The purpose of this newsletter is to inform you about the recent legal requirements concerning the new Law 254 of November 11, 2021, which amended Law 52 of October 27, 2016, regarding accounting records and supporting documentation.
NEW REQUIREMENTS ON THE FINANCIAL AND BUSINESS PROFILE FOR LEGAL ENTITIES (Corporations and Foundations)
Lima y Asociados must receive updated information on the identity of the final beneficiaries. For this reason, we must know their financial and business profile, as well as the nature of their professional or business activity, generating the income of the corresponding legal entity.
DEFINITION OF ACCOUNTING RECORDS AND SUPPORTING DOCUMENTATION
The accounting records must clearly contain information on the operations of the legal entity, the value of its assets, the income received, its liabilities and assets and the determination of the financial situation in the form of a balance sheet. The supporting documentation includes the contracts, invoices, receipts, and any other documentation necessary to support the transactions carried out. Said documentation must be available at the request of the competent authority.
ANNUAL DELIVERY OF THE ACCOUNTING RECORDS TO THE RESIDENT AGENT
Legal entities are obligated to provide the Resident Agent, as of April 30 of the respective year, a copy of the accounting records relating to the fiscal period ending December 31 of the immediately preceding year, unless listed on a recognized stock exchange local or international.
OBLIGATION TO KEEP ACCOUNTING RECORDS AND SUPPORTING DOCUMENTATION
Those legal entities that do not operate within the Republic of Panama, as well as those that are exclusively holders of assets, such as real estate, bank accounts from where they make investments such as the purchase of shares, bonds and
ETF, inside or outside of Panamanian territory, must comply with Law 52 of 2016 and the new Law 254 in order to keep their accounting records and supporting documentation. In turn, if the legal entity carries out commercial activities outside the Republic of Panama, a Diary and a Ledger must be provided.
PLACE TO KEEP ACCOUNTING RECORDS AND SUPPORTING DOCUMENTATION
The accounting records and supporting documentation may be custodied in the offices of the Resident Agent or outside of Panamanian territory. If the latter occurs, the Resident Agent must know, at all times, the name, I.D. number, profession and location of the person who prepares them and custody. The Resident Agent must custody the original or a copy of the accounting records and supporting documentation for up to five (5) years, after dissolution of the legal entity. Without a declaration stating that those documents are kept in custody by us, we will not be able to present the dissolution deed to the Public Registry.
The aforementioned Law 254 establishes sanctions, both for the Resident Agent who does not keep updated the information on the identity of the client, as well as the copy or original of the accounting records that the Resident Agent must receive annually. In addition, in the event that the legal entity does not adequately provide the information explained in this circular, the corresponding supervisory body will apply fines ranging from USD5,000.00 to USD1,000,000.00 and will suspend the corporate rights of the legal entity. In any case, the Resident Agent who does not receive the relevant documentation and information must resign, and will be subject to the application of fines.
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