Plan of action 13: Addition of the Country-by-Country Report within the transfer pricing framework in Panama

PANAMA - Plan of action 13: Addition of the Country-by-Country Report within the transfer pricing framework in Panama

July 2019

On 27 May 2019, through Executive Decree N° 46, the regulatory framework for the Country-by-Country report was established.

The incorporation of the Country-by-Country Report is part of the changes in Transfer Pricing, International Taxation, and Exchange of Information promoted and recommended in the Inclusive Framework of G20 and the OECD.

The aforementioned report is part of the 15 action plans against the erosion of the tax base and the transfer of benefits (Base Erosion and Profit Shifting - BEPS) that the OECD has been promoting since 2013 as a mechanism to combat global tax avoidance.

Within the 15 action plans, Action Plan 13 "Guidance on the Implementation of Transfer Pricing Documentation and Country-by-Country Reporting" establishes a comprehensive set of documentation for the analysis and report of transactions between related parties.

The aforementioned Executive Decree establishes:

  1. Article 2. Obligation: The obligors will be those Parent Companies (Ultimate parent Company) with consolidated income exceeding EUR 750 million (or the equivalent in PAB)
  2. Article 3. Notification: The Panamanian Taxpayer must notify the General Directorate of Revenue (DGI) of the identity, tax residence and the fiscal period used by the informant entity (Parent Company) which has declared the Country-by-Country report in its jurisdiction
  3. Article 4. Contents of the Country-By-Country Report: The general information which must be included is:
    1. Income, Profits (losses), Income taxes paid and accrued, declared Capital, Retained Earnings, number of employees and tangible assets (other than cash) of each of the jurisdictions in which the Multinational Group operates,
    2. Identification of each Member Entity or Belonging to the Multinational Group, jurisdiction to which it belongs, and activities it performs.
  4. Article 5. Forms and Deadlines: the terms will be established by the DGI, in "XML Schema" format. Temporarily, the obligation will be from 2018 and must be submitted within 12 months after the end of the corresponding fiscal period.

It is worth noting that in Article 6, it is established that the DGI "shall ensure the confidentiality of the information contained" and "may not make use of the information contained in the Country-By-Country Report as a conclusive tool by itself for the determination of transfer pricing adjustments”.

Lucas Rodriguez Gregueli