It is listed on a highly recognized local or international stock exchange.
- It is owned by an international or multilateral organization or by a State.
- It is an owner/charterer of vessels registered exclusively under the international service of the Merchant Marine of the Republic of Panama.
- It derives its income from commercial activities conducted within the Republic of Panama.
4. What are the consequences of failing to deliver the accounting records (original or copy) to the registered agent on time?
There are several repercussions in place for cases of non-compliance, they include:
- Paying fines anywhere from US$5,000.00 to US$1,000,000.00.
- Having the corporate rights of your company suspended.
- Being restricted from registering any type of document in the Public Registry and receiving any certificates issued by the aforementioned entity.
Disclaimer: While BBCIncorp strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact BBCIncorp’s customer services for advice on your specific cases.
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