Transfer pricing in Panama at a glance
|Regulation Type||National regulations|
|Are there specific transfer pricing regulations?||Yes|
|Submission deadline||6 months after close of fiscal year|
|Submission deadline upon request||45 days|
|Annual update required||Yes|
|Official language requirements||Spanish|
|Potential impact of penalties||1% of the intercompany transactions|
Panamas’ tax law
Rules for transfer pricing in Panama are based upon:
- Tax Code Articles 762-A up to 762-K
In Panama the OECD Transfer Pricing Guidelines can be used as a source of interpretation for national transfer pricing regulations. However, if the OECD Guidelines interfere with the national regulations, the national regulations prevail.
Accepted methods are:
- The comparable uncontrolled price method
- The resale price method
- The cost plus method
- The profit split method
- The transactional net margin method
Priority of methods
Rules for transfer pricing in Panama do not prescribe a priority of methods. The selection of the method should be based upon the best method to reflect the arm’s length principle.
Information that should be included in the documentation:
- Identification of the related parties with whom the taxpayers conducts intercompany transactions
- A detailed description of the nature, characteristics and amount of all intercompany transactions of the taxpayer, including the transfer pricing method employed
- A general description of the organizational, legal and operating structure of the group, with any relevant changes
- The transfer pricing policy of the multinational group, if any
Rules for transfer pricing in Panama prescribe that all documentation should be submitted in Spanish.
Requirements to prepare documentation annually
A taxpayer is required to update its documentation annually and the documentation should be submitted each year within six months of the close of a fiscal year.
Submission deadline upon request by tax authorities
Upon request of the tax authorities, a taxpayer had 45 days to submit its documentation.
Advance Pricing Agreements
Rules for transfer pricing in Panama do not provide for an option to obtain an Advance Pricing Agreement.
If a taxpayer fails to comply with it’s documentation requirements, a penalty up to one percent of the total amount of intercompany transactions may be imposed.