How to manage an offshore company in Panama - without accounting records

There are many misconceptions about the flexibility of offshore companies in Panama, especially regarding accounting records. According to Law 254 of 2021, an offshore company must maintain organized accounting records that clearly reflect its transactions, even if the company is not actively conducting business.

What does this mean? Essentially, even though an offshore company may not have financial transactions, these records are mandatory to comply with the law and avoid future legal penalties. Including basic information, such as balance sheets and financial statements, can protect your business from unnecessary risks.

• If the company is inactive, it must provide a certificate of inactivity.
• It is mandatory to submit basic documentation through the resident agent in Panama.

Law 254 requires companies to maintain an up-to-date flow of information. Below, we detail the requirements:

If your company is not active, you must certify this status before the resident agent. This must be done by a licensed public accountant.

It is essential to provide balance sheets, ledgers, and any document reflecting the financial health of the company, even if the transactions are minimal. This ensures that your business remains compliant.

Providing basic information such as the legal representative’s name, the certificate of incorporation, and the tax domicile.

Avoiding errors or delays in submitting these documents can help prevent hefty fines and even the suspension of the company.

One of the most confusing aspects for business owners is the physical location of accounting information. According to Panamanian law:

• Accounting records can be kept in any location that the company deems convenient.
• The resident agent must have access to this information and ensure it is available in case of audits by local authorities.

To maintain compliance, we recommend working with a certified public accountant based in Panama. This is crucial for avoiding legal complications and ensuring transparency.

If an offshore company in Panama does not maintain proper accounting records, it may face severe fiscal and administrative repercussions. Law 254 mandates compliance with these requirements, and failing to do so may result in:

• Significant fines that can exceed $1,000.
• Temporary or permanent suspension of the company.
• Increased scrutiny by tax authorities.
• Potential legal actions in cases of serious non-compliance.

Beyond monetary and legal sanctions, the lack of proper accounting records can damage the company’s credibility and reputation, potentially affecting its international business relationships.

To ensure compliance with Law 254 and avoid sanctions, follow these key strategies:

1. Keep organized financial records: Make sure you have a reliable documentation system, whether digital or physical.
2. Hire a specialized accountant in Panama: A professional with experience in local regulations will facilitate compliance.
3. Conduct regular audits: These internal reviews help detect and correct errors before they become serious problems.
4. Check with your resident agent regularly: Smooth communication with your agent will make it easier to update records and comply with regulations.

At Limitless Legal, we provide accounting and legal advice specialized in offshore companies in Panama, ensuring that your company operates within the legal framework and takes full advantage of its tax benefits.