Panama

Tax and financial measures associated with COVID-19

26 May 2020

Tax measures

  • A term of 120 calendar days is granted, starting on 20th March 2020, for the payment of taxes that are caused or must be paid in this period to the General Directorate of Revenue, this grace period will not cause surcharges, fines or interests. This includes ITBMS income tax (VAT), among others.
  • 30th May 2020 is established as the new date to file both the personal and corporate returns.
  • Taxpayers may establish their estimated income tax for the year 2020, for an amount not less than 70% of the tax caused in Income Statements for the year 2019 and pay it in two  terms, September and December 2020.
  • The dateline for the presentation of Income from Non-Reporting Taxpayer Reports, Sales Reports with Debit Cards, and the Report on Purchases and Import of Goods and Services is set for 30th June 2020.
  • The period of effects of the Tax Amnesty Law is extended until 30th June 2020, through which taxpayers may update their situation before the General Directorate of Income and make payment arrangements for unpaid taxes (the Law embeds some benefits for taxpayers as well).
  • The use of fiscal equipment for certain taxpayers is temporarily waived, while the State of National Emergency lasts.
  • 15th July 2020 is the new dateline to file the sworn Declarations of Tax on the Transfer of Personal Property and the Provision of Services (ITBMS – VAT), which period to report were on March, April and May 2020.
  • Donations made to the Panama Solidarity Plan (governmental fund to aid the needy during the State of Emergency) can be recorded as a deductible expense on the personal and corporate income tax statement.

Social security measures

  • Fines, surcharges and interest are suspended for the filing and / or late payment of the monthly statement of workers and salaries for the quota months of February, March, April and May 2020, by individuals or corporations, national or foreign, of public or private law, subject to the compulsory regime and the voluntary regime of the social security fund.

Employee and employer supportive measures

  • Work permits for foreign workers which were due on 12th March and so on, have been extended until further notice.
  • The article of the Labor Code that allows the modification of the working day is temporarily modified, making it possible to reduce the working daily hours through a employer-worker agreement.
  • Granting of early vacations and the teleworking modality is encouraged to avoid COVID¬19 contagion.
  • Businesses which remain open must adopt a Health Protocol develop by the Ministry of Health and the Labor Ministry.
  • Section 8 of article 199 of the Labor Code is modified to allow to the suspension of labor contracts to employees which employers have been forced to temporarily close their companies due to the COVID-19 quarantine measurements, for a period of 30 extendable days.
  • The government begins the delivery of food vouchers and food bags nationwide for all those affected by the suspension of labor contracts or the closings of their jobs.

Business support

  • The Public Services Authority (ASEP) approves a discount scheme for the end customer rates on electric bills for the months of April, May and June 2020.
  • All the procedures for the launching and eviction of real estate destined for residential use, commercial establishments, professional use, industrial and educational activities are suspended, while the State of National Emergency lasts.
  • The Colon Free Zone suspends the collection of leasing fees from companies that do not report operations during the months of April, May and June 2020.
  • The payment of public services such as: electricity, telephone, cellphone and internet are suspended for a 4-month period. After his period, such payment will be distributed among a 3-year period.

Financial measures

  • The Ministry of Economy and Finance authorises the issuance of Global Bonds by the Republic of Panama for up to US $ 3,000,000,000.00, in the international capital market.
  • The Superintendency of Banks of the Republic of Panama allows banks to create a new type of credit, called “modified loans” to allow the debtor to properly attend his obligation in the face of a potential deterioration crisis caused by the COVID-19.
  • Moratorium Law is approved until December 31, 2020, in agreement with the banks, for the payment of mortgage loans, personal loans, to small and medium-sized companies, to the agricultural, livestock, commercial, transportation, and auto loans sectors. and credit cards.

Accounting implications

  • Due to remote working, accountants are facing difficulties to efficiently development their work, which at the same time affects the work of external auditors and tax advisers.
  • During the month of April 2020, the Panama College of Public Accountants (CCPA), the main collegiate union of the accounting profession in our country, has held a series of webinars or virtual conferences in which it has developed important topics related to the financial effects of COVID-19:
    • Tax measures by State of Emergencies COVID-19
    • COVID-19 Labor Measures
    • The Structural Change of Companies and Society After COVID-19
    • Impact on Financial Information in Time of Crisis by COVID-19
  • The CCPA has also shared on its social networks the latest pronouncements issued by the IFRS Foundation, regarding the incidents of COVID-19 in some IFRS already in force, for example: IFRS 9 and COVID-19 – Accounting for expected credit losses applying IFRS 9 Financial Instruments in the light of current uncertainty resulting from the COVID-19 pandemic; IFRS 16 and COVID-19 Accounting for rental concessions related to COVID-19 that apply IFRS 16 Leases.

Others

  • The Executive Body ordered the temporary closure of commercial establishments and companies, 30 days beginning on March 20, 2020. This closure was extended while the National State of Emergency lasts.
  • A 24-hour curfew is declared for the entire population of the Republic of Panama from March 25, 2020 on.
  • The prohibition the consumption and sale of alcoholic beverages is declared.
  • A mobility plan of only one hour is established based on sex and the last number of the personal identity card. Only purchases on food and medicine are allowed.
  • Panama´s air space has been closed. Only humanitarian flights are allowed. Panama´s airports have been closed until June 22nd, 2020.

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