Tax Amnesty

By: Mgter. Luis Oscar Pitti – Lawyer and Tax Consultant

Executive Decree 512 of September 23, 2020, which modifies the provisions of Executive Decree No. 553 of November 19, 2019, modified and added by Executive Decree No. 257 of April 3, 2020, which regulates Law 99 of October 11, 2019; establishes an extension to the general tax amnesty for the payment of taxes administered by the General Directorate of Revenue of Panama.

This Law 99 of October 11, 2019, granted a general tax amnesty for the payment of taxes administered by the DGI of the MEF, in which it was established that they can benefit from the amnesty period for taxes, fees and contributions caused and delinquent until on June 30, 2019.

Justification of the Tax Amnesty

As a result of the pandemic that the country is experiencing, it has become impossible for all taxpayers to benefit from and take advantage of the benefits of Law 13 of March 20, 2020. That through Executive Decree 553 of November 19, 2019, the Decree 257 of April 3, 2020 and Law 99 of October 11, 2019 was regulated. The National Assembly approved Law 160 of September 1, 2020, which modified Law 99 of October 11, 2019 and extended the term until on December 31, 2020, to make payments of taxes due and delinquent as of February 29, 2020; subject to the forgiveness of 85% of all interest, surcharges and penalties. The term to prescribe the payment arrangements was extended, as well as for full compliance with the payment arrangement.

Who can benefit from the amnesty? The regulations establish that natural and legal persons and real estate that are in arrears, taxpayers, withholding agents and other persons responsible for taxes, can benefit from the amnesty. Also taxpayers who maintain pending processes for additional liquidations, encumbrances of trades or any other payment requirement before the DGI, prior withdrawal of the action or resource for the payment of the obligation.

Relevant points of the Tax Amnesty

Article 1 establishes an Amnesty period, which determines that in the case of Law 134 of March 20, 2020, and Law 160 of September 1, 2020, it determined that, in payment of taxes, it may be carried out from October 15, 2019 to December 31, 2020, or taxpayers may avail themselves of a payment arrangement between the months of October 2019 and December 2020, paying 25% or more when signing the payment agreement, if the payment arrangement was signed after February 29, 2020.

In accordance with Executive Decree 512 of September 23, 2020, taxpayers who have not been updated to date, with the payment of their tax obligations due to the issue of the pandemic, now has the opportunity until December 2020 for everyone to catch up on tax amnesty.

What this Decree 512 of September 23, 2020 has presented to the vast majority of taxpayers, who have difficulties in meeting their tax obligations, is a tax relief measure with a 25% discount if they accept a payment arrangement between October 15, 2019 and December 31, 2020 if they sign the payment agreement and may cancel it until December 31, 2021.

Terms of Payment Arrangements:

a. If the payment agreement was made in the month of October and November 2019, 100% of all interest, surcharges and fines will be forgiven.

b. If the payment agreement was made in December 2019, 95% of all interest, surcharges and fines will be forgiven.

c. If the agreement was made in the month of January 2020, 90% of interest, surcharges and fines will be forgiven.

d. If the payment agreement was made between the months of February to December 2020, 85% of the interest, surcharges and fines will be forgiven.

Deadline for full compliance with payment arrangements

a. Those made until February 29, 2020 will not exceed December 31, 2021.

b. Those made after February 29, 2020 and until December 31, 2020 must be canceled until April 30, 2021, these terms are non-extendable.

What about interest, surcharges and penalties?

Interest, surcharges, and penalties will be eliminated if the taxpayer pays all of the amount owed within the maximum agreed period.

Si el contribuyente no cancela la totalidad de lo adeudado al 30 de abril del 2021 o al 31 de diciembre de 2021, se procederá a la anulación del Convenio de Pago de Amnistía.

The taxpayer pays their taxes on time, avoids surcharges, interest, and fines, in this way you relieve your tax commitments and save money.