Transfer Pricing in Panama

The legal framework

Panama's transfer pricing regime occupies one chapter of the Código Fiscal — Chapter IX of Title I, Book IV, articles 762-A to 762-Ñ — and its reach has widened in stages. Ley 33 of 2010 inserted it, confined to counterparties in treaty jurisdictions; Ley 52 of 2012 extended it to all foreign related parties; Ley 114 of 2013 sharpened the reporting duty; and three 2018 laws brought entities under Panama's special regimes inside the perimeter. Decreto Ejecutivo 958 of 2013 and Decreto Ejecutivo 390 of 2016 — the latter effective for fiscal years from 1 January 2017 — supply the regulations and materially enlarged the study.

Article 762-A states the standard: prices, amounts and margins between related parties must match what independents would have agreed in comparable circumstances. Article 762-C defines relatedness by direct or indirect participation in management, control or capital, or by a common third participant, and reaches permanent establishments in relation to head office and sister establishments.

Two features shape practice. First, scope: articles 762-D and 762-L capture dealings not only with foreign related parties but with local related parties in the Zona Libre de Colón, Panamá-Pacífico, the SEM regime, Ciudad del Saber and equivalents. Territorial taxation and a free-zone address are not exemptions — a point the Supreme Court settled in the Heinz Panamá judgment of 22 April 2025. Second, there is no de minimis threshold: one reportable transaction of any size triggers the full compliance cycle.

The OECD Guidelines are a technical reference rather than enacted law. Article 762-D, as replaced by Ley 52 of 2012, applies the Guidelines approved by the OECD Council in 2010 — or those that replace them — as a referencia técnica, but only so far as they are congruent with the provisions of Chapter IX itself; the article imposes no treaty-consistency condition and does not measure them against the Code as a whole. They persuade; they do not displace Decree 390.

Transfer pricing is not run out of the general audit function. Resolución 201-10153 of 9 August 2013 delegated the function to the Dirección de Tributación Internacional, and casework sits with its Departamento de Precios de Transferencia — a different area from Grandes Contribuyentes, and the correspondent for study requests and Form 930 queries.

Methods, comparables and benchmarking

Article 762-F lists the five OECD methods and keeps a hierarchy rather than a most-appropriate-method rule. CUP, resale price and cost plus rank first; TNMM and profit split become available only where transactional complexity or an absence of information prevents proper application of a traditional method. Most Panamanian studies still land on TNMM, and the route there is not a formality — article 10 of Decree 390 requires the study to justify the method chosen and explain why the alternatives were discarded.

Comparability follows article 762-E: contractual terms, functions performed with assets used and risks assumed, characteristics of the property or services, economic circumstances and business strategies, with aggregation permitted where it is consistent with arm's length. Where two or more comparables produce a range, article 762-F read with article 9 of Decree 390 requires the interquartile range. A result inside it is treated as arm's length; a result outside it must be adjusted — by the taxpayer, and to the median, not merely back to the edge of the range. Any other statistical method is open only where agreed under a mutual agreement procedure or authorised by DGI general rules.

Two points repay attention. Article 5 of Decree 390 gives a domestic uncontrolled comparable priority over a foreign one — demanding, in a market where few companies publish financials — and Panama's OECD country profile confirms the preference. Separately, in Resolución TAT-RF-062 of 10 September 2020, decided under the earlier Decreto Ejecutivo 958 of 2013 for fiscal years 2013 and 2014, the Tribunal Administrativo Tributario held that verifying the data behind the interquartile range against the comparables' own source filings is the better course and lends the analysis greater reliability, while expressly declining to rank one commercial database above another. Form 930 then forces those choices into the open, tagging each comparable as internal or external, local or foreign, and asking whether adjustments or loss-making comparables were used.

Beyond services the statute is thin. Article 762-G imposes a benefit test on intra-group charges — the service must have been rendered and be capable of producing an advantage for the recipient — with direct charging where the benefit can be identified and, where it cannot, an allocation key reflecting the nature and benefit of the service. There is no domestic guidance on intangibles, hard-to-value intangibles, financial transactions or cost contribution arrangements; the OECD Guidelines fill those gaps. Panama makes no secondary adjustments, and the only year-end mechanism is the single rectification allowed by article 710.

Documentation: what the DGI expects

Three obligations run in parallel, and they are sequenced tightly.

The Informe de Precios de Transferencia — Form 930, under article 762-I — is due within six months of the close of the fiscal period and is filed through e-Tax 2.0 in US dollars. Version 3.0, adopted by Resolución 201-4247 of 16 June 2026 and applicable from fiscal period 2026, adds annexes for tested-party financials, related-party identification and fixed assets. The form captures each analysis at transaction level — counterparty and country, method, tested party and profit level indicator — plus a comparables annex and a questionnaire on group restructurings and foreign audits or disputes. There are no extensions and no rectificative filings: a wrong return must be annulled on request within the filing window and re-filed before the deadline, or the penalty bites.

The Estudio de Precios de Transferencia is the local file, required by article 762-J with contents prescribed by article 10 of Decree 390 — twenty items, from functional analysis and search strategy to segmentation criteria, justification of multi-year data and the range calculation. It must exist when Form 930 is filed, because the return is an extract of it, and must be produced within 45 days of a DGI request — a period the tax administration itself has told the OECD runs in business days. The study, and any further information the DGI requests, must be presented in Spanish; that is a requirement of article 10 of Decree 390, not a matter of practice.

Article 762-K, regulated by article 11 of Decree 390, adds a master-file-style group dossier with no threshold at all: organisational structure and group transfer pricing policy as standing items, extending on request to value chains, intangible inventories, financing policies and restructurings. Country-by-country reporting sits separately under Decreto Ejecutivo 46 of 2019, for Panamanian-resident ultimate parents above EUR 750 million, filed within twelve months of year end through the DGI's AEOI portal, with a first-year notification by local constituent entities.

Finally, the annual income tax return carries the taxpayer's related-party income, cost and expense figures, and those figures, Form 930 and the study must agree — not least because the DGI computes the 1% penalty on the related-party operations as recorded in the return.

Audits, penalties and the enforcement climate

The headline sanction is article 762-I: failure to file Form 930 attracts a fine of 1% of the total value of related-party transactions, capped at one million balboas. It is a reporting penalty, indifferent to the quality of the analysis, and the Supreme Court applied it to a free-zone taxpayer holding a legal stability agreement in Heinz Panamá, where the reported fine exceeded USD 128,000. Failure to produce the study attracts no bespoke sanction; the DGI falls back on the general Fiscal Code schedule — B/.1,000 to B/.5,000 where reports are not supplied within 72 hours, rising to B/.10,000 on repetition with possible closure of the premises. There is no documentation-based penalty protection: a good study is a precondition of compliance, not a shield.

Enforcement is concentrated and increasingly data-driven. The MEF's Memoria 2025 records that between November 2024 and October 2025 the transfer pricing and large taxpayer department opened 7 audits, requested 180 studies, imposed 195 penalties totalling B/.1.6 million and collected B/.2.2 million from adjustments — against 110 audits across the DGI's entire general audit function. The department now uses KNIME analytics for risk-based case selection, fed by an exchange-of-information function handling 80 requests from 19 countries. Prescription is transitional: article 737 gives seven years for periods accrued before 2022, while the Código de Procedimiento Tributario applies a five-year period, ex officio, from 1 January 2022.

Dispute resolution and advance certainty

Panama offers resolution but very little advance certainty. There is no advance pricing agreement programme — a 2017 DGI draft bill contemplating unilateral and bilateral APAs was circulated to the professional bodies but never enacted — and no safe harbours of any kind. What the Código de Procedimiento Tributario has added, since it came into force on 1 June 2024, is a general consulta tributaria under articles 145 to 149: any taxpayer, through counsel if a legal person, may put a question to the DGI, which must answer within 60 days, and the answer binds the DGI for the case consulted where it favours the consultant. It resolves a legal question; it is not an advance pricing mechanism and delivers no pricing certainty.

The other route is the mutual agreement procedure, regulated for the first time by Resolución 201-3777 of 7 June 2024, which sets out the requirements for a request, the procedure, the effect of an agreement and the confidentiality of information supplied. The DGI is the competent authority across a network of 17 comprehensive treaties. The caseload tells its own story: the 2024 statistics show 4 transfer pricing cases open at the start of the year, 7 started, none closed and 11 open at 31 December, ten of them with Spain. MAP is worth invoking where a treaty partner has made a primary adjustment, but nothing yet suggests it is a fast route.

Domestically, an assessment is challenged first by recurso de reconsideración before the Director General de Ingresos, then by appeal to the Tribunal Administrativo Tributario within 15 business days of notification, through counsel, pleading facts, law and evidence under article 1240-D. A TAT decision exhausts the administrative route and opens the contentious-administrative jurisdiction of the Sala Tercera. Both leading transfer pricing decisions came out of that ladder, and both went against the taxpayer.

Pillar Two, economic substance and what changes in 2026

Panama has not enacted the GloBE rules. No income inclusion rule, UTPR or qualified domestic minimum top-up tax appears in the DGI's inventory as at August 2026. Nor is Panama a covered jurisdiction for Amount B: its absence from the June 2024 OECD list follows from the World Bank income classification, not policy.

The 2026 development that matters is domestic. Ley 526 of 28 May 2026 adds articles 707-A to 707-Ñ to the Fiscal Code, imposing economic substance requirements where an entity belongs to a multinational group and earns foreign-source passive income: qualified and properly remunerated personnel and premises in Panama, strategic decision-making and risk assumption in Panama, and adequate local operating costs, with relaxed tests for holding and real estate entities and carve-outs for Panamanian-registry shipping and regulated financial entities. Fail, and the whole of that passive income bears a definitive 15% tax on net taxable income, with a non-refundable credit for foreign tax. The same law modernises the permanent establishment definition in article 762-M — 183-day construction, services and natural-resource thresholds, anti-fragmentation aggregation across related parties, and tighter dependent-agent rules. It applies from fiscal period 2027. The 15% rate invites confusion with Pillar Two; the two are unrelated. Separately, the DGI is revising local file and master file requirements along BEPS Action 13 lines and reviewing an Action 4 interest limitation.

How practitioners should respond

Treat the study as the source document and the return as its extract: build the analysis before the six-month clock expires, because there is no extension and no amendment. Reconcile the income tax return's related-party figures, Form 930 and the study before submission — the 1% penalty is computed on the related-party operations as recorded in the return. Invest in the comparables narrative — search the Panamanian market first, verify database financials against the comparables' own filings, and write the justification for every foreign comparable, adjustment and multi-year set into the study, in Spanish, rather than reconstructing it inside a 45-business-day notice period. And model the median: outside the interquartile range, the adjustment is the taxpayer's to make, and it goes to the median.

Then revisit the perimeter. Free-zone, Panamá-Pacífico and SEM entities are squarely in scope, and Ley 526 overlays a second question — whether the Panamanian entity has the people, premises and decision-making to support the returns its transfer pricing policy attributes to it. Functional and substance analyses should be prepared together. Finally, price the absence of certainty into planning: with no APAs and no safe harbours, the available mechanisms are a well-documented ex ante position, a binding consulta tributaria on a discrete legal question, and, if a treaty partner moves first, MAP.