EpiphyCorp

The DGI has been clear in terms of putting in practice and interpreting Decree Number 53 of June 16th 2010, through which it approved the use of fiscal equipment in the Republic of Panama.

After many discussions, debates, queries and protests, coming from diverse sectors and business people, the DGI has only one position and it is invariable: if it is not firmly included within any of the cases described in the Law, the fiscal equipment must be purchased.

The only exceptions that do not require the purchase of fiscal equipment, recognized by the Law itself are the following:

• Agricultural activity
• Transmission of real estate and assets that have or must have public documents.
• National transportation services, maritime or by land.
• General bank operations and services
• Financial institutions, including companies that  cater to financial loans, and the monetary market funds, as well as those regarding credit or financial institutions that are governed by special laws, savings institutions, pension funds, retirement funds and social prevision, as well as savings and loan companies.
• Operations made by the Panama Stock Exchange
• Services depending on the conformity of the Labor Code.
• Services offered under the umbrella of liberal, artisanal or artistic professions.

As you can see, the last point involves many people that write out invoices to their own name, who end up with the doubt, “are the services I offer independently included in liberal, artisanal or artistic professions?”.

The DGI responded by publishing a definition in that regard:

Liberal profession is any activity determined by an intellectual contribution, knowledge, technique, that is done independently or through civil societies constituted by professionals to carry out their services.

People that carry out liberal professions or that provide technical services in an independent way or through civil societies are not under the obligation to use fiscal equipment.

When it is a combination of operations that require the professional service along with commercial activities (product sales, renting supplies), the company must document all of their income through fiscal equipment. Every sale or service that is generated through a corporation (S.A.) must be documented by fiscal equipment.

It’s interesting to see what the DGI thinks about the services that are written out as consulting jobs:

Consulting: If the activity is carried out independently or through civil society, it would not require the use of fiscal equipment to print the invoice for their fee.

If the service is provided by a corporation (S.A.) fiscal equipment must be purchased for proper invoices.

If after reading this, you’re still not clear, the National Income Office (DGI) has demonstrated its response to all the queries that have been stated to date, in exactly the same way: “if it is not expressly exonerated IT NEEDS fiscal equipment”.

You may access the complete list of queries published by the DGI here, and there are some worth reading, which may help you identify whether or not you’re excluded from the list of having to purchase the fiscal printing equipment.

It’s always better to be perfectly clear and prepared in everything concerning the fiscal printing equipment, because fines start at US$1,000.00 and may go up to US$15,000.00 for lack of the equipment.

If you have any questions left we recommend that you: don’t believe everything your Lawyer, Accountant, Teacher or Priest says; brace yourself and with a great deal of patience, pay the DGI a visit to state your case and that way you will avoid any surprise based on the typical “someone told me…”.

Whenever our clients contact us in order to acquire a Panamanian corporation, we always get a sense of confusion from them in terms of the administration and control mechanisms –not just by those who want to structure their business in this way for the first time, but also by those that have used this sort of business model in the past.

What we always tell them is that according to Law 32, of 1927, by which Panamanian corporations are regulated, 3 different organs with different responsibilities and specific objectives have been established:

1. Shareholders Assembly
2. Board of Directors
3. Dignitaries

The Shareholders Assembly (Article 40) is the main organ and supreme authority within the corporation and consists in its totality of the shareholders or owners of the corporation. Its main duties consist of electing the Board of Directors, approving the reforms in terms of the social pact or its rules and deciding everything related to the organization and structure of the company. Its members are known as the shareholders and their decisions need to be made by obtaining the majority of votes.

The Board of Directors (Article 49) once the shareholders select the members, they will direct and manage all of the businesses related to the corporation, having complete and absolute control of it. The members of the Board of Directors are known as “Directors” and they al possess the same rank or quality and their decisions need to be made by obtaining the majority of the votes.

The corporation’s Dignitaries (Article 65) are the people designated by the Board of Directors to carry out specific tasks within the corporation, for example: the president schedules, organizes and directs the Board of Directors or Shareholders meeting; the Secretary keeps all the registries and summaries of the decisions that are made in such meetings and the Treasurer controls the finances of the business and presents the corresponding reports within the board or shareholders meetings. Besides the President, the Secretary and the Treasurer, the Board of Directors may appoint other dignitaries, depending on the structure of the corporation (General Managers, CEO, Officials, others).

The corporation’s Directors may appoint as President, Secretary or Treasurer any Director, and that’s where all of the confusion or misinterpretation comes from, as to whether the tasks pertaining to Directors and Dignitaries are the same or not, however you don’t need to be a Director to be a Dignitary for a corporation and every position (Director and Dignitary) has specific functions that must be respected in order to avoid any wrongdoing or actions that may be considered invalid on the basis of not pertaining to the jurisdiction of the person that carries them out.

In a previous article we offered a summary of the different tasks and responsibilities pertaining to the:  corporation’s directors

One of the most common uses for Panamanian corporations at an international level is to enable their shareholders to manage their private and public stock and bonds.

Law 32 of 1927, in article 19, number 10, enables properly constituted Panamanian corporations to:

Article 19: Every corporation constituted accordingly with this Law will have, besides the faculties this Law allows, the following characteristics:
1….
10. To guarantee, obtain, purchase, have, sell, grant, trespass, mortgage, pledge or dispose in any way, stocks or bonds issued by other corporations or by any municipality, province, state or government;

Because there is no rule that forbids a Panamanian corporation from having a single shareholder, this makes it the ideal instrument for people to manage their securities, stocks and bonds, enabling them to keep them separate from their personal property, with the advantage that any obligation they may contract on their own behalf, in case of personal problems or fulfillment issues, will not affect the titles managed by means of a corporation.

Another important advantage is that the administration of securities through a corporation, allows the shareholder to maintain his/her privacy and anonymity when dealing with government bonds or other instruments registered before state law officials.

Lastly, through these simple control mechanisms and decision making through a Panamanian corporation, the shareholder can administrate, invest, buy/sell security titles in a fast, safe and effective way.

EpiphyTips

At EpiphyCorp we’re specialists in the constitution and registration of Panamanian corporations, used in the purchasing and management of securities, including private and public stocks and bonds.

Our corporate service packages give our clients the necessary elements to constitute a corporation with all of the permits and documents required in order to purchase and manage securities immediately, as soon as they are received.

For more information, visit our Panama Corporations section.

Photo by: Katrina Tuliao