Obligations to disclose and maintain financial information and capital structures are becoming increasingly common in Panama, not only to maximise tax and financial transparency, but also to comply with the standards and recommendations of international organisations including the Organization for Economic Cooperation and Development (OECD) and the Financial Action Task Force (FATF).
In this article, we will focus on two specific regulatory changes that were recently adopted: the registration of beneficial owners; and the extensive due diligence records of resident agents.
Beneficial owner registration
The registration of beneficial owners is a new obligation arising from Law No. 129 enacted on 7 March 2020, which brought about the adoption of the 'Private and Unique System of Registration of Beneficial Owners of Legal Entities' (Sistema Privado y Único de Registro de Beneficiarios Finales de Personas Jurídicas).
Through this online system, legal entities registered in the country must, via their registered agents, report on their shareholders and beneficial owners. These are defined in the second article of Law No. 129 and are determined by:
- Participation: this is the natural person who ultimately owns or controls directly or indirectly 25% or more of the shares or voting rights of the company.
- Control: for business entities, this standard covers individuals who are responsible for the management of the company.
The deadline to report varies according to the status of the entity:
- For new entities, 30 business days counted from their incorporation.
- For existing entities, 30 business days counted from any modification in the reported information.
On 20 April 2022, the Ministry of Economy and Finance (MEF), together with the Superintendence of Non-Financial Subjects (SSNF), made the first presentation of the Private and Unique System of Registration of Beneficial Owners of Legal Entities to demonstrate how it will operate. Registration to the system is being be done in phases, by invitation to resident agents.
Entities that fail to comply with this obligation are liable to penalties, including:
- Suspension of corporate rights
- Non-registration of documents in the Public Registry
- Monetary fines.
Due diligence for resident agents
Other measures adopted by local government include the implementation of extensive due diligence registers for resident agents, by means of Law No. 254 enacted on 11 November 2021. The law introduced adjustments in the areas of international tax transparency, prevention of money laundering, financing of terrorism and financing of the proliferation of weapons of mass destruction. The law also introduced a series of other obligations for resident agents of Panamanian entities. It is important to note that having a resident agent is a mandatory appointment for all entities registered in the country.
The law also requires resident agents to verify the activities of their clients, and to monitor them by means of any mechanisms they deem relevant. Entities that do not comply with these requirements are subject to the suspension of their corporate rights by the Public Registry of Panama, and resident agents that do not implement these measures will face fines.
Additionally, the law establishes the obligation to keep accounting records for all entities that do not operate in the country, as well as entities holding assets inside or outside the territory of Panama. These records must be kept for a minimum period of five years, either at the offices of the resident agent or anywhere in the national territory. In this case, the resident agent must provide complete copies of the accounting supports for review and safekeeping.
The deadline for the delivery of the accounting and due diligence records to the respective resident agent is 31 October 2022. With this in mind, it is of the utmost importance to start the process of obtaining the relevant documents or, alternatively, updating them if the relevant documents are out of date.
Establishing and operating a business while ensuring compliance with regulations and reporting obligations is a real challenge for companies. The increasing complexity of regulatory compliance can make it difficult for companies to grow, or even to get established in the first instance.
TMF Panama has the local knowledge to help you identify business opportunities and to address any challenges that stand in the way. Our experts stay up to date on global trends and local rules around tax and financial transparency and can support you with your regulatory and compliance obligations.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.