In order to adapt to the Inclusive Framework on Base Erosion and Profit Shifting, Panama is currently reviewing its tax regulations and reviewing multinational companies in the country comprehensively.
1. Background
Panama was one of the 130 countries that endorsed the OECD’s BEPS Plan to fight tax evasion and profit shifting in 2021. Under Pillar One, Panama and other jurisdictions would be reallocated the right to tax more than $155,000 million in annual profits. On the other hand, under Pillar Two, the country is considering the introduction of a global minimum corporate tax of 15%.
2. Tax Collection
According to Tiffany Reyes, head of Transfer Pricing at the DGT, the national legislation needs some amendments for implementing the global minimum tax. Conversely, if Panama cancels such tax, the 15% tax collection would be at risk. Meanwhile, the DGI is evaluating both possibilities, reviewing figures, special economic areas, incentives, and others.
Likewise, Tiffany Reyes assures that the implementation of the global minimum tax would avoid unfair competition among large multinationals and would receive additional income.
3. National Strategy
The global minimum tax implies challenges for the DGT, as well as the evaluation of the current regulations in Panama. Therefore, the Directorate of International Financial and Tax Strategy will be in charge of defining and adapting the national strategy adopted for international tax and financial standards.
On the other hand, the international taxation team, especially the Transfer Pricing area of the DGI, actively participates in the OECD meetings that address both pillars and the discussions on the implementation guidelines.
Therefore, Panama will have to review the laws locally and regionally to make a comparative analysis for the implementation and the best option, given that the OECD expects the complete implementation of both pillars by 2024.
Source: La Estrella de Panamá 18/07/23
