Panama, Tax Reform - Act 8 of 2010, Part III - Prescription - Income Tax Return
The term to exercise the right to be reimbursed any overpaid or improperly paid amounts to the Treasury is reduced from 7 to 3 years, counted from the last day of the year on which payment was made.
Increases by 2%, that is, from July 1, 2010, the rate will be 7%.
Excluded from this tax are any services rendered to the Government or the State, as well as any personal services in a dependent relationship. Included, however, are new service concepts, such as:
1. Public entertainment, events, seminars, conferences, lectures, performances by artists, musicians, s ingers, performers, sports professionals and professionals in general, which are not free and are carried out in Panama, except for sporting events carried out nonprofit organizations and the Panamanian Sports Institute (Instituto Panameño de Deportes).
2. Local and international passenger Air Transport
3. Lodging services or public accommodations, the latter at the rate of 10%.
Goods and Services Exempt from the ITBMS
1. The criteria has been broadened as regards petroleum derivative products (diesel, light diesel, marine diesel, gasoline, aviation gasoline, natural gas, low viscosity fuel oil, intermediate fuel oil, fuel oil or bunker C, liquefied petroleum gas, turbo jet fuel or fuel, kerosene and tar). It does not include lubricants, lubricating oils and greases).
2. Articles for infant care, according to specific tariffs and rates (bottles, diapers, strollers, chairs, bathtubs).
3. Goods found within free zones, including their transfer between them and in the customs area with their respective document of endorsement.
4. Freight, air, sea and land freight transport, as well as transportation of passengers by sea or land (modifying the recent Act 69).
5. Logistics operations carried out in the free zones and special economic areas.
Classifications 1 and 2 for the submission of ITBMS forms are eliminated; same must be submitted monthly with the exception of independent professionals and civil society organizations which will submit them every three months.
The exemption for residential telephony has been repealed. On the other hand, credit notes were extended to 180 days.
- The use of the existing stamps is permitted until December 31, 2011.
- Stamped paper and stamps are eliminated.
- Where covering the tax by means of stamped paper and notaries is necessary, the use of authorized 8 x 13 plain legal paper of no less than twenty (20) pounds will be allowed, and each two-sided sheets will be made valid and effective through B/.8.00 stamps (B/8.00) imprinted with a postage stamp machine or by affidavit. In the authorized paper, the space shall be thirty lines, and double-spaced in general, the horizontal space shall be 6.69'', with equal margins on both sides.
- Natural and legal persons are obliged to cover the stamp tax, payable monthly by affidavit or any other mechanism made available by the DGI (Income Directorate General). The DGI may extend the period or deadline for the submission of the tax return or statement, pursuant to a duly substantiated request by the taxpayer.
- The affidavit for stamps will be submitted within fifteen (15) calendar days following the end of each month.
- There will be a single kind of notarial paper and its value shall be eight dollars (B /.8.00).
Plain authorized paper will be extended to briefs, writings or petitions submitted to any official or public authority, with the exception of the tax authorities. It shall also be extended to testimonies, accounts, settlements, discharges and copies that need to be used for official use or that, even without such purpose, need to be issued by any public authority.
The use of plain authorized paper for formalities, actions, requests or complaints in all kinds of administrative proceedings before the tax authorities, the Administrative Tax Court, the Public Procurement Administrative Courts and any other court established in the future, is not required. In the case of papers used at notary offices, same must pay a stamp tax, stamped or imprinted by postage machine or tax affidavit, in the amount of eight dollars (B /. 8.00).
Offences and Penalties
It includes penalties for those who alter, falsify or tamper with postage machines or who use the documents already stamped or another device to evade the tax.
There is an increase in the prison sentences to 3 and 6 years (formerly 2 and 5 years) for whoever falsifies engraving tools, lithographic stones or other instruments used to engrave, print, or otherwise make the Republic of Panama’s fiscal stamps.
It is stipulated that the fines will be imposed by the DGI and that any appeals will be heard by the Administrative Fiscal Court.
Subparagraph 11 of Article 764 was added, which establishes what immovable property is exempt from this tax. According to what is stated in this paragraph, areas that constitute property for public use shall not be subject to the payment of this tax, as long as they have been allocated and segregated by registration at the Public Registry as new properties. The beneficiary of this exemption must have a certification issued by the pertinent public entity evidencing that they are of public use. The exemption will be recognized by the DGI through the issuance of a resolution which will be valid from the time these immovable assets become of public use.
Through the tax reform approved on 15 March, new parameters and changes in relation to land tax were set. In accordance with the provisions of this rule concerning the exemption of the first B/.30,000.00, the implementation of the progressive rate cannot be extended to property subject to the Horizontal Property Regime during the period in which it is legally exempt. In these cases, the 1% rate is applied. Upon the expiration of the term during which improvements are exonerated, the regular rate will apply. For the purposes of applying the combined alternative progressive rate, the exemption for the first B/.30000.00 which had been eliminated by Act 49 of September 2009 is reinstated. This exemption does not apply to immovable assets covered by the Horizontal Property Regime. Paragraph 1-A was added, which states that the combined alternative progressive rate will be applied on the value of the improvements and land.
The general and partial appraisals officially decreed by the Land Registry and Property Assets Directorate may be carried out by officials of the Land Registry and Property Assets Directorate or by private appraisers hired by the Ministry of Economy and Finance, in compliance with the Public Procurement law.
ABOUT THE AUTHOR: Rodrigo Julio Molina Ortega
The law firm MOLINA & Co., offers services relating to civil, administrative, maritime, commercial, banking, general and corporation matters within and outside of Panama, serving customers with honesty and top efficiency and professionalism.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.