Business Closure Procedure to Avoid Future Taxes
Contributed by Lombardi Aguilar Group
25 March, 2019
When closing a business, the following notifications must be made to avoid future taxes and charges:
1) Public Registry (if it is a company or legal entity),
2) Ministry of Commerce,
3) Local municipality,
4) Directorate General of Revenue (DGI),
5) Social Security Fund (if you had employees),
For the Public Registry, a Shareholders Resolution must be registered with the dissolution of the company or legal entity. In case owners decide to temporarily inactivate the business to reactivate it later, the Franchise tax and Resident Agent fee must continue to be paid.
At the Ministry of Commerce, the Operation Notice Business License must be canceled through the Panamaemprende online gateway. The procedure has no cost and does not require a lawyer, but it does require the password with which the Notice was initially obtained. The other entities will request proof of this cancellation in order to inactivate the business in their records and stop charging future taxes.
At each municipality where there are operations, the definitive closing of the operations of a company or business assigned to the municipality must be notified in writing. In the Municipality of Panama the filing must be sent to:
Department of Fiscal Surveillance, Hatillo Building, between Ave. Justo Arosemena and Cuba and between streets 35 and 36 East. Corregimiento of Calidonia. Republic of Panama. https://atencion.mupa.gob.pa/cierre-definitivo-del-negocio-o-empresa/
At the DGI, a Final Tax Return must also be filed by the company accountants through the online gateway Etax2. In addition to the abovementioned documents, an original authorization and a copy must be submitted requesting the General Directorate of Revenue to accept the dissolution of the company duly signed by the legal representative or its lawyer.
After paying severance to employees, the employer must notify the Social Security Fund of the cessation of operations of the company no later than thirty (30) calendar days after filing the monthly return at zero (0) with the http://www.css.gob.pa/cesedeoperaciones.html form. Failure to comply with this provision infringes Article 88 of the Organic Law 51 of the CSS of December 27, 2005.
It is very important to notify the Municipality, CSS and DGI of the closure, since these entities will continue to collect taxes and can enforce them through the courts.
Having notified the closing, it is convenient to close the bank accounts if they will not maintain high balances since banks will continue to debit minimum balance charges until the account is at zero.
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