New Panama laws for declaration of the ultimate Beneficial Owners
If you have not learned from the Panama Papers debacle, then listen up to the newly enacted Panama laws for declaration of the ultimate Beneficial Owners’ reporting requirements. Penalties are extremely harsh!
- The resident agent will be sanctioned with fines ranging from $1,000 to $50,000 for each legal person whose information is not registered or updated, considering the seriousness of the offense, the degree of recidivism, the magnitude of the damage, and the size of the resident agent. On the other hand, the Super Intendency of Non-Financial Subjects will order the Public Registry of Panama to suspend the corporate rights of legal entities that have not been registered or updated in the Unique System of Registration of Ultimate Beneficial Owners by their resident agent; and
- The legal person that does not comply with the obligations established in this Law will be sanctioned with a fine ranging from $5,000 to $1,000,000. Also, the resident agent will be sanctioned with fines ranging from $5,000 to $100,000. These sanctions will be applied by the General Directorate of Revenue, considering the seriousness of the offense, the recurrence, and the magnitude of the damage.
On November 11, 2021, Panama enacted Law 254 to amend Panama Law 23 which was originally enacted in 2015 to bolster international tax transparency and the prevention of money laundering, the financing of terrorism to meet international standards.
AMENDMENTS TO LAW 23 OF 2015
With this new law, new obligations are introduced for non-financial obligated subjects, which must carry out the following:
Law 254 will require information and documentation be obtained by Resident Agents, RA, that relates to the financial and transactional profile of its clients, perpetually
evaluating their risk-rating to know the nature of their clients’ business:
- Gather information from your clients to know the nature of their professional or business activity,
- Check the declared activities of its clients as established in the regulations of this Law Identify,
- Know who is/are the ultimate beneficial owner/owners, and
- Continuous monitoring of the business relationship.
AMENDMENTS TO LAW 23 OF 2015
Legal entities that do not carry out operations that are perfected, consumed or produce their effects within the Republic of Panama, as well as those that dedicate themselves to being exclusively holders of assets, within the Republic of Panama or abroad, are obliged to keep accounting records and their supporting documentation. The accounting records and supporting documentation must be kept for a minimum period of 5 years, counted as of the last day of the calendar year in which the transactions posted in the accounting records were generated.
Legal entities will be obligated to provide their Resident Agent annually, as of April 30, the accounting records or a copy of the accounting records relating to the fiscal period that ended on December 31 of the previous year. The resident agent is obliged to keep, in its offices in Panama, a copy of the share certificates and shareholders’ registry of the corporations for which it acts.
The accounting records must be submitted as follows:
- Legal entities that do not carry out commercial acts according to article 2 of the Commercial Code of the Republic of Panama and that are exclusively dedicated to being holders of assets, whatever their class, must provide information that demonstrates the value of the assets that are held, the income received from those assets and the liabilities related to those assets.
- Legal entities that carry out commercial acts abroad must provide an accounting including a detailed General Journal and a Stock Ledger.
Some reprieve is given to legal entities incorporated before November 11, 2021, will have only 6 months to deliver the accounting records or a copy thereof, which will be kept in the offices of the RA. The competent authority, for the purposes of national or international cooperation, may request any information in accordance with the provisions of the Law and its regulations, without it constituting a violation of confidentiality. Competent Authority under Panama’s tax treaty with the United States as a bilateral agreement that provides for the exchange of information. This particular treaty was agreed on April 27, 2016, to “improve international Tax Compliance and to Implement FATCA… the exchange of certain information with respect to U.S. and Panama Reportable Accounts on an automatic basis…”
This reporting between treaty countries is automatic and with 58 countries currently in treaty relationships with the U.S.; you can envision massive informative files flying over the night sky with highly damaging and criminally dangerous information on American activities of its citizens and Green Card Holders.
If you have concerns or questions on your relationship with Panama or other countries in reference to the U.S. and International Tax and disclosure matters, please contact our office at your earliest convenience.
Michael B. Nelson, Esq.