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Tax Guide

General Tax Amnesty.

Through Law 143 of March 20, 2020, Law 99 of October 11, 2019, which grants a general tax amnesty for the payment of taxes, and Law 76 of February 13, 2019, regarding the Code of Tax Procedure were amended, and other provisions were issued.

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What is the general tax amnesty?

It consists in a write-off of:

  • Interest, fines and surcharges of delinquent taxes owed by taxpayers;
  • Fines for late filings or omissions of tax returns that are presented during the validity of Law 99 of 2019;
  • Fines for late submission of reports for compliance obligations that are presented during the validity of Law 99 of 2019 until December 31, 2019; and
  • Fines for violations within DGI¬īs jurisdiction as of June 30, 2019.

 

Covered under the concept of taxes are:

  • Taxes,
  • Duties,
  • Special contributions,
  • Any other debts of money, liquid and payable, that in any concept a natural or legal person and real estate have to pay to the DGI,
  • The fines for late filings or omissions of tax returns that are presented during the validity of Law 99 of 2019,
  • Fines for late submission of reports for compliance obligations that are presented during the validity of Law 99 of 2019 until December 31, 2019, and
  • Fines for violations under the jurisdiction of the DGI as of June 30th, 2019.

 

The following are eligible for the tax amnesty period for taxes generated and defaulting on payment as of June 30, 2019:

  • Natural and legal persons and real estate, including those taxpayers who maintain payment arrangements as of the entry into force of Law 99 of 2019, defaulters on the payment of taxes, fees and special contributions as of June 30, 2019,
  • Taxpayers, withholding agents and other persons responsible for taxes,
  • Taxpayers who maintain pending processes for additional settlements, ex officio liens or any other payment request before the DGI, after desisting from the action or appeal for the payment of the obligation.

Not eligible for the tax amnesty are:

  • Taxpayers under processes for administrative tax evasion or criminal tax fraud.
  • The tax amnesty period is granted until June 30, 2020, subject to the following conditions:
  • 100% of the total interest, surcharges and fines, if the payment is made in the months of October and November 2019, will be written off;
  • 95% of the total interest, surcharges and fines, if the payment is made in the month of December 2019, will be written off;
  • 90% of the total interest, surcharges and fines, if the payment is made in the month of January 2020, will be written off;
  • 85% of the total interest, surcharges and fines, if the payment is made in the month of February 2020, will be written off;
  • 85% of the total interest, surcharges and fines, if the payment is made from February 29, 2020, until June 30, 2020, will be written off.

 

From March 20, 2020 to June 30, 2020, the deadline to present to the DGI, exempt from their respective fines, the forms that had to be presented until February 29, 2020, corresponding to:

 

  • Reports of received donations,
  • Non-reporting taxpayers (NGO) report F27,
  • Payroll report 03-F3
  • Retirement, pension fund and other benefits reports F-40
  • Insurer Reports-certification of medical expenses per insured F-41
  • Certification of interest on residential mortgage loans without preferential interest F-42,
  • Purchase and import reports of goods and services F-43,
  • Credit Card Sales Report (VTD) F-44,
  • Transfer Pricing Reports F-930,
  • Income tax return, natural person F-1
  • Income tax return, legal person F-2
  • Income tax return Free zone F-18

 

Only the forms that are presented as of the entry into force of this Law will be considered exempt, and it is recognized that they will not cause a fine to the extent that these taxpayers comply with the conditions and commitments of the aid package and economic stimulation issued by the state  of emergency decreed because COVID-19 or who are taxpayers who maintain operations. Conditions that must be verified by the DGI.

 

The tax that results from an update and / or income tax return and that corresponds to periods prior to June 30, 2019 must receive the benefits of the Amnesty Law, applying them in the statement of account, according to the period that was caused, avoiding the additional debit that is established now without giving  the correct treatment regarding the period in which they were caused. Even if the taxpayer has omitted some taxes, the debt that he had until June 2019 can be paid in full or benefit from a payment arrangement.

 

The taxpayer, who, at the time of availing himself of the benefits of this Law, has a payment arrangement, may withdraw it and must sign a payment agreement, with a  down payment of 25% of the nominal tax due, at the time of  the signing of the payment agreement, subject to the following conditions:

 

  • 100% of the total interest, surcharges and fines Will be written off if the agreement is signed during the months of October and November of 2019;
  • 95% of the total interest, surcharges and fines Will be written off if the agreement is signed during the month of December 2019;
  • 90 % of the total interest, surcharges and fines will be written off if the agreement is signed during the month of January 2020;
  • 85 % of the total interest, surcharges and fines will be written off if the agreement is signed during the month of February 2020;
  • That the term for full compliance with the payment arrangement made until February 29 is extended until December 31, 2020. Payment arrangements made after February 29, 2020 can only be made until December 31, 2020.

 

Availing to the benefits of this Law will be automatic when delinquent taxpayers have made a payment to settle the debt that is maintained with the General Directorate of Revenue.

The DGI may declare ex officio that the tax debts paid or paid by the taxpayer from its entry into force have availed of the benefits of this Law.

All those delinquent balances that are not canceled in the tax amnesty period or when their respective payment agreement expires, will be subject to the interest, surcharges and fines provided by law.

In order for the taxpayer to qualify for the benefits of the tax amnesty, the DGI must be notified, either in person or through a representative, or via the web (e-Tax 2.0).

The DGI must declare, upon request of an interested party, that the tax debts existing in the current account of the taxpayers as of June 30, 2019, which are granted amnesty, are prescribed.

It is important to note that, during the term of the tax amnesty, the late declaration of improvements will not cause a fine, provided that the public deed on the declaration of new improvements built is filed before the Public Registry. The aforementioned will be valid until December 31, 2020.

Finally, this Law modifies Law 76 of 2019 related to the Tax Procedure Code in the following aspects:

  • Article 101 regarding personal notification, provides that this process may be avoided only in the event of a declaration of a state of emergency, in accordance with the provisions of Law 22 of 2006 and our Political Constitution.

The Tax Procedure Code will take effect on January 1, 2021, except for articles 1, 2, 3, 4, 5, 6, 9, 11, 65, 78 and section 3 of article 88, articles 100, 101, 127, 128, 208, 259, 262, 273, 284, 285, 286, 287 and 288 and section 11 of article 324, which will take effect on June 20, 2020.

Any new amnesty or tax moratorium is suspended until December 31, 2024.

  • Executive Decree 257 of April 3, 2020.

Whereby Executive Decree 553 of November 19, 2019, which regulates Law 99 of October 11, 2019 (Law that grants general tax amnesty for the payment of taxes) is amended.

 Amnesty period. In the case of payment of taxes, it may be made from October 15, 2019 until June 30, 2020.

The taxpayer can avail of a payment arrangement between the months of October 2019 to June 2020, paying 25% or more at the time of signing it, and may cancel it until December 31, 2020.

Late reporting or omitted tax returns. May be filed no later than December 31, 2019 without a fine.

Beginning on March 20, 2020 until June 30, 2020, late reports or tax returns which should have been submitted until February 29, 2020 may be submitted to the DGI, and will be exempt from fines, provided that comply with the formalities.

Late Declaration of improvements and prescription requests. May be carried out from October 15, 2019 until December 31, 2020.

Procedure for availing of the tax amnesty. It will be automatic when delinquent taxpayers have made a payment aimed at paying off the debt that remains outstanding with the DGI.

In the case of payment arrangements, the request must be submitted via the web (Form 752).

Payment arrangement agreements signed until February 29, 2020, may be canceled until December 31, 2020. 

New payment arrangement agreements may be signed until June 30, 2020, and may be canceled until December 31, 2020.

To sign a payment arrangement agreement, the taxpayer must pay 25% of the nominal and delinquent taxes.

In the case of late filings, those taxpayers who have been affected by COVID-19 and submit between March 20, 2020 and June 30, 2020, the forms that they had to submit until February 29, 2020 to the DGI, are benefited with the exemption from the payment of fines. This includes:

  • Reports of received donations,
  • Non-reporting taxpayers (NGO) report F27,
  • Payroll report 03-F3
  • Retirement and pension funds, other benefits, reports F-40
  • Insurer Reports-certification of medical expenses per insured F-41
  • Certification of interest on residential mortgage loans without preferential interest F-42,
  • Purchase and import reports of goods and services F-43,
  • Credit Card Sales Report (VTD) F-44,
  • Transfer Pricing Reports F-930,
  • Income tax return, natural person F-1,
  • Income tax return, legal person F-2,
  • Income tax return, Free Zone F-18.

Present withdrawal of the pending processes that the taxpayers have for cases of additional settlements, ex officio liens, requests for non-application of CAIR or any other payment request that is in dispute in the DGI and make the payment of all the due within the amnesty period.

In cases of prescription of taxes, the application must be submitted by the taxpayer, via the web, so that the prescription of the tax debts prescribed in the current account as of June 30, 2019, is declared, provided that the total amount owed is paid within of the amnesty period or upon expiration of the payment arrangement.

Of the Amnesty Payment Arrangement Agreements.  Are those agreed with the sole purpose of availing the benefit of tax amnesty and they may be agreed and will take effect, as long as:

  • Applies to any taxes under DGI mandate.
  • The taxpayer who manifests, no later than December 31, 2020, his interest in signing a payment arrangement agreement, must pay 25% of the delinquent nominal tax.
  • Payment arrangement agreements are subject to the following conditions:
  • 100% of all interest, surcharges and fines will be forgiven, if the agreement is signed in the months of October and November 2019;
  • 95% of all interest, surcharges and fines will be forgiven, if the agreement is signed in December 2019;
  • 90% of all interest, surcharges and fines will be forgiven, if the agreement is signed in January 2020;
  • 85% of all interest, surcharges and fines will be forgiven if the agreement is signed between February and June 2020;
  • The term for full compliance with the payment arrangement will not exceed December 31, 2020. This term is non-extendable.
  • Interest, surcharges and fines will be eliminated if the total amount owed is paid within the maximum term indicated, that is, December 31, 2020.
  • If the taxpayer does not pay the entire amount due, within the maximum period, the payment arrangement will be canceled. Delinquent balances will be subject to interest, surcharges and fines provided by law.
  • At the time of signing the payment arrangement agreement, the taxpayer can pay more than the required 25%.
  • The system will set two installments in the payment arrangement agreement:
  • Initial installment corresponding to 25% or more,
  • A second installment that must be paid no later than December 31, 2020. This second installment must be canceled by a single payment or debit installments made by the taxpayer.
  • For payments, the electronic multiple payment ticket and the multiple payment ticket may be used.
  • The payment arrangements signed before February 29, 2020, will remain in force and only the payment dates will be extended to December 31, 2020.

 

 

Tax Measures- Executive Decree 251 of March 24, 2020.

Through which tax measures are adopted to alleviate the economic impact resulting from the State of National Emergency. The State of National Emergency was declared by Cabinet Resolution No. 11 of March 13, 2020.

That through Law 76 of February 13, 2019, which adopts the Tax Procedure Code, recently amended by Law 134 of March 20, 2020, Articles 9 and 78 of this Code come into force, by which the Executive Branch may suspend, in whole or in part, in the event of a legally declared State of Emergency, the application of taxes of any type or kind, deferring its payment temporarily throughout the national territory.

During the term of the State of National Emergency, a term of one hundred twenty (120) calendar days, counted from March 20, 2020, is granted for the payment of taxes that are incurred or must be paid during said period and that are the responsibility of the General Directorate of Income (DGI) of the Ministry of Economy and Finance (MEF), without causing interests, surcharges and fines.

What taxes are subject to the aforementioned benefit?

  • Direct and indirect national taxes,
  • Duties,
  • Special contributions,
  • Any other liquid and enforceable money debts that a natural or legal person must pay to the DGI.

Are there exceptions to this benefit?

Yes, those whose obligation arises from the quality of withholding agent, namely:

  • Income tax withheld from employees,
  • Income tax withheld from non-residents,
  • T. B. M. S. (VAT) withheld from non-residents,
  • T. B. M. S. (VAT) withheld by the State,
  • T. B. M. S. (VAT) withheld by local withholding agents,
  • Dividends tax
  • Property tax withheld by banks.

Is the term for filing the income tax returns modified?

Executive Decree 251 of March 24, 2020, grants a definitive term for the filing of the income tax return corresponding to the 2019 fiscal period, of natural or legal persons, until May 30, 2020.

As a consequence of this measure, the term of extension is eliminated.

Likewise, Executive Decree 251 of 2020 authorizes the presentation of documents that serve as evidence or requirements for procedures and requests before the DGI, electronically, through the procedures that the entity will enable for this purpose.

  

Filing of the estimated income tax return of the income that will be obtained in the following year.

By reason of the State of National Emergency, taxpayers may determine for the year 2020, the estimated tax to be paid, an amount not less than 70% of the taxes incurred in their tax returns for the 2019 fiscal period, without said estimate being subject to investigation or verification by the DGI.

The tax thus estimated must be paid in two (2) installments during the fiscal period 2020, the first no later than September 30, 2020 and the second no later than December 31, 2020.

The term is extended for one (1) more year for the income tax exoneration to taxpayers who meet the conditions provided by Law 33 of July 25, 2000 (SMEs), to the extent that they have expired during the fiscal period 2019 or fiscal period 2020.

During the term of the State of National Emergency, the DGI is authorized to take the necessary measures with the aim of guaranteeing that taxpayers comply with the reporting obligations required by current laws.

Other benefits during the term of one hundred twenty (120) calendar days:

  • DGI Will be able to issue endorsed certifications of tax payment (paz y salvos) in favor of those taxpayers who present delinquency or inconsistency in their current account, upon request, duly substantiated and supported.
  • Filing of certifications of payment issued by the DGI by the CSS (Social Security), are exempted or all the procedures carried out before the General Directorate of Treasury of the MEF and the DGI.

If during the State of National Emergency, the capacity of the taxpayers to comply with their reporting obligations is affected, the DGI is authorized to issue a resolution, to postpone the terms of presentation of the different tax compliance declarations and reports, without the generation and payment of fines.

Who will not be able to take advantage of the benefits of this Executive Decree 215 of March 24, 2020?

Taxpayers who are being prosecuted for administrative tax evasion or criminal tax fraud.

(4) Municipal Agreement 76 of March 24, 2020.

By which an extension is granted for the payment of municipal taxes. This Agreement 76 applies to all taxpayers of the Municipality of Panama, whether natural or legal persons.

What taxes are subject to the aforementioned benefit?

  • Taxes
  • Fees
  • Special levies
  • Rights
  • Fines

All taxes corresponding to the months of March, April, May and June 2020, may be paid until June 30, 2020, without the respective surcharges and interest.

Author(s)

José Agustin Preciado

Senior Partner

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