Fiscal Residency – Benefits Panama
Background
Article 762-N of the Fiscal Code, added by Law 52 of 2012, defines the concept of fiscal residency applicable to both individuals and legal entities in the Republic of Panama. It also establishes the necessary requirements to be considered a fiscal resident.
In Official Gazette number 27951-A, dated January 19, 2016, Resolution No. 201-0354, issued on January 13, 2016, by the General Directorate of Revenues, was published and became effective. This resolution regulates the applications for Fiscal Residency Certificates for individuals and legal entities in the Republic of Panama and repeals articles two through seven of Resolution 201-10860 of 2013 issued by the National Public Revenue Authority.
What is the importance of fiscal accreditation and its uses?
Fiscal residency is a fundamental concept for determining a country's tax jurisdiction. Accrediting residency is crucial in determining where a taxpayer should be taxed. Countries have the authority to tax income earned by their fiscal residents anywhere in the world, or income earned in the country by non-residents.
Through these certifications, the tax administration of the Republic of Panama accredits a specific fact regarding the tax situation of an individual or entity and their status as a fiscal resident in Panama. Fiscal residency certificates are commonly used to confirm fiscal residency status in the Republic of Panama for the purposes of applying double taxation treaties signed with other countries. It is important to note that even if a taxpayer has a permanent or temporary residence permit or a work permit in Panama, they might not be considered a fiscal resident.
Who can apply for a fiscal residency certificate?
Individuals who stay in the national territory for more than one hundred eighty-three (183) consecutive or alternate days in a fiscal year or the immediately preceding year can apply for fiscal residency certification. Legal entities incorporated under the laws of the Republic of Panama that have physical means of management and administration within Panamanian territory and are duly registered in the Public Registry can also apply.
Where and how to apply for a fiscal residency certificate?
Any individual or legal entity needing a fiscal residency certificate from the Republic of Panama must submit a petition meeting the requirements set out in the resolution to the Correspondence Section of the General Directorate of Revenues. The petition will then be forwarded to the International Taxation Department of the General Directorate of Revenues for evaluation.
What requirements must be provided?
A petition stating the reasons for considering the applicant a fiscal resident of the Republic of Panama, detailing the following information:
- Clear and express identification of the applicant.
- Address in the Republic of Panama.
- Economic activity carried out in the Republic of Panama.
- Specification of the treaty or agreement to avoid international double taxation, if applicable.
- Fiscal year for which the Fiscal Residency Certificate is requested.
- Any other relevant evidence.
What can be considered as "Other relevant evidence"?
These are additional documents supporting the arguments and reasons detailed in the application petition, such as:
- Notarized copy of the lease agreement proving the applicant's address in the Republic of Panama.
- Receipts for public services (water, electricity, and/or telephone) demonstrating the applicant's use of the commercial premises, offices, or residence indicated in the application petition.
- Copy of the Income Tax Declaration for the requested fiscal year.
- Copy of the Operating Notice for legal entities.
- Copy of the employee payroll for legal entities or business owners.
Is obtaining the Fiscal Residency Certificate automatic once the petition with requirements and evidence is submitted?
No, it is important to note that submitting the application does not imply its approval. The authority is obliged to evaluate it and subsequently issue a resolution either accepting or denying the Fiscal Residency Certificate for the requested period.
What analysis elements does the General Directorate of Revenues evaluate?
For individuals, it must be proven that:
- They have stayed in the national territory for more than one hundred eighty-three (183) consecutive or alternate days throughout the year or the immediately preceding year.
- The concept of permanent housing, interpreted as the person's center of vital interests, referring to their economic or family interests. Simply having housing available does not automatically qualify a person as a fiscal resident; a personal connection to the housing is necessary.
For legal entities, to determine if a company registered in the Public Registry of Panama has ties to the national territory and has physical means of management and administration, it is necessary that:
- The applicant informs the General Directorate of Revenues about the commercial or support activities carried out from the national territory.
- The entity has offices for such purposes.
- It is proven that the company has personnel available. This is derived from conducting commercial activities.
How long does it take to obtain a fiscal residency certificate?
Currently, the response time of the General Directorate of Revenues for evaluating and subsequently accepting or denying the fiscal residency application is two (2) to three (3) months.
What happens if I cannot provide all the required documents for obtaining the certificate?
If the application is incomplete or if the authority requires additional documentation, the interested party will have two (2) months from the date of notification to provide the required documentation.
What happens if I want to voluntarily provide additional documentation that I believe could benefit my application?
The General Directorate of Revenues allows the interested taxpayer to submit any additional evidence they deem appropriate later. This should be done through a petition referring to the submitted application.
What should I do once I receive the fiscal residency certificate?
Once the General Directorate of Revenues issues the fiscal residency certificate, if it is to be used abroad, it must be legalized accordingly. Any document to be used in another country must have the corresponding apostille.
The Hague Apostille (full name) is a simplified method of legalizing documents to verify their authenticity in the context of Private International Law. Physically, it consists of a page attached to the documents that the competent authority stamps on a copy of the public document.
In Panama, the Ministry of Foreign Affairs is the competent authority for obtaining the apostille.
