Transfer Pricing
Country Summary

This document summarizes the transfer pricing requirements and regulations in Panama. Panama has established transfer pricing regulations based on the OECD Transfer Pricing Guidelines, making it a pioneer in Central America. These regulations include requirements for the submission of master files, local files, country-by-country reporting, and the notification of such reporting. A key document, Form 930, is obligatory for taxpayers involved in transactions with non-resident related parties.


While Panama is not an OECD member, its tax authorities recognize and incorporate the OECD Transfer Pricing Guidelines. Panama enacted transfer pricing legislation in 2010 through Law 33, with further modifications in 2012 (Law 52) and clarifications in 2013 (Decree 958). Key components of this regulation are found in the Tax Code of Panama.

Related Parties Definition:

Panama defines related parties based on direct or indirect participation in management, control, or stock. This definition extends to permanent establishments and their principal offices.

Documentation Requirements:

Panama introduced regulations following BEPS Action 13 recommendations. This enables authorities to request various information and documentation, including organizational and operational structures, transfer pricing policies, financial statements, and descriptions of intercompany agreements.

Advance Pricing Agreements (APA):

While the current regulations do not cover APAs, a draft bill proposes their introduction, valid for up to three fiscal years.

Audit and Compliance:

Panama’s audit strategies for transfer pricing are confidential, but automated systems identify transactions with related parties. In 2015, Panama executed its first transfer pricing audit. Form 930 was modified in 2018, requiring additional information and analyses related to related-party transactions.

Transfer Pricing Documentation:

In order to submit Form 930, taxpayers must perform a transfer pricing study that includes details on the taxpayer’s identification and related parties, information for valuation, comparability analysis, and transfer pricing method selection.

Choice of Transfer Pricing Method:

Panama follows the OECD Transfer Pricing Guidelines, specifying five methods, including the Comparable Uncontrolled Price Method (CUP), Resale Price Method (RPM), Cost Plus Method (CPM), Profit Split Method (PSM), and Transactional Net Margin Method (TNMM). Statistical tools like percentiles are used to determine arm’s length ranges.

Economic Analysis – Benchmark Study:

Panama follows the comparability analysis guidance outlined in Chapter III of the OECD TP Guidelines. Local comparables are preferred, but foreign comparables are allowed when local ones are unavailable.

Inter-company (IC) Legal Agreement:

While legal agreements formalize relationships, Panama places a higher emphasis on the conduct of parties following the OECD 2017 Guidelines.

Record Keeping:

Income tax information must be retained for seven years, counted from the last day of the year in which the tax was due.

Penalties and Interest:

Failure to submit Form 930 can result in a penalty of 1% of the total amount of related-party transactions. The penalty is calculated based on the gross amount of these transactions and should not exceed 1 million Balboas.

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