Transactions between related companies are a common practice within corporate groups. However, when these transactions involve different jurisdictions or specific tax regimes, they must comply with Panama’s transfer pricing rules, which are designed to ensure that agreed prices reflect market conditions.
These rules establish specific obligations for certain taxpayers, including the preparation of technical documentation and the filing of Form 930 with Panama’s General Directorate of Revenue (Dirección General de Ingresos – DGI). Proper planning helps reduce tax risks and strengthens overall tax compliance.
What Is Transfer Pricing in Panama?
Transfer pricing refers to the tax rules governing transactions between related companies to ensure that prices are consistent with those that would have been agreed upon by independent parties under comparable circumstances.
The purpose of these rules is to prevent the artificial shifting of profits between jurisdictions through non-market pricing.
Transfer pricing rules may apply to transactions such as:
| Sale of goods |
| Sale of goods |
| Provision of services |
| Intragroup services |
| Financing arrangements |
| Royalties |
| Intellectual property licenses |
| Transfers of intangible assets |
All these transactions must comply with the internationally recognized Arm’s Length Principle, as established by the OECD.
Who Must Comply with Transfer Pricing Rules in Panama?
Not every company operating in Panama falls within the transfer pricing regime.
Generally, transfer pricing obligations apply to taxpayers engaging in transactions with related parties under the circumstances established by Panamanian tax legislation.
Each case should be analyzed individually, as the obligation depends on factors such as the nature of the transactions, the relationship between the companies, and the applicable tax regime.
Each case should be evaluated individually, considering factors such as:
- Buys or sells goods to companies within the same corporate group.
- Provides or receives services from related companies.
- Maintains intercompany loans or financing arrangements.
- Pays or receives royalties.
- Uses trademarks, software, or other intangible assets owned by another company within the group.
- Conducts transactions with related companies located abroad or operating under special tax regimes.
Recommendation: If your company is part of a multinational group, it is advisable to periodically review whether its related-party transactions create transfer pricing obligations under Panamanian law.
What Transactions Are Subject to Transfer Pricing?
Panama’s transfer pricing rules may apply to a wide range of transactions between related companies.
The most common include:
| Type of Transaction | Example |
| Sale of goods | Distribution of products between companies within the same corporate group |
| Provision of services | Administrative, financial, or consulting services |
| Intercompany loans | Financing provided by the parent company |
| Royalties | Payments for the use of trademarks or patents |
| Licensing | Use of software or intellectual property |
| Intangible assets | Transfer of rights or technology |
Each transaction should be analyzed based on its specific characteristics to determine whether it complies with the Arm’s Length Principle and the obligations established under the applicable transfer pricing regulations.
What Are the Main Transfer Pricing Compliance Requirements in Panama?
Companies subject to Panama’s transfer pricing regime must comply with a series of reporting and documentation requirements before Panama’s General Directorate of Revenue (Dirección General de Ingresos – DGI). The purpose of these obligations is to demonstrate that transactions between related parties were conducted in accordance with the Arm’s Length Principle.
The main transfer pricing compliance requirements include:
| Requirement | Purpose | General Deadline |
| Form 930 | Report related-party transactions to the DGI. | Within six (6) months following the end of the fiscal year. |
| Transfer Pricing Study | Demonstrate that related-party transactions were conducted at arm’s length. | Must be available upon request by the DGI. |
| Supporting Documentation | Substantiate the economic and functional analysis supporting the transactions. | Must be maintained and kept up to date. |
| Annual Income Tax Return | Report transactions when required under applicable tax regulations. | According to the applicable tax filing calendar. |
Timely compliance with these obligations helps reduce the risk of penalties and facilitates responses to information requests or tax audits conducted by the DGI.
What Is Form 930 and When Must It Be Filed?
Form 930 is Panama’s Transfer Pricing Informative Return, through which certain taxpayers report related-party transactions to the General Directorate of Revenue (DGI).
Whenever taxpayers are legally required to file it, Form 930 must be submitted electronically through the e-Tax 2.0 platform within six (6) months following the end of the taxpayer’s fiscal year.
Although it is an informational return, Form 930 serves as a key tool that enables the DGI to identify transactions that may require further review or analysis.
Recommendation: Preparing Form 930 generally requires financial, accounting, and contractual information from multiple areas of the business. Starting the process early helps minimize errors, avoid delays, and ensure timely compliance.
What Transfer Pricing Documentation Does the DGI Require?
In addition to filing Form 930, Panama’s transfer pricing regulations require taxpayers to maintain documentation demonstrating that related-party transactions were carried out in accordance with the Arm’s Length Principle.
The required documentation may include:
Transfer Pricing Study
The Transfer Pricing Study is the technical report that analyzes transactions between related parties and demonstrates that the transfer prices applied are consistent with market conditions.
It generally includes:
- Identification of the related parties.
- Description of the controlled transactions.
- Functional analysis.
- Selection of the transfer pricing method.
- Comparability analysis.
- Economic analysis and conclusions.
Local File
The Local File contains detailed information regarding the taxpayer’s related-party transactions, the economic analysis performed, and the supporting documentation for those transactions.
Master File
The Master File provides an overview of the multinational group, including its organizational structure, business activities, intangible assets, and financial policies.
Country-by-Country Report (CbCR)
The Country-by-Country Report (CbCR) applies to certain large multinational enterprise groups and allows tax authorities to assess how revenues, profits, and taxes are allocated across the jurisdictions in which the group operates.
Maintaining this documentation facilitates responses to DGI requests and strengthens the taxpayer’s position during a transfer pricing review or tax audit.
What Are the Penalties for Non-Compliance with Panama’s Transfer Pricing Rules?
Failure to comply with Panama’s transfer pricing requirements may result in financial penalties, tax adjustments, and tax audit procedures initiated by the General Directorate of Revenue (DGI).
Under the applicable legislation, penalties may reach up to 1% of the total amount of related-party transactions, subject to a maximum penalty of B/.1,000,000, depending on the nature of the violation and the specific circumstances of each case.
In addition to monetary penalties, non-compliance may lead to other significant consequences, including:
- Additional information requests from the DGI
- Adjustments to taxable income for corporate income tax purposes.
- Increased costs associated with tax audits and administrative proceedings.
- Greater exposure to tax risks and compliance contingencies.
Case law issued by Panama’s Supreme Court of Justice and the criteria adopted by the Tax Administrative Court (Tribunal Administrativo Tributario – TAT) have reaffirmed the importance of timely compliance with transfer pricing obligations and maintaining sufficient documentation to support related-party transactions.
How Can Companies Reduce the Risk of Transfer Pricing Adjustments?
A proactive compliance strategy is the most effective way to reduce transfer pricing risks and potential tax contingencies.
Some best practices include:
- Periodically reviewing related-party transactions.
- Preparing the Transfer Pricing Study before it is requested by the DGI.
- Keeping intercompany agreements and supporting documentation up to date.
- Verifying that internal transfer pricing policies accurately reflect the transactions actually carried out.
- Coordinating tax compliance among the different companies within the corporate group.
More than a formal compliance requirement, effective transfer pricing management strengthens overall tax compliance and helps reduce the risk of tax adjustments during a transfer pricing review or tax audit.
Frequently Asked Questions About Transfer Pricing in Panama
Form 930 must be filed by taxpayers that carry out related-party transactions and are subject to Panama’s transfer pricing regime under the regulations administered by the General Directorate of Revenue (DGI).
Form 930 must be submitted within six (6) months following the end of the taxpayer’s fiscal year through the DGI’s e-Tax 2.0 electronic filing platform.
Failure to file Form 930 may result in penalties of up to 1% of the total amount of related-party transactions, subject to a maximum fine of B/.1,000,000, in addition to other potential tax consequences.
The Arm’s Length Principle requires that transactions between related companies be conducted under terms and conditions comparable to those that would have been agreed upon by independent parties operating under similar market circumstances.