Accountant in Panama

There’s no accounting for haste

As many will know accounting plays an important role in running a business as it gives the ability to track revenue and costs, ensure statutory compliance and provide stakeholders such as management, shareholders and local governmental authorities with quantitative financial information which can be used for assessing the business´s performance and making business decisions for the future.

Laws, regulations and principles tend to vary between different jurisdictions. Proper accounting systems and processes should always ensure that your business meets its statutory compliance obligations as well as provide an efficient accounting function to ensure that ongoing liabilities such as tax are properly addressed.

Tax in Panama – A brief insight

Panama is a country globally recognised as being one of the most welcoming and attractive countries in the world with respect to commercial activities. Many of the world’s biggest corporations, Including Heineken, Proctor & Gamble, BMW, has its headquarters in Panama owing to the country´s generous approach to taxation. The best example of this being that most offshore companies need only pay $300 annual tax. This is because Panama adopts a territorial tax system, which means that only profits achieved from Panamanian sourced income require payment of income tax.

Any profitable business that takes place outside of Panama is generally not taxable in Panama but sometimes local taxes can be incurred from foreign sourced income, for example, a foreign citizen living in Panama in receipt of dividend distributions, from a Panamanian corporation, on income that originated from outside of Panama is taxed at a rate of 5%. This is lower than the 10% charged on dividends derived from local income, so the marginal tax rate is favorable, but it is not tax free.

Registering for Tax Residency

In Panama, taxpayers are required to have a tax ID Number (NIT) before they can file their tax returns. To apply for a tax ID number, usually, a Panamanian national ID card (e-cedula) and a utility bill for your address in Panama needs to be provided.

The tax ID number is requested through Panama´s tax office, the Direccion General de Ingresos (DGI) and there is no cost for the application process which can be completed online. For those whose comprehension of the Spanish language is not at a fluency level sufficient enough to be able to speak and comprehend well enough to hold a conversation, they may find it easier to engage the services of, for example, a lawyer or accountant in Panama to assist. Tax returns can be filed online by making a declaration, and foreign citizens can file their taxes online through the DGI or engage an accountant in Panama to assist them.

The benefits and advantages that can be gained through Panama´s tax regime can be plain to see, but still there remains doubt through the moral ethics of doing business in a so-called “tax haven”. The outcries of protestation across media channels grows in a number as business giants such as Apple, Facebook, and Google have based their headquarters in tax efficient jurisdictions. But it is important to note that there is absolutely nothing illegal about offshore companies and they are an excellent method to protect your assets and manage your wealth. The advantages are additionally compounded in Panama owing to their strict maintenance of its privacy and confidentiality laws. Important to note, however, that you should remember that having offshore accounts in Panama does not exonerate you from complying with any local tax requirements that exist in your country of origin and Topaz Services always strongly recommends that its clients seek independent and expert tax advice.

Accounting in Panama

The accounting principles accepted in Panama are the International Financial Reporting Standards (IFRS) and there are three active accounting professional organisations: the Certified Public Accountants Association, the Panamanian Certified Public Accountants College and the Panamanian Association of Women Accountants. In 1978 these organisations appointed a Financial Accounting Standard Committee to define Generally Accepted Accounting Principles in Panama.

A Panamanian corporation that operates in Panama, even if its income is not generated from Panamanian sources, may be subject to reporting obligations. In most cases, there are no requirements for the formal delivery of financial statements to the local authorities.

Panamanian companies that generate income in Panama are required to file tax returns. In the case that a taxpayers reported capital is greater than $100,000 or the annual sales or gross income exceeds $50,000, the annual tax return must be countersigned by a Panamanian Certified Public Accountant (CPA) and financial statements duly audited by a CPA.

The minimum corporate accounting books required for a Panamanian corporation are:

  • Shareholders Register
  • Minute Book
  • Journal
  • General Ledger

Law 52

The maintenance of accounting records is required by law for a corporation that does business in Panama.

In 2016, and in the interests of transparency, Law 52 was enacted and it establishes the obligation to keep accounting records and supporting documentation for any corporation, limited liability company and private interest foundation incorporated in Panama. These accounting records and supporting documentation must be available for a period that is no less than five years and they must be kept at the office of a resident agent in Panama, or at any place appointed by the corporation’s board of directors or administrators. If the accounting records are not kept at the office of the resident agent in Panama, then the following must be provided in writing:

  1. The physical address where the accounting records are held: and
  2. The name and contact details of the person who keeps them in their custody.

English speaking accountant in Panama

Topaz Services offers a wide range of accountancy services in Panama and we have experience of taking care of the process from the start of a company´s operations to filing annual returns and performing all of the accounting services in between. At Topaz Services we provide a value adding solution to meet your needs and we take great care to get to know our clients in order to design the framework that can meet their needs to improve the management of their business affairs. Our unique and bespoke approach can make that crucial difference.

When choosing Topaz Services to be your service provider you can have total peace of mind and take great reassurance that your accounting function in Panama will be performed to the highest standard and in a timely manner.

Topaz Services has been providing quality of advice and expertise for over forty years and our experience in Panama is accompanied by the reliability, understanding, personal approach and responsibility you could expect from a British-run company.

More and more business entrepreneurs are looking to set up operations in jurisdictions like Panama that offer significant advantages such as gaining tax efficiencies. However, it is no small matter to make the right choices in choosing a service provider to take the responsibility of handling your local taxes, accounting and the rest of the finance function, especially when entering uncharted waters.

The selection of the right accountant in Panama for you is a business-critical decision for the future planning of your enterprise. You would ideally want your accounting service provider in Panama to be well versed in what you need, plenty of experience, can speak your language and help you make your future plans. Such a selection process takes time, and in an age where speed and instant action has become the norm in business, a hasty decision made in who you entrust with your finance function could result in a regretful outcome. Similar to the well coined phrase by the nineteenth century writer, Anthony Trollope it could be held that when it comes to choosing the perfect accounting service provider for your business, there is no accounting for haste!