It is imperative that the country take steps to implement the global minimum tax on multinational groups, following the example of Europe which already applies 15%. Experts point out that failure to do so would result in the loss of an important source of tax revenue that would be collected in other jurisdictions. Prompt action is needed to ensure an equitable distribution of the tax burden and to prevent tax avoidance by large corporations.
Panama is at a crucial moment in its commitment to the Inclusive Framework of the BEPS Project as it considers the application of the global minimum tax on multinational corporations. This measure, already in force in the European Union, aims to tax the profits of subsidiaries of large corporations. The discussion on the implementation of this tax and its economic and fiscal implications is in full swing in the country.
As a member of the Inclusive Framework of the Base Erosion and Profit Shifting Project (BEPS), Panama will have to adopt measures to apply the global minimum tax to multinationals. Since January of this year, the European Union has been applying this tax, which establishes that the profits of subsidiaries belonging to multinational groups with global revenues exceeding 750 million euros will be taxed at an effective rate of 15%.
The analysis of this issue is in the hands of the local authorities, although a concrete decision has not yet been reached. José Luis Galíndez, partner of Galíndez, Medrano y Asociados, highlights the importance of observing the behavior of multinationals or subsidiaries in Panama in relation to this tax.
Recently, during a breakfast organized by the firm Galíndez, Medrano y Asociados, this issue was discussed with the participation of representatives of the French Chamber of Commerce, representatives of the DGI, among other relevant actors. In this meeting, the case of a multinational corporation with presence in different areas of Panama was mentioned and it was explained that if the 15% tax rate is not reached for all the entities in the country, the profits will be taxed in the jurisdiction of the parent company.
Frida Medrano, partner of the firm, emphasizes the need for Panama to implement the global minimum tax in a term no longer than three to five years, since each year that passes represents lost income for the country. She also stresses the importance of reviewing what other benefits can be offered to these companies to encourage them to stay in the country in a short period of time.
The decision not to apply this tax would imply giving up a potential source of revenue that could increase the income generated in Panama, according to Medrano. In addition, it would mean a loss of market, competitiveness, investment attractiveness and the opportunity to take advantage of existing supply chains, as well as to boost other economic sectors.
It is important to point out that 191 companies operate in Panama under the Multinational Company Headquarters license, which underlines the importance of this debate for the country.
Another topic addressed during the breakfast organized by the firm Galíndez, Medrano y Asociados was transfer pricing, a crucial aspect in the tax legislation of many countries. These prices refer to the value at which goods, services or assets are transferred between related companies, such as subsidiaries of the same multinational company.
The main objective of transfer pricing regulations is to prevent tax evasion and to ensure that transactions between related parties are carried out at arm's length prices. In the specific context of Article 762-I of the Panamanian Tax Code, a fine is established for taxpayers that omit or file the Transfer Pricing Report extemporaneously.
This obligation to file the report arises within six months after the closing of the fiscal period, which underlines the importance of complying with this regulation to avoid economic sanctions.
In summary, the discussion around the application of the global minimum tax to multinational companies and the correct management of transfer pricing are crucial issues for Panama in its quest to strengthen its tax system and attract sustainable investments in the long term. Informed and strategic decision making in these areas will be fundamental for the country's economic development in an increasingly interconnected and competitive global environment.