June 24, 2019 Panama issues decree on the country-by-country reporting requirement Certain entities must file the country-by-country report for tax year 2018. Reporting entities should review the provisions of the Executive Decree, as it sets forth the thresholds for filing the report, what must be included in the report, and a ruling request procedure for any questions related to the Decree's provisions. On May 27, 2019, Panama's government published, in the Official Gazette, Executive Decree No. 46, which addresses the disclosure of information in the country-by-country report (CbC report) by tax resident companies in Panama for purposes of the automatic exchange of information. Panama's tax authorities signed the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports, which covers the standards for the automatic exchange of information of related parties or CbC report, on January 24, 2019. Entities required to submit the CbC reports Any ultimate parent entity of a multinational group must file the CbC report on an annual basis if it (1) has consolidated revenues that are higher than €750 million or its equivalent in Balboas, at the exchange rate as of January 2015, during a tax year; and (2) is tax resident in Panama. An ultimate parent entity means an entity in a multinational group that meets the following criteria: (i) the entity owns directly or indirectly a sufficient interest in one or more group entities such that it must to prepare consolidated financial statements under applicable local accounting standards, or would be required to do so if its share interest were listed on a stock exchange in its jurisdiction of tax residence; and (ii) there is no other entity of such a multinational group that owns directly or indirectly an interest described in subsection (i) in the first-mentioned entity. A reporting entity is any entity of a group or multinational group that must file the CbC report in its tax jurisdiction on behalf of the multinational group. The reporting entity is the ultimate parent entity. Notification A group or multinational group that is tax resident in Panama must notify the Panamanian Tax Administration of the identity and tax residence of the reporting entity, as well as the fiscal period used by the multinational group. Any entity in the group may provide the notification. The entity doing the reporting must submit the notification using the format and terms and conditions established by the Panamanian Tax Administration. Contents of the CbC report The CbC report must include:
Filing format and due date The reporting entity must submit the CbC report annually in an "XML Schema" file within 12 months of the tax year end. The CbC report must meet the guidelines and regulations, which will be defined by the Panamanian Tax Administration. Tax year 2018 is the first CbC report required to be filed. Sanctions for non-compliance in the supply of information Failure to comply with the CbC report obligations will result in penalties in accordance with Article 756 of the Panamanian Tax Code. Penalties range from US $1,000 to $5,000 and closure of the business for two days. However, failure to comply repeatedly could result in fines of $5,000 to $10,000 and closure of the business for 10 days. If failure to comply persists, a closure of business for 15 days will apply. Consultations Executive Decree No. 46 establishes a ruling request procedure for questions regarding the content and scope of the Decree. A list of requirements for the ruling requests is set forth in the Decree. The Tax Administration must respond to the ruling request within two months, except in complex cases in which the Tax Administration requires additional time. Any ruling request that fails to comply with the procedure because of false or inexact information will be considered invalid. ———————————————
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