January 2020. As of October 31, 2016, the Government of Panama adopted the implementation of the recommendations made by the G20 countries and the Organization of Cooperation for Economic Development (“OECD”), on the application of BEPS actions (“Base Erosion and Profit Shifting”)(“Erosión de la Base y Traslado de Beneficios ” in Spanish).


The minimum standards established the implementation of at least four of the actions contemplated in the BEPS project. One of the actions that Panama committed to implementing was action 13, which addresses the strengthening of the Transfer Pricing Documentation Standards and the Country-by-Country (CbC) report. Said report seeks to consolidate the financial information of the Multinational Groups in order to verify the application of Transfer Prices in intra-group operations.


Executive Decree No. 46 of May 27, 2019 introduced the regulatory framework for the CbC report in Panama. In accordance with this Decree, it is mandatory for any ultimate parent entity of a multinational group in Panama to comply with the annual presentation of the CbC report if it has consolidated revenues that are higher than €750 million or its equivalent in Balboas (Panamanian currency) at the exchange rate as of January 2015, during a tax year, and is considered as resident in Panama for tax purposes.


Contents of the CbC report
The information that must be included in the CbC report is: Information on revenues, profits or losses before deduction of taxes, income tax paid, income tax earned, declared capital, retained earnings, number of employees, tangible assets other than cash or cash equivalents. At the same time, the report should contain information on the identity of each member entity of the multinational group, indicating the corresponding tax jurisdiction of each one.


CbC report deadline extension
The reporting entity must submit the CbC report annually in XML Schema within the twelve (12) months following the closing date of the corresponding fiscal period to the Panamanian tax authorities (Dirección General de Ingresos or DGI).


As of December 31, 2019, the obligation to submit the first CbC report with respect to the fiscal period 2018, expired. However, the Panamanian tax authorities issued Resolution No. 201-9116 of December 2019 extending the deadline for submitting to January 31, 2020.


Notification report
Executive Decree No. 46 of May 27, 2019, also contemplates the obligation for those Entities Integrating or Belonging to a Multinational Group (as defined in numeral 4 of article 1 of the norm), the obligation to present the Panamanian tax authorities (Dirección General de Ingresos or DGI) a notification report. This report consists of providing the tax authorities with information on the Multinational Group Reporting Entity, that is, the last Parent Company, as well as the fiscal residence of said entity and the fiscal period used by the Multinational Group.

If the Multinational Group has more than one subsidiary in Panama, all of these companies are obliged to comply with the notification report.


Notification report deadline extension
The presentation of the Notification report must be made 12 months after the close of the fiscal period. The report for the 2018 period should have been presented as of December 31, 2019, however this period was extended by the Panamanian tax authorities as of January 31, 2020.


Unlike the CbC report, the Notification report is presented only once. However, a new report must be presented to update the corresponding data if changes occur in the organization of the Multinational Group which impact the information previously reported by the Reporting Entity.


Newly available notification platform
Through Resolution No. 201-9117 of December 2019, the Panamanian tax authorities issued the applicable procedure for the presentation of these reports through the platform enabled by this agency. The mentioned program is currently enabled; however, it undergoes continuous modifications in order to configure and set the parameters to meet action 13 requirements.


Consultations
Executive Decree No. 46 provides a procedure for the submission of enquiries to the tax authorities regarding the CbC report and the notification report regulatory framework.


For this purpose, legal entities will need to perform them through legal guardianship. For its part, the Tax Administration must respond to the ruling request within two months, unless for duly justified reasons in which the Tax Administration requires a period longer than the stipulated period.

If you have questions or require assistance in reference to the obligation of the CbC report or the Notification report, please contact us.