Global Tax Alert (News from Americas Tax Center) | 25 October 2013

Panama approves tax amnesty program

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On 6 September 2013, Law 51, approving a tax amnesty program (the Law) in Panama, was published in the Official Gazette.

The amnesty period began on 7 September 2013 and ends on 7 December 2013. Taxpayers have therefore until 6 December 2013 to participate in the program.

The program is available for tax years up to 2011 and it applies to taxpayers that did not correctly report their income for income tax purposes and taxpayers with outstanding tax debts.

Taxpayers that did not correctly report income

Amnesty is granted to taxpayers that have not declared their income correctly for income tax purposes, including cases of negligent and fraudulent tax returns. Eligible taxpayers must make an additional tax payment that amounts to 25% of (i) the sum of the taxable income reported in the last three income tax returns (ii) divided by three.

Special rules apply to compute the tax due if the taxpayer had losses in the tax periods covered by this amnesty.

Taxpayers that failed to file or had no activities in any or all of the last three tax periods have to submit or amend the corresponding income tax returns, as the case may be, and such returns must be approved by the tax authorities' administrator for the taxpayers to be eligible to participate in the amnesty program.

Taxpayers that participate in the program and pay the tax due thereunder will not be audited by the tax authorities until 31 August 2014. Once the tax due has been paid in full, the tax authorities' administrator issues a certificate expressly stating that the taxpayer has been audited up to tax year 2011.

Taxpayers may agree with the tax authorities to pay the tax due through an installment agreement with at least 40% of the amount owed to be paid immediately and the balance over a three-month period.

The amnesty is not available to taxpayers who are currently undergoing a tax examination, or those who have already been audited and have formal proceedings before the tax authorities or the Tax Administrative Court pending.

Taxpayers with outstanding tax debts

The amnesty applies to taxpayers with outstanding tax debts with the tax authorities. By electing to pay the taxes owed, taxpayers are granted a waiver on applicable penalties and surcharges together with a 25% discount on the late payment interest.

Taxpayers that apply to this part of the amnesty will not be granted the benefit of not being subject to a tax examination until 31 August 2014, and will not be provided a certificate by the tax authorities expressly stating that they have been audited up to tax year 2011.

Penalties, surcharges and late payment interests resulting from audits already carried out by the tax authorities are not within the scope of the amnesty.

Taxpayers in arrears on tax payments that have a payment arrangement with the tax authorities concluded before the Law was enacted have to enter into a new payment arrangement.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Limited Corp., Panama City
  • Luis Eduardo Ocando
    +507 208 0144
  • Isabel Chiri
    +507 208 0100
  • Klaus Bieberach
    +507 220 89800
Ernst & Young, S.A., San José, Costa Rica
  • Rafael Sayagués
    +506 2208 9880
  • Alexandre Barbellion
    +506 2208 9800
Ernst & Young LLP, Latin American Business Center, Houston
  • Priscila Maya
    +1 713 750 8698

EYG no. CM3910