Transfer Pricing in Panama 2024: A Detailed Overview

June 25, 2024

In Panama, the Transfer Pricing regime continues to evolve, strengthening obligations for companies and adjusting expectations around documentation and tax compliance. As global operations become more interconnected, the Directorate General of Revenue (DGI) places particular emphasis on ensuring that related party transactions are transparent and in accordance with the arm’s length principle.   

Current Obligations  

Companies in Panama must comply with several key obligations under the Transfer Pricing regime. Among them, the filing of the Transfer Pricing Report (Form 930) and the Transfer Pricing Study stand out. The former must be filed annually within six months after the closing of the fiscal year, while the latter when requested by the DGI. In addition, any entity that is part of a multinational group and is fiscally resident in Panama must file a Country by Country Report if its consolidated income exceeds 750 million euros.  

New Incorporations and Legal Amendments  

Since 2019, with the introduction of Article 762-L of the Tax Code, even entities that enjoy a zero income tax rate and are hosted under special regimes, such as Free Zones or Free Trade Zones, must adhere to Transfer Pricing rules for all their operations, whether local or international.  

Sanctioning and Taxation Aspects  

Failure to comply with Transfer Pricing obligations may result in severe penalties…In addition, in case of transactions that do not reflect adequate market margins, the DGI may make adjustments to the price or profit margin, which could also include additional audits and adjustments to tax returns.  

Advance Pricing Agreements (APAs)  

A notable development in Panamanian legislation is the facilitation of Advance Pricing Agreements (APA). This mechanism allows companies to obtain prior certainty on the prices of transactions between related parties for a specific period. The request for an APA must include detailed information on the transactions, the proposed pricing methodology and other relevant data to ensure transparency and compliance with tax regulations.  

Conclusions and Recommendations  

In light of the constantly changing and complex tax environment in Panama, it is recommended that companies operating in multiple jurisdictions keep up to date with their transfer pricing obligations and consider expert advice to effectively navigate the regulations. Proper implementation of Transfer Pricing policies not only complies with legal requirements, but also minimizes tax risks and potential penalties. 

In summary, Transfer Pricing regulations in Panama continue to strengthen, requiring companies to be more diligent and accurate in their compliance. With the proper understanding and management of these regulations, companies can ensure a tax efficient and transparent operation.