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On December 19, 2024, the Panamanian government enacted Executive Decree 168, introducing new regulations on the management of accounting records for legal entities incorporated in Panama. This decree establishes specific obligations for different types of entities, aiming to ensure compliance with local tax and corporate laws.
In this article, we provide a comprehensive summary of the decree, including the classifications of legal entities, their respective obligations, and important deadlines for implementation. This information is intended to guide legal entities and their registered agents in understanding and fulfilling their responsibilities under the new framework.
The decree classifies legal entities into the following main categories:
Panamanian Legal Entities: Exclusively dedicated to holding assets within Panama. Their ultimate beneficiaries must be exclusively Panamanian citizens or tax residents in Panama.
Foreign owned Panamanian Legal Entities: Engaged in holding assets inside and/or outside Panama, whether or not they generate income. Their ultimate beneficiaries include at least one foreign citizen or foreign tax resident.
Panamanian Non-Operating Legal Entities: These entities do not conduct commercial activities or generate taxable income. They do not own assets inside or outside Panama.
According to their classification, legal entities must comply with the following obligations:
- Panamanian Legal Entities
Submit a sworn declaration certifying:
That the legal entity is dedicated exclusively to holding assets within the Republic of Panama, detailing the type of asset, its location, registry data or other information that allows its identification and its registered or declared value; and
That the legal entity does not carry out operations or activities that generate taxable income in the Republic of Panama.
Alternatively, these entities may provide the registered agent with a financial statement or a balance sheet that summarizes their financial situation, signed by any officer or member of the board of directors or the foundation council of the legal entity, its final beneficiary or a duly authorized representative of the latter.
- Foreign owned Panamanian Legal Entities
Submit a financial statement or balance sheet signed by a director, officer, beneficial owner or authorized person.
- Panamanian Non-Operating Legal Entities
Submit a certification or sworn statement signed by a member of the board of directors or the foundation council, as appropriate; or by its final beneficiary or an authorized representative thereof, certifying:
That it has not carried out, nor does it carry out, any commercial activity, or perform any type of operations;
That it has no income, nor does it carry out activities that generate income within and/or outside the Republic of Panama; and,
That it has no assets within and/or outside the Republic of Panama.
Alternatively, Panamanian legal entities without operations may provide the registered agent with a financial statement or a balance sheet that summarizes their financial situation, signed by any officer, director or member of the board of directors or the founding council of the legal entity, its beneficial owner or a duly authorized representative of the latter.
Submit an annual sworn declaration to the Panama Tax Directorate, listing the name and TAX ID of the legal entities under their custody.
Maintain custody of the accounting records and supporting documentation of the legal entities represented.
Provide the documentation required by the competent authorities within the established timeframe.
April 30: Deadline for legal entities to submit documentation to the registered agent for the years 2021, 2022, 2023 and 2024.
July 15: Deadline for the resident agent to submit the sworn declaration to the Panama Tax Directorate.
We are at your disposal to assist you in the collection, submission, and compliance with these new legal obligations. Do not hesitate to contact us if you have additional questions or need support in the steps to follow. We will continue to provide updates as the government issues further clarifications or guidelines.
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