In recent days, the General Directorate of Revenue (DGI) published resolution No. 201-4523 of June 5, 2025, published in Official Gazette No. 30304 of June 19, 2025 , by which it revokes tax recognition to a group of Non-Governmental Organizations (NGOs) and non-profit associations, which had been previously authorized to receive donations deductible from Income Tax.
This measure, although expected due to the persistent failure of many entities to submit required reports and documentation, generates significant fiscal consequences for both the affected NGOs and non-profits, as well as for the donors who contributed to their sustainability.
Most relevant consequences:
- Loss of tax-deductible donations.
Revoked NGOs will no longer be able to receive tax-deductible donations from individuals or legal entities, unless they initiate the recognition process again under current regulations. - Non-deductible expenses for donors.
Donations made in years where the NGO is found to be in non-compliance may not be recognized as deductible for the donor, which may result in tax adjustments (scopes) and penalties for these taxpayers. - Full taxability of income.
Upon ceasing to be recognized by the DGI, all affected NGOs lose the tax-exempt status provided for in paragraph (i) of Article 14 of Executive Decree 170 of 1993 and Article 10 of Executive Decree 84 of 2005.
This means that if they continue to operate or receive income:
- They must pay Income Tax (ISR) like any other legal entity.
- If annual income exceeds B/.36,000, they will be required to declare and pay ITBMS.
- They must issue an authorized electronic invoice.
- They may be subject to municipal taxes depending on the jurisdiction.
- Fines for unsubmitted reports.
In addition to revocation, the resolution requires NGOs to submit outstanding reports within 15 calendar days, or face sanctions in accordance with current regulations.
There are only 15 business days to act! From the publication in the Official Gazette. In other words, time is already running out.
Any affected NGO has the right to file an appeal for reconsideration with the DGI within 15 business days following the publication of the resolution in the Official Gazette and/or appeal before the Administrative Tax Court.*
This appeal must be duly supported with documentation proving compliance or legal grounds demonstrating errors in the measure taken.
| *It should be noted that there are serious doubts about this “massive” revocation of the rights of NGOs and non-profit associations, since the DGI’s reasoning with respect to article 300 of the Tax Procedure Code, that although numeral 1 of article 300 of the Tax Procedure Code empowers the Tax Administration to revoke its own administrative acts, the massive and automatic application of this revocation raises legal questions, contrasts with article 100 and 101 of this same legal body, which requires personal notification when it comes to individual rights (natural or legal persons) that must be analyzed on a case-by-case basis, considering the principle of legality, proportionality and right of defense, and which does not find an exception in Law 50 of July 2, 2003 (Terrorism Law) which requires non-profit associations to have greater financial controls. Today it’s NGOs and non-profits; tomorrow it could be massive denial resolutions for CAIR non-application requests, property tax exemption requests, etc. |
Was your NGO affected?
Do you have questions about how to appeal, correct, or reapply for the scheme?
Contact us for comprehensive legal and tax advice:
Javier Mitre Bethancourt,
Tax Partner |
Lac Tax Legal | Lac Legal
Panama, Bella Vista, Tower Financial Center, 36th floor.
Phones: (+507) 395-5607 / (+507) 6294-0626
Email: jmitre@lacgrp.com
Web: www.lacgrp.com