Who must keep accounting records in Panama?

Keeping accounting records in Panama is a legal obligation that reaches far more entities than most people assume, including companies that have never operated inside the country. The confusion is common: many directors believe that an “inactive” company or an offshore corporation does not have to account for anything. The opposite is true. In this guide we explain who is required to keep them, what must be retained, the deadlines involved and the penalties for failing to comply.

What are accounting records and why are they mandatory?

Accounting records are the set of books, financial statements and supporting documentation that reflect the operations and financial position of an entity. In Panama, this obligation arises from the Commercial Code and is reinforced by Law 52 of 2016, amended by Law 254 of 2021, which brought the country into line with the international tax-transparency standards promoted by the OECD and the FATF. The aim is clear: every legal entity must be able to demonstrate, at any time, the origin and destination of its funds.

Who is required to keep accounting records in Panama?

The obligation is broad. As a general rule, every legal entity registered in Panama must keep accounting records, whether or not it operates within the national territory. It helps to distinguish three situations:

Companies with operations inside Panama

Companies that carry out commercial activity in the country —sales, services, payroll, imports— must keep formal accounting in accordance with the Commercial Code, file their income tax returns with the General Directorate of Revenue (DGI) and retain their books and supporting documents. For them, accounting has always been a natural part of doing business.

Offshore corporations and entities without local operations

This is the most important change. Legal entities that do not carry out operations completed, consummated or taking effect inside Panama —the classic offshore corporations— are also required to keep accounting records and retain their supporting documentation. Even if they file no income tax return because they have no Panamanian-source income, they must keep their accounting available for when the authorities request it.

Private interest foundations and asset-holding companies

The private interest foundations and companies whose sole activity is to hold assets (shares, real estate, bank accounts, vessels, among others) are expressly included. In these cases, the records must reflect the value of the assets they own and the income they generate.

What must accounting records contain?

The law does not impose a single format, but the information must be sufficient to determine the entity’s financial position with reasonable accuracy and to allow financial statements to be prepared. In practice, the records must include:

• Financial statements that reasonably reflect the entity’s situation.
• A record of all transactions: income, expenses, assets and liabilities.
• Supporting documentation: invoices, contracts, bank statements and receipts.
• For asset-holding companies, the details of the assets they own and their value.

Key deadlines: annual filing and retention

Law 254 of 2021 introduced specific time-based obligations that should always be kept in mind:

The role of the resident agent

For corporations and foundations without local operations, the resident agent —the lawyer or firm that represents them in Panama— is the cornerstone of compliance. The law requires that the accounting records, or a copy of them, be delivered to the agent each year so they can be kept at its offices in Panama. If the entity fails to comply, the resident agent may be forced to resign from the representation, which in turn can lead to the suspension of the company.

Penalties for failing to keep accounting records

Non-compliance is no longer a minor matter. The consequences provided for by law are severe:

• Fines from US$5,000 to US$1,000,000, depending on the seriousness of the breach, recurrence and the harm caused.
• Suspension of corporate rights at the Public Registry: the entity cannot sell assets, register acts or obtain certificates of good standing.
• Compulsory administrative liquidation in the most serious cases, ordered by the DGI.
• Penalties for the resident agent as well who fails to comply (fines from B/.5,000 to B/.100,000), which in practice tightens oversight of each entity.

On top of the fines comes an immediate operational risk: a company whose corporate rights are suspended is paralyzed for any procedure, precisely when action is most needed.

Frequently asked questions

Does an inactive company or one without income have to keep accounting records?

Yes. The obligation does not depend on whether the company generates income, but on its existence as a legal entity. Even a company without activity must be able to demonstrate that situation through its accounting.

Does keeping accounting force an offshore company to pay taxes in Panama?

Not necessarily. Keeping accounting records is not the same as paying taxes. If the company does not generate Panamanian-source income, it generally does not pay tax in Panama, but it must still keep its accounting and have it available.

Where are the accounting records kept?

They may be kept at the resident agent’s offices in Panama or elsewhere, even abroad, provided that the resident agent keeps a copy and that they are delivered to the authority within the legal deadlines.

How often must the accounting be delivered?

Once a year, no later than 30 April, for the previous fiscal year. In addition, upon request from a competent authority, the records must be delivered within the following 20 business days.

What happens if I do not deliver the records on time?

The entity is exposed to fines starting at US$5,000, the suspension of its corporate rights at the Public Registry and, in extreme cases, compulsory liquidation ordered by the DGI.

Comply without complications with Lima y Asociados

At Lima y Asociados we support companies, offshore corporations and private interest foundations throughout the entire accounting-compliance cycle: we organize and maintain the records, prepare the financial statements, handle the annual delivery to the resident agent and verify that your structure is in order with the DGI and the Public Registry. That way you protect your company and avoid fines, suspensions and unpleasant surprises.

This content is informational and general in nature; it does not constitute legal or tax advice. Obligations, deadlines and penalties may vary depending on legal reforms or DGI provisions. Confirm the regulations in force for your case.