Make the most of the Panama tax amnesty

Panama has published a law introducing a Tax Amnesty and Payment Reliefs as a temporary measure to boost tax collection.

The new law aims to boost investment and social development by forgiving a percentage of tax arrears.

But how do you make the most of the Panama tax amnesty?

The amnesty is relevant for clients if they have a corporate entity registered in Panama, either an ordinary company or a Private Interest Foundation, or hold property in Panama, that isn't in good legal standing in the payment of annual taxes.

Some of the key aspects of the Law are as follow:

1. Tax Amnesty is extended until 31 December 2022

The General Directorate of Revenue (DGI) can grant a 100% exemption over interests and surcharges owed until 31 January 2021, if the payment is made on or before 31 December 2022.

2. Exemption on annual franchise taxes

The DGI can exempt dormant companies until 31 December 2023.  This condition applies for all annual franchise taxes and surcharges owed to the DGI excepting from the last fiscal period.

However, if the entity owes taxes for 3 consecutive periods and it appears as “suspended” at the Panama Public Registry, it must settle the reactivation fine in the amount of USD1,000.00.

3. Exemption on annual franchise taxes to entities holding real estates in Panama

Panama entities that own real estates registered in Panama and have not complied with the payment of annual franchise taxes for the years 2020 and 2021, can ask for an exemption including its fines and surcharges, as long as the following conditions are met:

• It pays the current 2022 annual franchise tax.; and
• That the real estate being held by the entity is in good legal standing in the payment of its taxes or the taxpayer has entered into a payment arrangement with the DGI.

4. Fiscal relief over the Property Tax

DGI may grant a 15% tax relief from the property tax during the years 2023 and 2024 to all taxpayers who arrange for the full payment of the annual property tax to the DGI for the relevant year.

5. Exemption on fines up to a 60%

The DGI can exempt all fines up to a 60% of their value, as long as the following conditions are met:

• Outstanding obligations are not or have not been part of a payment arrangement made with the DGI earlier or part of tax amnesties between 2019 and 2021.
• The taxpayer is not being investigated for the alleged commission of tax evasion or fraud.
• The amounts due be settled before 31 December 2022.

Taking advantage of the Panama tax amnesty is difficult. Dealing with the Panamian tax authorities can be frustrating for those without knowledge of how they operate.

So in answer to the question, how to make the most of the Panama tax amnesty? Please contact me for an initial conversation and we will see if we can help.