The Law of Panama No. 254 of 11 November 2021 establishes the rules regarding combating the legalization of proceeds from crime. The changes, in particular, imply the obligation to keep accounting records for 5 years from the last day of the calendar year in which the relevant operation was performed.
Accounting records mean the documents that indicate the operations of the legal entity, its assets and equity in a clear and precise manner. These records must allow to determine, at all times, the financial position of the company and prepare its financial statements. Besides this, companies must keep their supporting documentation that includes contracts, invoices, receipts and/or any other documentation necessary to support the transactions performed by a legal entity.
The originals of the accounting records and supporting documentation must be kept at the registered agent’s office in the Republic of Panama or in any other place (including outside Panama). At the request of government agencies, companies are required to provide any supporting documents and accompanying information for the period of interest to the competent authorities of Panama. It is worth noting that the competent authorities can request the accounting records of Panama at any time.
Companies must provide the registered agent annually with originals or copies of accounting records no later than 30 April of the year following the relevant financial year. The financial year ends on 31 December.
If a company is not engaged in active business activities and is solely owns its assets, it must provide information confirming the value of these assets, the amount of income from these assets and liabilities associated with them. If a company performs commercial activities, it must provide a general ledger and journal of transactions.
Companies incorporated before 11 November 2021 have six months to comply with new legal requirements. Therefore, by 11 May 2022, the registered agent should have access to copies of the accounting records of each company for the last five years of their existence. In the event of a company’s liquidation, the registered agent is obliged to keep accounting records and supporting documentation for the last five years preceding the liquidation. Records of the liquidated company must also be kept for five years.
Also new to the law is that the registered agent must file an affidavit, a written sworn statement. The affidavit must contain information about the companies to which the registration agent provides services, including the location of the accounting records and the persons responsible for this. The affidavit must be submitted to the General Directorate of Revenues of Panama. Generally, such an affidavit must be filed no later than 15 July (annually). If the accounting records are not transferred to the registered agent within the time limits established by law, the agent must inform the competent authorities of the Republic of Panama, which in turn will decide to collect a fine from the company.
The law establishes sanctions for non-compliance with the requirements for the submission/keeping accounting records.
For a registered agent:
The General Directorate of Revenues of Panama may prosecute a registered agent who does not comply with the obligations under this law and recover a fine from 5,000 to 100,000 US dollars, taking into account the severity of the violation, recurrence, and the amount of damage caused.
For a company:
Companies that do not comply with the requirements for keeping accounting records will be imposed a fine of 5,000 to 1,000,000 US dollars.
The General Directorate of Revenues of Panama may also initiate a procedure for the compulsory liquidation of a legal entity due to these violations.