Panama

Business Central Panama: When to Switch from Free Invoicing to a PAC

Electronic Invoicing and PAC in Microsoft Dynamics 365 Business Central Panama
09
Nov

The Business Central Panama localization allows companies to manage their tax and electronic invoicing processes directly within Microsoft Dynamics 365 Business Central. As transaction volumes increase, it is also important to understand when the DGI Free Invoicing System is still sufficient and when it is time to prepare for working with a Qualified Authorization Provider (PAC).

For organizations using Microsoft Dynamics 365 Business Central, a Business Central Panama localization helps address the country’s tax requirements within regular business processes, reducing reliance on separate systems to manage electronic invoicing.

That is why understanding the differences between the Free Invoicing System and the PAC model is an important part of planning a company’s tax operations in Panama.

Electronic Invoicing in Business Central Panama: Free Invoicing System vs. PAC

The General Directorate of Revenue (Dirección General de Ingresos – DGI) defines an electronic invoice as a legally valid digital tax document, generated and electronically signed to support commercial transactions. DGI

Within Panama’s Electronic Invoicing System (SFEP), taxpayers can operate under two main models:

  • Free Invoicing System
  • Qualified Authorization Provider (PAC)

Both models are part of Panama’s established electronic invoicing framework. Law 256 of 2021 provides for electronic invoicing through a PAC or through the SFEP Free Invoicing System. Official Gazette

What Is Panama’s Free Invoicing System?

The Free Invoicing System is a simplified electronic invoicing tool provided by the DGI.

This tool allows users to generate different electronic documents, including invoices, credit notes, debit notes, and cancellation events.

One particularly important point for companies using a business management system is that the DGI states that the Free Invoicing System does not support integration with other systems. DGI

According to the parameters currently published by the DGI, the following limits apply to the Free Invoicing System:

  • Annual gross revenue of up to B/.36,000.
  • Up to 100 documents per month. DGI

For this reason, growing companies should monitor these parameters and assess in a timely manner whether their current electronic invoicing model remains suitable.

When Should You Consider Switching to the PAC Model?

The model involving a Qualified Authorization Provider follows a different approach.

The DGI establishes specific requirements for taxpayers adopting this model, including the PAC’s technical requirements and the corresponding electronic signature certificate. DGI

There is also a procedure for switching from the Free Invoicing System to a PAC. According to the DGI, taxpayers must submit an amended adoption declaration to the SFEP, select the Qualified Authorization Provider model, and have the corresponding electronic signature certificate. DGI

For companies operating with Microsoft Dynamics 365 Business Central, this scenario makes having a Business Central Panama localization particularly relevant, as it helps align tax and electronic invoicing processes with the transactions recorded in the business management system.

CUFE, CAFE, and Electronic Invoice Validation

There are other important concepts in Panama’s electronic invoicing framework that implementation teams should understand.

The CUFE (Unique Electronic Invoice Code) uniquely identifies an electronic invoice.

The CAFE (Electronic Invoice Auxiliary Receipt) represents the electronic invoice in an auxiliary format. The DGI documentation includes information such as the QR code, CUFE, and authorization code. DGI

These elements make it possible to verify electronic documents and are part of the processes organizations should consider when implementing their invoicing workflows.

Why Is Integration with the Business Management System Becoming More Important?

For an organization with a low volume of documents, an independent tool may initially meet its needs.

However, the situation can change as business transactions increase.

A company may need to manage several processes simultaneously:

  • Sales recorded in Business Central.
  • Electronic document generation.
  • PAC-related processes.
  • CUFE information.
  • CAFE generation and management.
  • Tax information.
  • Accounting and reconciliation processes.

When these activities are handled through disconnected systems, additional manual tasks may arise, along with a greater need to reconcile tax and accounting information.

The DGI’s statement that the Free Invoicing System cannot be integrated with other systems therefore becomes a relevant factor when evaluating an organization’s electronic invoicing strategy. DGI

Bringing Panama’s Electronic Invoicing into Business Central

A Business Central Panama localization extends Microsoft Dynamics 365 Business Central by incorporating functionality related to the country’s tax and electronic invoicing requirements.

The goal of a localization should not be limited to generating an electronic invoice. It should also ensure that the tax process is properly integrated with the business operations the company manages daily through its business management system.

This helps reduce the need to manage electronic invoicing as a process separate from the company’s main business management platform.

How Can You Prepare for the Transition from the Free Invoicing System to a PAC?

Companies currently using the Free Invoicing System should periodically review their situation against the applicable conditions established by the DGI.

The following aspects should be monitored:

  1. Annual gross revenue.
  2. Number of documents issued monthly.
  3. Current electronic invoicing model.
  4. Electronic signature requirements.
  5. PAC technical requirements.
  6. Integration of electronic invoicing with the business management system.

The DGI has established a procedure for changing from the Free Invoicing System to a PAC. Preparing in advance allows companies to manage this transition in a more controlled manner. DGI

Get Ready for Panama’s Electronic Invoicing Requirements

Electronic invoicing is just one of the requirements organizations must consider when using Microsoft Dynamics 365 Business Central in Panama.

Having a Business Central Panama localization makes it possible to incorporate local requirements into the business management environment and reduce reliance on separate processes to manage tax operations.

For companies approaching the thresholds established for the Free Invoicing System, this may be a good time to evaluate their current model and determine whether they need to prepare for integration through a PAC.

Is Your Company Ready to Manage Electronic Invoicing in Panama?

At LLB Solutions, we help Microsoft Dynamics 365 Business Central companies and partners incorporate local tax requirements into their projects.

Would you like to explore how to manage electronic invoicing and PAC integration through Business Central?

Contact us and discover how we can help you prepare your operations in Panama.

info@llbsolutions.com | Localization Panama