Law No. 57 was published on October 24, 2018 in the Official Gazette, which amends the multinational headquarters regime (MHQ regime). It contains provisions on applying transfer pricing regulations to transactions conducted by entities with an MHQ license. It will be applicable from the tax year 2019 and will apply to any related-party transaction that an individual or entity conducts with companies with an MHQ license. Companies with an MHQ license have a reduced rate of income tax.
The transfer pricing rules also will apply to those companies which conduct related parties transactions that are established in Panama, tax residents of other jurisdictions, or established in the ColĎŚn Free Zone. Also, the transfer pricing rules will apply if the related parties operate in the Oil Free Zone under Cabinet Decree 36 of 2003, in the special economic area of Panama-Pacifico, under the MHQ regime, or in any other free zones or special economic areas. In all cases, the application of the transfer pricing regulations must follow the provisions of the Fiscal Code.
