Panama’s alignment with OECD standards continues to be one of the most significant issues on the regional economic and tax agenda.
In this context, Transfer Pricing is playing an increasingly strategic role in policies relating to tax transparency, international compliance and the monitoring of transactions between related parties.
During the 6th Transfer Pricing Conference organised by the International Fiscal Association, it was highlighted that Panama faces significant challenges relating to:
- fiscal transparency,
- economic substance,
- tax arbitrage,
- and international compliance standards.
The debate takes on particular significance given that the Panamanian government has officially reiterated its interest in strengthening the process of alignment with the standards promoted by the OECD, driving reforms aimed at improving competitiveness, institutional capacity and international confidence.
Panama and its alignment with the OECD
According to Panama’s Ministry of Economy and Finance, this process seeks to strengthen international best practices, governance, transparency and institutional efficiency.
The objective goes beyond the tax sphere and forms part of a comprehensive strategy aimed at:
- increasing international confidence,
- improving the investment climate,
- and strengthening the country’s competitiveness within the global environment.
In the field of international taxation, this scenario implies greater focus on transactions between related parties, multinational structures, value creation and economic substance.
Economic substance: a priority in international tax audits
One of the key messages addressed during the conference was the growing importance of economic substance within international tax audit processes.
Nowadays, it is no longer sufficient to rely solely on contracts, formal studies or defensive benchmarking. Tax authorities are focusing their audits on validating:
- functions actually performed,
- risks actually assumed,
- assets utilised,
- and genuine generation of economic value.
This approach responds directly to the trends driven by the OECD’s BEPS project, which prioritises consistency between the economic reality of transactions and their tax treatment.
The new role of benchmarking in Transfer Pricing
During the event, international specialists highlighted that benchmarking remains a fundamental tool in Transfer Pricing; however, it no longer constitutes, on its own, a sufficient mechanism for tax defence.
International tax audit trends show a greater focus on:
- operational traceability,
- economic substance,
- robust functional analysis,
- and evidence of the effective realisation of intra-group transactions.
Panama and international tax standards
Panama’s process of alignment with the OECD represents a significant change for the regional tax environment and for companies with international operations.
The progressive adoption of international standards will entail higher levels of transparency, the strengthening of economic substance, and tax audits increasingly focused on the economic reality of operations.
In this scenario, multinational organisations must prepare for an environment where value creation, functional consistency, and economic traceability will be determining factors in Transfer Pricing reviews.
At TPC Group, we have specialists in Transfer Pricing and international taxation who are ready to advise multinational companies on economic substance analysis, tax compliance and technical documentation in line with the OECD’s international standards.
Source: RevistaSumma