Law 126 of 2020 approved regulations regarding work from home.  These regulations allow the parties, within the possibilities of the operation of each business and the employee’s duties, to agree that the employee will provide his/her services from home.  For this, the parties must execute an amendment to the employment contract agreeing that the services may be provided from home, either permanently or temporarily.   The employer must provide the employee with all the necessary equipment for the provision of the services, and agree with the employee which expenses the employee will assume for the provision of the services from home, which will be covered by the employer.  The employer may decide, unilaterally, when it will require the employee to provide the services from the employer’s offices again.

As a result of the pandemic caused by COVID 19, the Ministry of Labor has regulated article 159 of the Labor Code, which allows for the reduction of the work schedule with the consequent reduction of the salary.  To apply this measure, the parties must execute a temporary amendment to the employment contract in which the following is agreed:

• The reduction of the work schedule
• The reduction of the salary in accordance with the reduction of the work schedule
• The methods by which the work schedule will be gradually restored
• The term during which the reduction of the work schedule will be in effect

Executive Decree No. 71 of March 13, 2020 establishes the approved text that the temporary amendment to the work schedule must have.

Executive Decree No. 101 of July 13, 2020 establishes that the maximum monthly reduction of the work schedule is 50%. This Executive Decree also establishes that the temporary amendments to the work schedule may only be applied until December 31, 2020.

The signed amendment must be sent electronically to the Ministry of Labor, through the Panama Digital platform, with a copy of the company’s Notice of Operation (Aviso de Operación) and a copy of the last payroll form submitted before the Social Security Office immediately before the reduction of the work schedule.

The employer is not obligated to grant its personnel vacation time; however, it is a measure encouraged by the labor authorities, which have authorized the employer to force its personnel to take vacation time.  Generally, vacations must be agreed to with the employees; however, through Executive Decree No. 78 of March 16, 2020, employers were authorized to instruct their personnel regarding the mandatory use of their vacation time.

This Executive Decree also granted employees 60 years or older, those with chronic diseases and pregnant employees the option to take vacation for a minimum of 15 calendar days.

As a result of the pandemic caused by COVID 19, the government of Panama declared the State of Nacional Emergency through Cabinet Decree No. 11 of March 13, 2020.  As a result of said declaration, Executive Decree No. 500 of March 19, 2020 was issued, which ordered the closure of business and offices for a period of 30 days as of March 21, 2020, with certain exceptions, which period may be extended.

The above gave rise to the application of Article 199 Section 8 of the Labor Code which allows for the suspension of the effect of employment contracts, which means that the employee has no obligation to provide services and the employer has no obligation to pay salaries.  Notwithstanding, the Ministry of Labor’s authorization is required for the suspension to take effect.

The Ministry of Labor has regulated Article 199 Section 8 mentioned above and has established the process that must be followed in order to obtain the required authorization for the suspension of the contract to come into effect.

The following information must be sent electronically to the Ministry of Labor:

• Written request explaining the justification for the suspension of the effects of the contracts and requesting the suspension of the contracts for a period of 30 days, which period may be extended, signed by the Legal Representative or an authorized attorney in fact;
• Copy of the Notice of Operation (Aviso de Operación) of the employer;
• Copy of the last payroll form submitted before the Social Security Office immediately prior to the closing of operations;
• Suitable proof of the economic loss suffered by the employer;
• List of the employees whose contracts are requested to be suspended, specifying each employee’s name, identification number, social security number, home address, occupation, gender, age, phone number and email address.

The Ministry of Labor will have three business days to respond to the suspension request.  If the Ministry does not respond during this period, then the suspension will be understood to have been granted for all legal effects. In that sense, Executive Decree No. 95 of April 21, 2020 has clarified that the suspension of the contracts will be effective as of the fourth business days following the filing of the authorization request.

For those businesses, whose closure was ordered by means of Executive Decree No. 500 of March 19, 2020, the extension of the suspension will be automatic.

For those businesses, whose closure was not ordered, but who because of economic loses requested the suspension of employment contracts, the extension of the suspension will have to be requested at least five business days prior to the expiration of the initial suspension, and must provide justification for the extension and indicate the period for which it is requested.

Through Law 157 of August 3, 2020 the extension of the suspension of employment contracts was approved until December 31, 2020. Companies must request the approval of the extension of the suspension every month.

The gradual reinstatement of employees, whose contracts have been suspended, cannot be used as a means of retaliation or discrimination measures for reasons of sex, race, religion, or disability, among other causes. Employers that discriminate or retaliate against employees while reactivating the suspended contracts once activities resume, will be fined between US$500 and US$1,000 for each employee subject to discrimination.

Nothing in the legislation or regulations that have been issued as a result of the declaration of a State of Emergency prohibits or restricts the power of the employer to terminate the employment relationship. Such terminations must be carried out subject to the usual restrictions and in compliance with the usual formalities established in the Labor Code.

Notwithstanding the above, the newly enacted Law 157 of August 3, 2020 requires employers to provide employees at least two business days to analyze the termination proposal prior to executing the mutual termination agreements, otherwise such mutual termination agreements will be considered null and void, in which case the employee may ask for their position to be reinstated.  This law also requires that the amounts due upon the termination of the employment relationship are paid immediately.

Law 157 is applicable to companies that were affected by the State of Emergency and who have suspended their employees employment agreements as a result.

The Panamanian government has established a moratorium period for certain credits granted by banks, thrift companies and cooperatives. Law 156 of 2020 orders, among other things, a moratorium on the debts owed by certain clients to local banks, cooperatives and financing companies (financieras). The moratorium applies retroactively from March 1, 2020 until December 31, 2020 (“Moratorium Period”), and applies to the following credits (“Included Credits”): (i) residential mortgages, (ii) personal loans, (iii) car loans, (iv) credit cards, (v) loans to small and medium-size companies, (vi) commercial loans, (vii) credit to the transportation sector, (viii) credit to the agricultural sector, and (ix) consumer loans. 

The clients which may benefit from the moratorium are only those “persons affected by the economic crisis caused by the Covid-19 pandemic, that is, persons whose employment contract has been suspended or terminated, independent workers and merchants whose activity has been affected by the health measures established by the Executive Branch”.  Such clients must be able to duly document that they have been affected, either by way of a sworn statement or by providing evidence of the termination, suspension or decrease in working hours, in their employment contract.

During the Moratorium Period, banks, cooperatives, and financing companies will not be able to collect, increase applied interest rates, surcharges, or any other interest in relation to Included Credits. Additionally, during the National State of Emergency and up to 60 days after it is lifted, credit histories will not be affected. Once the term of the moratorium expires, the banks and the beneficiaries should negotiate a refinancing or prorating of the debt, without charging any fees for late payment or any other administrative expense. 

Under Law No. 156 of 2020, banks may not charge any fees for late payment or any other administrative expense as a result of the non-payment and refinancing of applicable loans.

On April 2, Law No. 132 of 2020 was published in the Official Gazette, which, among other things, establishes that flexibility measures will be adopted by state-owned or run financial institutions.

In addition, the Panamanian government has established a moratorium period for certain credits granted by banks, thrift companies and cooperatives. Law 156 of 2020 orders, among other things, a moratorium on the debts owed by certain clients to local banks, cooperatives and financing companies (financieras). The moratorium applies retroactively from March 1, 2020 until December 31, 2020 (“Moratorium Period”), and applies to the following credits (“Included Credits”): (i) residential mortgages, (ii) personal loans, (iii) car loans, (iv) credit cards, (v) loans to small and medium-size companies, (vi) commercial loans, (vii) credit to the transportation sector, (viii) credit to the agricultural sector, and (ix) consumer loans. 

The clients which may benefit from the moratorium are only those “persons affected by the economic crisis caused by the Covid-19 pandemic, that is, persons whose employment contract has been suspended or terminated, independent workers and merchants whose activity has been affected by the health measures established by the Executive Branch”.  Such clients must be able to duly document that they have been affected, either by way of a sworn statement or by providing evidence of the termination, suspension or decrease in working hours, in their employment contract.

During the Moratorium Period, banks, cooperatives, and financing companies will not be able to collect, increase applied interest rates, surcharges, or any other interest in relation to Included Credits. Additionally, during the National State of Emergency and up to 60 days after it is lifted, credit histories will not be affected. Once the term of the moratorium expires, the banks and the beneficiaries should negotiate a refinancing or prorating of the debt, without charging any fees for late payment or any other administrative expense.

Although no mandatory measures have been implemented, the Ministry of Commerce and Industry, by means of Resolution No. 31, urged thrift companies to implement special and temporary mechanism to provide certain flexibility to consumers such as grace periods, reduction in the interest rate, extending lending term, among others.

To date, no measures have been taken to allow for banks to postpone or roll forward any payment obligations to customers´ savings or investments, and thus banks are required to comply with the payment of earnings of its customers.

By means of General Resolution SMV No. JD-3-20, the SMV adopted a special procedure for the notification of administrative acts before the SMV, allowing all administrative acts issued by the Board of Directors or Superintendent of the SMV to be notified by email with a digitized copy of the document containing the administrative act. Additionally, the resolution establishes the obligation of users and their representatives to include an email address in all requests, queries and other procedures that are presented before the SMV.

SMV Agreement No. 3 of 2020 (“Agreement No. 3-2020”) issued by the Superintendency of the Capital Market (“SMV”), approved certain special and temporary measures for the abbreviated registration of the modifications of certain terms and conditions of public offerings of securities registered with the SMV. In accordance with Agreement No. 3-2020, issuers of securities who are already registered with the SMV, and who have payment obligations to disburse to investors or financial conditions to fulfill between March 24, 2020 and 30 September 2020 are exempt from submitting the request established in Agreement No. 4-2003, article 2 when it comes to certain modifications. The issuer will have to file a public communication of significant event (“comunicado público de hecho de importancia”) with the SMV and the stock exchange indicating the requested modification and the negotiation of said securities will be suspended for three business days.

The modifications to the terms and conditions of registered securities that are exempt from the above-mentioned request under Agreement No. 3-2020, apply exclusively to: (i) maturity date of the securities, dates and form of payment of interest or principal; (ii) interest rates; (iii) reasons and / or financial conditions; (iv) redemption date of the securities, form or grounds for requesting redemption of the securities; and (v) term for the declaration of default or causes of early maturity, without said term being greater than thirty calendar days.

The Tax Authority issued Resolution No. 201-2419 of April 20, 2020, which enables the notification by email while the State of Emergency is in place. This notification will be made to the email that is registered in the taxpayer information in the e-Tax 2.0 system.

Once the email has been sent and for the following five (5) days, said notification will be understood to be valid. The information attached to the email will be the corresponding resolution or administrative act.

The period to initiate a reconsideration or appeal process is within a term of 15 business days after the formal notification of the Resolution issued by the Tax Authority.

All taxpayers who have submitted their annual tax return for the 2019 fiscal year without applying the reduction to the estimated tax for the 2020 fiscal year, may file an amended tax return without generating any costs or fines until July 17, 2020.

The deadline for submission of the 930 Tax Form on Transfer Pricing, in which transactions with related parties abroad are reported, has been extended until September 30, 2020.

Executive Decree No 251 of March 24, 2020 (“Executive Decree No 251”) approved certain tax measures for the deferral of income tax payments and the filing of income tax returns for the fiscal year 2019 for individuals and companies. 

In addition, Law 134 of March 20, 2020 (“Law 134 of 2020”) approved the extension of the Tax Amnesty previously granted through Law 99 of 2019.

Liquidation and reorganization proceedings are governed by Law No. 12 of 2016. To date, no special regulations or resolutions have been issued to provide temporary or special relief for these proceedings as a result of COVID-19.

The Civil and Commercial Courts were closed until May 31, 2020 and re-opened on June 1, 2020.

However, the filing deadlines are suspended until June 21, 2020, (i.e., the deadlines for filing answer to complaints, writ of appeals, evidence, etc.).