Incorporating a corporation in Panama is a simple and expeditious procedure, however, the same cannot be said of the process of dissolution and closure of operations in the different government entities. People are often mistaken to think that the dissolution and closure of a business is carried out in a single step, leaving unfinished processes that in the long run involve balances and surcharges with certain entities such as the General Directorate of Revenue, Municipality, Social Security Fund, among other State institutions.
It is important to note that from the moment a corporation is incorporated, obligations arise before the Directorate of Revenue and before other government entities such as the Municipality of Panama, if it carries out commercial activities within the Republic of Panama, as well as before the Social Security Fund, from the moment the first employee is hired.
The process to dissolve a company does not only consist of entering the Public Deed of Dissolution in the Public Registry, but a series of steps must be complied with to prevent the Corporation from continuing to generate single fees, taxes, surcharges and interest.
The necessary steps to properly close a corporation with business operations within the Republic of Panama are as follows:
- Prepare the Minutes of the Shareholders’ Meeting approving the dissolution of the Company and then notarize it before a Notary Public.
- Enter and register the deed in the Public Registry.
- Publish the Registered Dissolution in a local newspaper.
- Request from the Social Security Fund (CSS) a Certificate of Not obliged to register as an employer, if the company has not had employees. In the event that the company has had employees, it must carry out the definitive cessation of operations before said entity and then request the necessary certification confirming said definitive cessation
- Prepare with an Authorized Public Accountant a Final Legal Income Tax Return before the DGI.
- Request the definitive closure of the business before the Municipality in case the Corporation had activities or operations in Panama.
- Finally, prepare a memorial for the Closure of the Single Taxpayer Registry (RUC) addressed to the General Directorate of Revenue (DGI) including the documents obtained in the previous points.
A Public Limited Company that does not comply with the steps described above, especially the step referring to the closure of the RUC before the General Directorate of Revenue, will continue to generate the single rate tax, which will continue to accumulate before said entity, even if the company has been formally dissolved before the Public Registry of Panama.
Of equal importance is the closure before the Social Security Fund when the company has had employees. Of all the entities, this is perhaps the one that has the most powers to carry out the coercive collection of debts accumulated by companies, even after the closing of operations, with the legal representative being the person they will contact for the collection of what is owed. For this reason, it is important to request the formal cessation of operations before the CSS at the time of the closure of a company.
Most business owners tend to completely forget about the closure of the business before the Municipality of Panama. Unfortunately, at present, there is still no automatic connection between the Public Registry, the Municipality and the DGI for the issue of business closures. Therefore, the fact that a person dissolves his company in the Public Registry does not imply that it will automatically be closed before the Municipality, DGI and CSS. The interested party, through their lawyer and accountant, must carry out the necessary procedures to make all the closings in each entity separately.
Licenciado Roberto Fong
LEGALIA PANAMA
