It is as important to incorporate a company as it is to know your company´s tax obligations in Panama. We must be aware that depending on whether the company generates taxable income or not in Panama, we will be subject to certain tax obligations that must be complied with, since the majority of these fines are imposed on those who do not comply with the payment in due time and form.
Companies that generate foreign source income are not subject to taxation in Panama, therefore the recommendations mentioned below only apply to those companies or corporations whose income is generated within the national territory. In this case we will detail the obligations to which you should pay attention:
An income tax-deductible expense or cost deductible for income tax purposes will be considered one, when such cost or expense is necessary to produce the income or to conserve the source. What is relevant is that this cost or expense must be documented in order to be deductible. The invoice is the document that proves the existence of this expense.
There are non-deductible costs and expenses that are specified in Executive Order 170, including entertainment, parties, awards, etc.
The income tax return in Panama is among the most relevant tax obligations of your company in Panama. The income tax return, also known in other jurisdictions as the annual income tax return, must be paid by any individual or legal entity that generates income in the Republic of Panama. In this regard, there is a series of information that you, as a taxpayer, should be aware of.
In accordance with Article 710 of the Fiscal Code of the Republic of Panama, every taxpayer is obliged to file, personally or through a proxy or representative, a sworn declaration of income obtained during the previous taxable year, as well as the dividends or participations contributed among its shareholders or partners and the interest paid to its creditors.
The deadlines for the annual filing of this affidavit are:
In the case of legal entities, the Law provides for an extension of up to one (1) month to file the tax return.
The Tax Code establishes that together with the Income Tax Return, the taxpayer is obliged to file the so-called Estimated Income Tax Return, which is a declaration of estimated income that this person will obtain in the year following the one covered by the tax return.
This declaration, as its name implies, consists of an estimate that can never be less than the income indicated in the affidavit. In cases where the estimated declaration is lower, there must be support for the fact since the General Directorate of Revenue (DGI) in Panama can request a review and in this case an explanation of the reasons that supports it must be prepared: closure of a line of business, closure of markets, etc.
Corrective tax returns are those that are made to correct any error or classification in the tax return. This can result in penalties of between $100.00 or $500.00 depending on whether the person is a natural or legal person.
The affidavit of income must be filed by a Panamanian certified public accountant or company with an accredited signature provided that:
If your company processed the Notice of Operations which is mandatory if you want to carry out a commercial acts in the Republic of Panama, you should know that at the moment of registering or requesting and obtaining the notice of operations of your company, Panama Emprende will send a report to the corresponding Municipality.
Once the Municipality receives the notification from the MICI, the latter searches in its tax catalog and verifies what must be paid for the activity it carries out. Therefore, we suggest that you be aware of the activity that was cataloged in the Municipality and so you do not get a surprise at the time of payment of taxes.
There are other forms that companies should make sure they are not required to file such as the Tax Information Form (Form-43) or the well-known Form 930 on transfer pricing because if you are required to file and do not file, the fines per month overdue are very high.
If you have any doubts about your company's tax obligations in Panama, do not hesitate to contact us: info@legalsolutionspanama.com
