Transfer Prices in Panama, regulations and formal obligations demanded by DGI

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In accordance with the current legislation in Panama, the operations that the taxpayers perform with related parties will have to be valued according to the free competence principle. For this purpose, the (DGI) demands the annual presentation of an inform of the operations performed with related parties (Form 930).
Legal Basis:
Chapter IX of the Fiscal Code of the Republic of Panama, added according to the Article 1 of the Law 33 in 2010, modified by the Law 52-2012 (Regulations of Adaptation to the Agreements and Conventions to Avoid Double International Taxation).
Compulsory Taxpayers:
Taxpayers who perform operations with related parties that are fiscal residents of other jurisdictions, as long as these operations have effects such as profits, costs or deductions in the setting of the tax basis, for income tax purposes, in the fiscal year when the statement or operation takes place.
The current Panamanian legislation does not mention operations performed with tax heavens, or anticipated agreements of transfer prices.
Date of presentation:
Taxpayers must present, annually, an inform of the operations performed with related parties, within the six months (6) after the closing date of the corresponding fiscal year.
Related Parties
Two participating parties are considered related when they fulfill one or more of the following aspects:
1. One of them takes part directly or indirectly in the administration, control or capital of the other one.
2. A person or group of people take part directly or indirectly in the administration, control or capital of those people.
3. At the same time, it is considered as related parties of a permanent establishment, the main office or other permanent establishments of it, as well as the people mentioned in the previous point and their permanent establishments.
Technical Study of Transfer Prices:
The people who are obliged to present the form 930 must have, at the moment of its presentation, a Technical Study of Transfer Prices, the one which will have to contain the information and analysis that will permit to value and document their operations with related parties according to the established dispositions.
Nevertheless, the taxpayer will only have to provide this study when the DGI requests it, within a forty-five- day period (45) being counted since the request notification.
This obligation is established without prejudice to the DGI faculty of requesting this additional information that in the course of the auditing period considers necessary for the exercise of its duties.
Infractions and penalties:
a) Penalty of one per cent (1%) of the total gross amount of the transactions with the related parties for the unfulfillment of the form 930 presentation;
b) In case of the lack of the Study of Transfer Prices, the fines can go from B/.1,000.00 to B/. 5,000.00 at first instance; and from B/. 5,000.00 to B/. 10,000.00 in case of unfulfillment reoccurrence.
c) The DGI has the legal authority to close the taxpayer’s offices for, at least, two (2) days at first instance, in case of reoccurrence, it can be for, at least, ten(10) days and if the unfulfillment is persistent, it could be for, at least, fifteen (15) days.
Everything mentioned above, without taking into account the possible penal repercussions that could arise for the unfulfillment of the regime, as it is established at the end of the article756 of the Fiscal Code.



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