Panama has met the terms of reference (ToR) for the calendar year 2017 (year in review).
Panama can legally issue one type of ruling within the scope of the transparency framework.
In practice, Panama has issued one past ruling; and for the year in review, Panama issued no future rulings within the scope of the transparency framework.
As no exchange of information was undertaken by Panama, no peer input was received in respect of the exchanges of information on rulings received from Panama.
973. This peer review covers Panama’s implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.
974. Panama can legally issue one type of ruling within the scope of the transparency framework: rulings related to preferential regime,1 which are known as “fiscal agreements”. A company that holds a MHQ/SEM license can negotiate fiscal agreements with the Ministry of Economy and Finance. The request shall be address to the Director General of Revenue of the Ministry of Economy and Finance. Once the agreement is settled and signed by the Minister of Economy and Finance, the company will present a copy of the fiscal agreement to the Technical Secretariat of the Ministry of Commerce and Industries (i.e. the office of the Director of Multinational Headquarters).
975. For Panama, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2015 but before 1 April 2017; or (ii) on or after 1 January 2012 but before 1 January 2015, provided they were still in effect as at 1 January 2015.
976. The process for identifying past rulings was conducted as follows. Each unit and relevant department within the tax administration manually reviewed all of the files related to all existing fiscal agreements to identify those fiscal agreements that could qualify as "rulings" under the transparency framework. Those files are stored in the tax analysis office at the Ministry of Economy and Finance which is responsible for documenting and collecting statistics on rulings. An analyst is in charge of gathering the relevant information and passing it to the head of the unit, who verifies their accuracy. This search resulted in the identification of only one ruling within scope of Action 5.
977. In order to identify potential exchange jurisdictions this information was found in the ruling itself and as such Panama did not need to use the “best efforts approach”.
978. For Panama, future rulings are any tax rulings within scope that are issued on or after 1 April 2017.
979. The process used to identify future rulings was the same as adopted for past rulings. Each unit and relevant department within the tax administration manually reviewed the fiscal agreement files stored in the tax analysis office at the Ministry of Economy and Finance, and confirmed that no future rulings in scope of the transparency framework had been issued. The review of future rulings is carried out on a rolling basis. Every time a ruling is negotiated, the tax analysis office would receive the relevant documents signed by the Minister of Economy and Finance. However, Panama notes that article 25 of Law 41 of 2007, which allows for the negotiation of fiscal agreements, is being abolished and this will be confirmed in the subsequent peer review.
980. As no future rulings were issued, it was not relevant for Panama to identify the potential exchange jurisdictions for the year in review. If a future ruling is issued in the following year, Panama would be able to identify the information from the ruling itself as was the case for past rulings.
981. Each unit and relevant department is in charge of the review and supervision mechanism.
982. Officials in charge of complying with the transparency framework have received internal and external guidance and training about the transparency framework requirements. Two senior officers within the tax analysis office (i.e. a BEPS analyst, responsible for compliance with the transparency framework and the head of the office coordinating the implementation of the BEPS Project) are in charge of providing oversight on the process to ensure that the relevant information is captured accurately.
983. Panama has met all of the ToR for the information gathering process and no recommendations are made.
984. For the year in review, Panama did not have the necessary domestic legal basis to exchange information spontaneously. However, domestic legislation implementing the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”) was introduced in 2017 and permits spontaneous exchange of information under the Convention for taxable periods beginning on or after 1 January 2018.
985. Panama is a party to international agreements permitting spontaneous exchange of information, including the Convention. The Convention was ratified through Law no. 5 of 21 February 2017 and entered into force as of 1 July 2017. Since the Convention will have effect for administrative assistance related to taxable periods beginning on or after 1 January 2018, no exchanges could occur under the Convention for the year in review. Panama also has double tax agreements in force with 17 jurisdictions, however spontaneous exchange of information under these agreements is not authorised by Panama’s domestic law as noted above.2
986. Two dedicated officials within the tax analysis office (i.e. a BEPS analyst, responsible for compliance with the transparency framework and the head of the office coordinating the implementation of the BEPS Project) were in charge of completing the template contained in Annex C of the 2015 Action 5 Report (OECD, 2015). In respect of the one past ruling in scope of the transparency framework, the template was completed according to the instructions in the Action 5 Report, and the summary was drafted including the relevant details of the fiscal agreement. The template was then compared with the ruling itself and reviewed by two officers, one of which is a senior officer. The completed template was sent to the exchange of information office within the Dirección General de Ingresos (“DGI’ or tax administration). Before transmitting the file to the relevant jurisdictions, the exchange of information office reviews the technical and legal aspects of the exchanges.
987. The template on the past ruling was submitted to the exchange of information office in December 2017. If a future ruling was to be issued, it would be submitted to tax analysis office immediately after it had been issued. The tax analysis office shall complete the template and submit it to the exchange of information office for the actual exchange with relevant jurisdictions.
988. For the year in review, the timeliness of exchanges is as follows:
|
Past rulings in the scope of the transparency framework |
Number of exchanges transmitted by 31 December 2017 |
Delayed exchanges |
||
|
Number of exchanges not transmitted by 31 December 2017 |
Reasons for the delays |
Any other comments |
||
|
0 |
1 |
See below |
N/A |
|
|
Future rulings in the scope of the transparency framework |
Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted |
Delayed exchanges |
||
|
Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority |
Reasons for the delays |
Any other comments |
||
|
N/A |
N/A |
N/A |
N/A |
|
|
Total |
0 |
1 |
||
|
Follow up requests received for exchange of the ruling |
Number |
Average time to provide response |
Number of requests not answered |
|
N/A |
N/A |
N/A |
989. Information on the one ruling was not able to be exchanged as there was no legal basis permitting spontaneous exchange of information for the year in review. Panama will undertake the exchange of information in 2018 to the extent covered by the Convention.
990. For the year under review, Panama was not required to undertake exchanges as it did not have the necessary legal framework in place for spontaneously exchanging information on rulings. Panama has implemented the legal framework and will conduct exchanges of information pursuant to that legal framework in 2018. Panama has met all of the ToR for the exchange of information.
991. As no information on rulings was exchanged for the year in review, no statistical data can be reported.
992. Panama offers an intellectual property regime (“IP regime”).3 However for the year in review no transparency requirements under the Action 5 report (OECD, 2015) were relevant, as follows:
New entrants benefitting from the grandfathered IP regime: not applicable for the year in review, because Panama is currently in the process of amending/abolishing the regime and has not yet decided whether it will allow grandfathering for new entrants. Should Panama provide grandfathering to taxpayers for which IP income benefits and that entered the regimes after the publication of the 2017 Progress Report (OECD, 2017), which occurred on 16 October 2017, transparency requirements will apply and this will be taken into account during the subsequent peer review.
Third category of IP assets: not applicable to this regimes, which in 2017 was in the process of being amended.
Taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption: not applicable to this regimes, which in 2017 was in the process of being amended.
|
Aspect of implementation of the transparency framework that should be improved |
Recommendation for improvement |
|---|---|
|
No recommendations are made. |
OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.
OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.
OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.
← 1. With respect to the following preferential regime: Multinational Companies Headquarters’ regime (i.e. MHQ/SEM).
← 2. Barbados, Czech Republic, France, Ireland, Israel, Italy, Korea, Luxembourg, Mexico, Netherlands, Portugal, Qatar, Singapore, Spain, United Arab Emirates, United Kingdom and Viet Nam.
← 3. This regime is the City of knowledge technical zone.