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A decade of transfer pricing in Panama

Updated: Mar 15, 2023

The transfer pricing regime was introduced in Panama in 2010 and is contained in Articles 762-A to 762-L of the Tax Code. In addition, there are regulations on the matter through Decree N°390 of 2016 and from 2019, the adoption of country-by-country reporting.

Transfer prices are known in the tax world as the prices agreed in transactions between related parties.

Unlike a price agreed between independent parties, the common interest that the parties have in this type of transactions may result in prices that do not reflect the functions performed and the risks assumed by each of the parties.

When it is a multinational group, with subsidiaries located in different jurisdictions, with different tax rates and carrying out transactions between them, the tax authorities of these jurisdictions seek to ensure that these prices are in line with market prices to ensure that the income declared in their jurisdiction and the tax paid are appropriate.

In the case of Panama, the legislation has adopted the international criteria contained in the Transfer Pricing Guidelines of the Organisation for Economic Co-operation and Development (OECD), among which are the linkage criteria, the definition of regulated entities, methods, statistical measures and comparability factors to validate compliance with the arm's length principle.


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