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Offshore Corporation Law to be Changed

Corporations that are registered in Panama, but do not have operations in the country, will be exposed to financial penalties, suspension of rights and even dissolution if they are delinquent with the payment of anual taxes for an extended period.

A proposed change in the corporation law would also create the obligation for these corporations to maintain accounting records, in Panama, for their operations.

The project was approved by the Cabinet Council and will be taken to the National Assembly for discussion. According to the proposal, the Public Registry shall suspend the corporate rights of companies that do not pay the yearly taxes for a period of three years. The same procedure will apply to companies that are delinquent with payments of a fine or others sanctions.

If a company is suspended, it cannot engage in legal procedures, execute business activities or manage their assets. Once the suspension is registered, a dissolution period of two years starts. During this period the representatives of the corporation can apply for its reactivation, for which they must pay a fine of $5,000 and remedy the cause for its suspension. If the corporation has not been reactivated within this period, the Public Registry will proceed in the definitive cancelation of the corporation and it will be permanently disbanded.

The initiative, which has been recommended to Panama by international institutions for years, pretends to increase the transparency of the legal service industry.

SANCTIONS FOR NOT TAKING RECORDS

Companies registered in Panama with foreign operations (“offshore”) that do not maintain accounting records of their operations may be sanctioned with fines of up to $ 5,000, and $ 500 for each day that passes without remedy the shortcoming.

This is the intention of the Government, which approved a draft law last week in order to obligate offshore corporations to maintain accounting records for at least five years, as recommended to Panama by international institutions for years.

Having access to the accounting records of the companies shall increase the transparency of this kind of legal figure, which in different occasions have been used to hide patrimony to tax authorities, among other illegal activities. It will be the obligation of the corporation to maintain accounting records, but the authorities may file the request through the Resident Agent.

The legal entity will be obligated to provide the information to the Resident Agent, in case he does not keep it in his own office. The law draft establishes that if the corporation does not make the information available to the Resident Agent, the Agent will be obligated to resign from his position within 10 days. If not, the agent will be exposed to a fine of $ 1,000 and the Public Registry will effectively remove the Agent from his position in this corporation.

In order to register a new agent, the corporation needs to remedy the deficiencies that caused the sanction. If a corporation, after resignment, removement or cancelation of the previous resident agent, remains without resident agent for more than 90 days without nominating a replacement, the Public Registry will suspend the corporation rights of the company.

According to calculations made by the Ministry of Foreign Affairs, between 200 to 300 thousand corporations have not fulfilled their obligations to pay the anual tax and could have discontinued the business relationship to their Resident Agent.

13 de septiembre 2016 – La Prensa (http://www.prensa.com/in_english/Sociedades-offshore-paguen-disolveran_21_4574002555.html)