PRACTICAL GUIDE FOR THE INCORPORATION OF AN OPERATIONAL PANAMANIAN CORPORATION AND NOTIFICATION OF ITS OPERATION BEFORE GOVERNMENT ENTITIES

By Marleny Medina

Law 32 of the 26 of February 1927, which regulates corporations, establishes the procedure to be followed when two or more natural persons, of any nationality, even if they are not domiciled in the Republic of Panama, wish to incorporate a corporation for any lawful purpose in the Republic of Panama. 

 With the inscription of the document of incorporation of the corporation in the Public Registry of Panama, the legal entity is born into legal life, with the capacity to acquire rights, incur obligations and be the subject of legal relations. However, to exercise commercial or industrial activities and be commercially operative in the Republic of Panama, it must comply with a series of procedures and carry out formalities before different government entities, according to the commercial activity to be carried out.

 To inform you about the process to be followed, we are pleased to provide you with this guide in which we share the different steps to be taken in the process of incorporation and operation of a commercially active Panamanian corporation, and identify the government entities that must be notified in a mandatory basis, regardless of the commercial activity to be developed, for the legal entity to operate, namely, Dirección General de Ingresos (General Revenue Directorate, DGI), Ministerio de Comercio e Industrias (Ministry of Commerce and Industries, MICI), Caja de Seguro Social (Social Security Fund, CSS) and the corresponding Municipality.

 STEP 1. INCORPORATION OF A PANAMANIAN CORPORATION BEFORE THE PUBLIC REGISTRY OF PANAMA.

  • To initiate the process of establishing a Panamanian corporation, it is necessary to sign articles of incorporation, which must comply with the formalities required by law.
  • The same must be recorded in a public deed and registered in the commercial section of the Public Registry of Panama.  With said registration, the corporation begins its existence.  

STEP 2. REGISTRATION OF THE RUC / REGISTRATION WITH THE GENERAL REVENUE DIRECTORATE / OBTAINING THE TAX IDENTIFICATION NUMBER (NIT).

  • Once a corporation is incorporated, it must obtain a Single Taxpayer Registry, better known by its acronym RUC, from the General Revenue Directorate (DGI) of the Ministry of Economy and Finance, which is its identification number. 
  • In the case of legal entities, the RUC number will be the registration number in the Commercial Section of the Public Registry.
  • Any natural or juridical person, before starting its commercial, industrial, or any other kind of activities, whether in or from Panama or abroad, regardless of its business, shall register with the RUC Department of the DGI. This process is carried out before the DGI electronically, remotely, through a platform known as the e-tax 2.0 system. 
  • Once the corporation is registered with the DGI’s RUC Department, it must request its tax identification number (NIT).
  • The tax identification number (NIT) is the access key to the e-tax 2.0 system, by which the taxpayer may consult the tax records online with the DGI. This password is for personal use and is not transferable, so it is the responsibility of each taxpayer to preserve its confidentiality.

STEP 3. OBTAINING AN OPERATION NOTIFICATION (PANAMA EMPRENDE SYSTEM-MICI)

  • Any person, natural or juridical, who wishes to engage in commercial or industrial activities within the national territory, must notify its commencement of operation, its registration and the obtaining of an Operation Notice before the Panama Emprende System, created by Law 5 of the 11 of January 2007, which regulates the opening of companies in the Republic of Panama, as controlled by Executive Decree 26 of the 12 of July 2007.
  • Once the Operation Notice is obtained, the Panama Emprende System automatically assigns a unique number, different from the RUC, which will serve to identify each taxpayer who carries out operations within the Republic of Panama, both for the payment of national and municipal taxes and before any public institution.   

 STEP 4. NOTIFICATION OF COMMENCEMENT OF BUSINESS ACTIVITIES TO THE RELEVANT MUNICIPALITY.

  • Article 84 of Law 106 of the 8 of October 1973, which regulates the municipal system in the Republic of Panama, establishes the obligation of every person, natural or legal, to register as a municipal taxpayer with the Municipal Treasury of the Municipality in the Republic where the company will have its main operational headquarters.
  • Those who fail to comply with this notification will be considered defrauders of the municipal treasury and will be obliged to pay the corresponding tax from the date of commencement of the operation plus a late payment surcharge of 25%.

STEP 5. NOTIFICATION OF COMMENCEMENT OF OPERATIONS TO THE DGI.

  • Once the taxpayer obtains its Notice of Operation, regardless of its obligation to register as a municipal taxpayer, DGI must be notified, via the web, completing and submitting the RUC form and accompanying it with a copy of the Notice of Operation. Remember that, before this step, the taxpayer has already obtained its RUC, once it is incorporated as a corporation.

STEP 6. NOTIFICATION OF COMMENCEMENT OF OPERATION TO THE SOCIAL SECURITY FUND (CSS).

  • Article 87 of Law 51 of the 27 of December 2005, provides that it is the duty of any natural or legal person, of public or private law, operating in the national territory and employing workers in Panama, to register with the Social Security Fund as an employer, within the first six working days following the date of commencement of operations.
  • The non-registration as an employer or the unaffiliated of the employees and the non-notification of the employer’s substitution, will be sanctioned with a minimum fine of $ 100.00 and a maximum of $ 5,000.00, according to Article 121 of Law 51 of the 27 of December 2005.

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