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Multinational companies fined for transfer pricing violations

Updated: Mar 15, 2023

Multinational groups operating in Panama are exposed to high fines for non-compliance with Transfer Pricing reporting.

The transfer pricing tax control regime in the Republic of Panama is becoming more relevant after the publication of several rulings by the Administrative Tax Court and the Supreme Court of Justice. In these rulings, the amount of the scope and penalties for non-compliance with supporting documentation is striking. This shows the active role of the Tax Administration in the control of intra-group transactions.

The Transfer Pricing documentary obligations to be submitted to the General Directorate of Revenue of the Ministry of Economy and Finance include the Transfer Pricing Study, the Information and Documentation relating to the business group (master file) and the Country-by-Country Report. Failure to comply with these obligations is subject to the provisions of Article 756 of the Tax Code.

The Transfer Pricing Study is prepared annually and contains the transactional analysis that supports the information contained in the Transfer Pricing Report. This Study has a deadline of forty-five working days from the date of its request by the Directorate General of Revenues. The information and documentation relating to the business group (master file) is updated annually and does not include a deadline for submission, therefore, it must be submitted within the period stipulated in the request for information from the Directorate General of Revenue. In both cases, the fine established by Article 756 of the Tax Code for the omission or late submission of the information is $1,000 to $10,000 and up to a possible temporary closure of the establishment.

The Country by Country Report is filed annually by those multinational groups with revenues in excess of 750,000,000.00 euros for the fiscal period reported and whose ultimate parent company is a tax resident in Panama. These entities must submit the report containing financial, tax and functional information by entity and jurisdiction where the multinational group operates through the Information Exchange Portal of the Directorate General of Revenue.


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