Accounting Records in Panama: A Complete Guide for Businesses and Legal Entities

Accounting records are essential financial documents that detail an entity's transactions, assets, liabilities, revenues, and expenses. According to Law 254 of 2021, all legal entities incorporated in Panama, such as corporations and private interest foundations, are legally required to keep these records up to date.

The main goals of this regulation are:

• Ensuring fiscal and financial transparency.
• Preventing the misuse of corporate structures for illegal activities.
• Complying with international standards for anti-money laundering measures.

Supporting documentation required includes invoices, contracts, and any files that substantiate financial movements and decisions. A key aspect of the regulation is that records can be maintained either within or outside Panamanian territory, as long as they are accessible for review when requested.

Resident agents play a crucial role in ensuring compliance with this legislation and now face increased responsibilities. Under Law 254 of 2021, legal entities must annually provide their resident agents with:

• A general summary of the accounting records.
• Information about the physical location where these records are kept (if they are outside Panama).

It is important to note that accounting records must be accessible and preserved for at least five (5) years following the dissolution of the company or the transaction they document.

Resident agents are obligated to report any non-compliance to the competent authorities, such as the General Directorate of Revenue (DGI). Failure to fulfill these responsibilities may lead to penalties for companies and their representatives.

The law sets out certain exemptions for specific companies that are not required to submit accounting records annually. These exemptions include:

• Corporations listed on the Panama Stock Exchange.
• Financial entities regulated by the Panamanian Superintendent of Banks.
• Companies already supervised by other national financial and regulatory authorities.

While these entities are exempt from annual submissions, they are not exempt from maintaining records. If required, they must present the corresponding documentation during audits or official investigations.

To ensure compliance with Panama’s accounting laws, it is essential to follow these best practices:

1. Digitize your records: Use digital accounting systems that align with international standards to securely store your financial records.
2. Keep them constantly updated: Accounting records must reflect the company’s current transactions to avoid delays and legal issues.
3. Collaborate with your resident agent: Provide the required information on time and transparently to avoid penalties.
4. Train your staff: Ensure your team is informed about regulatory changes, such as those introduced by Law 254 of 2021 and Law 52 of 2016.

These measures not only help comply with the law but also ensure efficient business management and prevent legal complications.

Failure to comply with accounting regulations in Panama can have serious legal and financial consequences for companies. Among the main sanctions are:

• Economic fines: Entities that fail to record adequate information may face penalties starting from B/. 500 to much larger amounts depending on the severity of the breach.
• Suspension of operations: Companies could be banned from operating in Panama until they regularize their situation.
• Legal Implications: Depending on the circumstances, a lack of records can also lead to legal investigations for potential illegal activities.

At Limitless Legal, we understand the importance of maintaining your company's good financial reputation. That's why we offer accounting and legal advisory services to ensure that you comply with all Panamanian regulations.