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Transfer Pricing tax risks after 2020

Updated: Mar 15, 2023

Through transfer pricing, different entities belonging to the same economic group or having some kind of link could transfer profits and/or losses between different jurisdictions (cross-border or special regimes).


Therefore, countries introduce as anti-abuse rules "the arm's length principle" which aims to ensure that taxpayers entering into transactions between entities of the same group agree on their transactions as if they were independent entities at arm's length.

Frida Medrano y José Galindez Socios de la firma Galindez, Medrano & Asociados
Frida Medrano y José Galindez Socios de la firma Galindez, Medrano & Asociados

Under Panamanian tax regulations, taxpayers that carry out cross-border transactions with related parties and/or transactions with local related entities when at least one is located in the Free Zones, Free Trade Zones, Special Economic Areas and Special Regimes in Panama, are obliged to declare and value those transactions as if they were independent parties in market circumstances for the purposes of determining Income Tax and filing the Transfer Pricing Report due on 30 June 2021.


Taxpayers subject to transfer pricing regulations in Panama are also required to have supporting documentation in accordance with Chapter IX Title I of Book Four of the Panama Tax Code and Executive Decree 390 of 24 October 2016, such as: the Transfer Pricing Study and the Business Group Documentation (Master File), at the request of the Tax Administration.


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