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Court ratifies transfer pricing adjustment to banana multinational

The initial transfer price adjustment made by the DGI to the banana company reached an amount of twenty million 640 thousand dollars, causing an Income Tax to be paid of six million 300 thousand dollars.

Transfer prices in Panama

The Tax Administrative Tribunal (TAT) of the Republic of Panama, through Merits Resolution No. TAT-RF-048 of June 26, 2023, issued its decision regarding a transfer pricing controversy between a multinational banana company and the General Directorate of Income (DGI) of the Ministry of Economy and Finance for the 2016 fiscal period. The initial adjustment of transfer prices made by the DGI to the banana company reached an amount of twenty million 640 thousand dollars, causing a Tax on Rent payable of six million 300 thousand dollars.

The ruling indicates that the banana multinational carried out banana sales operations with its related parties abroad for an amount of ninety-nine million 470 thousand dollars during the fiscal period 2016. The scope carried out by the General Directorate of Revenue ( DGI) for these operations was based on the applicability of the “Uncontrolled Comparable Price” (PCNC) method, the existence of comparables for transparent market goods or “commodities” and the making of adjustments to the accounting for natural effects on the plantations. banana plantations.

On the other hand, the Transaction Net Margin (NTM) method is less direct, since it compares profitability margins of the company analyzed and the profitability margins obtained between independent parties. This method allows differences to exist between the goods and services transferred. In this case, the latter was the method used by the taxpayer in its analysis.

In practice, determining the most appropriate method depends on the specific circumstances of the case and the existence of comparable operations that serve as a reference to establish the market price.

In this particular case, the taxpayer did not apply the PCNC method, arguing that it was unable to identify comparable operations in the market and, consequently, proceeded to apply the MNT method by searching for comparable companies. From this search, the taxpayer obtained a range of market values ranging between 0.71% and 11.09% measured from operating results on total costs and expenses.

Likewise, the taxpayer presented operating losses during the periods 2012, 2013, 2014, 2015 and 2016. For the 2016 period, the operating result over total costs and expenses was -1.83%, remaining below the range of values of market. The taxpayer argued that it faced unforeseen weather events that affected its results and proceeded to make an adjustment, increasing its sales by five million 972 thousand dollars, raising its profitability indicator from -1.83% to 3.57%.


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