It is expected that the DGI will increase its transfer pricing reporting requirements and the imposition of fines on taxpayers who do not comply with their obligations.
Keeping up to date with the changes related to Transfer Pricing is key, given its importance for multinational groups and local economic groups under the provisions of the Panamanian Tax Code.
The transfer pricing regime is a tax control rule that seeks to prevent profit shifting through transactions between related parties. Taxpayers subject to the transfer pricing regime in Panama must comply with the arm's length principle of Article 762-A and the documentary obligations established in Articles 762-I, 762-J and 762-K under the Tax Code.
With the application of the transfer pricing tax control regime by the Directorate General of Revenue (DGI), important discussions have arisen regarding compliance with the arm's length principle and documentary obligations by taxpayers that carry out operations with related parties from Free Zones, Free Trade Zones, Special Economic Areas and Special Regimes, and controversies have also arisen in this regard due to transfer pricing adjustments and the imposition of fines that have reached up to one million dollars in accordance with Article 762-I of the Tax Code.
It should be noted that until the 2018 tax period, only those taxpayers that carried out transactions with related parties located in other jurisdictions were obliged to comply with the transfer pricing regime, provided that such transactions had an effect on income, costs and expenses for income tax calculation purposes.