Panama Amends Transfer Pricing Rules

Panama has adopted amendment to transfer pricing rules on transactions with foreign related parties. 

According to the previous Panamanian transfer pricing rules the transaction between two related parties was exempted from these rules application if one of the parties was a tax resident in a country that had signed a double tax agreement with Panama. The amended rules apply irrespectively of whether one of the transaction parties is tax resident in a country that signed a DTA with Panama or not. 

Permanent establishment (tax residence) rules were also amended for transfer pricing purpose. Now an individual can also be deemed as having a permanent establishment in Panama and the country where the other transacting related party is based. The rules were amended this way in order to prevent avoidance by structuring transactions through individuals.

The amended transfer pricing legislation is effective for the tax year 2012, and taxpayers subject to the rules must file a special form (Form 930), reporting on the use of transfer pricing rules in transactions with related parties, by June 2013.