PANAMA - New tax fraud legislation
Law No. 70 dated January 2019 was recently adopted by the Republic of Panama including new regulations on tax fraud.
The Panamanian tax fraud law in detail
Panama has been evaluating over several months the possibility of introducing legislation to penalise the attitude and behaviour of people who do not comply with the Panamanian tax law.
In this regard, this new tax fraud law introduces sanctions on whoever intentionally defrauds the Panamanian Tax Authorities by pretending, hiding, omitting, falsifying or misleading a tax obligation, in order to avoid paying all or part of the corresponding taxes. Such action will be penalised with a prison term of two to four years.
The same penalties will apply to anyone who fraudulently obtains an exemption, return, enjoyment or use of undue tax benefits.
Under Law No. 70, legal entities which are used to develop some of the above-mentioned actions will be penalised with a fine of between one and two times the amount of tax fraudulently evaded.
In each case, the penalty will only be applicable when the amount of tax fraudulently evaded in a fiscal period is equal to or greater than USD 300,000 (excluding fines, surcharges, and interest). Administrative sanctions will be applied where the amount is less than USD 300,000.
Law No. 70 includes some negotiation terms that would help taxpayers to reduce or avoid sanctions. In this respect, if the taxpayer pays the amount of the fraudulently evaded tax before a decision is passed by the court of first instance, the sanction would not be applied. If payment is made during the investigation phase, no penal action will be taken.
Finally, a penalty of two to four years in prison will be imposed on anyone who, personally or through a third person, receives, possesses, deposits, negotiates, transfers or converts money, bonds, stocks, assets and other financial resources, knowing its history in criminal use against the National Treasury, for the purpose of hiding, concealing or covering its illegal origin, or helps to avoid the legal consequences of such a sanctionable event.
If action has been executed through one or more legal entities, a fine of one to three times the amount of the tax fraudulently evaded will be imposed.