Panama changed transfer pricing rules

07.09.2012

Several days ago Panama adopted amendment prescribing application of transfer pricing rules for transactions with foreign related entities regardless of whether one of the parties is a tax resident in country which concluded double taxation avoidance agreement with Panama. Previously the condition of residence exempted parties from using of transfer pricing rules.

The sense of the transfer pricing rules is in achieving of fair transactions taxation, that are concluded by related entities. As a rule, the cost of transaction is determined by the principle as the two entities were not related.

In order to avoid transaction schemes through natural persons participation the amendment foresees that an individual can be deemed as a resident in Panama and in the country of another party to transaction.

It should be noticed that amendment will enter into force in 2012, and therefore tax payers will have to file the Form 930 on application of transfer pricing rules during calculation of taxable amount by June 2013.

Expert’s opinion

As we see, Panama tries to comply with OECD standards in reglamentation of transfer pricing rules. Exactly, by expanding of related persons to whom these rules are applicated. 

On the one hand, the amendment leads to increasing of number of controlled transactions, consequently, to strengthening of tax authorities’ control, to the risk of prices overview and taxes additional assessment. On the other hand, the tendency on steady perfection of transfer pricing rules today is universal and is devoted to prevent price collusions between large and medium-sized businesses. Thus, the motive of amendment adoption complies with the principles of fair taxation.

On the basis: http://www.presidencia.gob.pa/

Julia Akhmetova ( Paralegal of Moscow office Company Honest & Bright )