With the approval of Law 66 of December 13, 2018, published in Official Gazette No.28675-B, which amends and adds articles to Law # 41 of July 20, 2004, the obligation arises for certain companies established in the Panama-Pacific Area, to comply with the presentation of a sworn statement containing relevant information so that the Panama-Pacific Agency, after complying with the requirements demanded, issues a resolution that certifies the right to maintain the tax incentive recognized by the aforementioned law. These companies are called “Companies Subject to Substance Measurement”.

What is economic substance?

The more local presence and commercial activity an international company brings to a given market, the greater its “economic substance” in the eyes of the tax authorities.
A multinational company with little or no local business activity may have adverse tax consequences in that jurisdiction.
Encouraged by the OECD’s new global standards and the European Union’s blacklist of non-cooperative tax jurisdictions, tax authorities around the world are now scrutinizing their economic substance requirements much more strictly.
This obligation contained in the above mentioned law, has been regulated by Board Resolution #4 -2020, published in the Official Gazette No.29080 and by Board Resolution No6-2020, published in the Official Gazette No.29132.
The companies have a term of 6 months as of the end of their fiscal period 2022, for the timely delivery of all the required documentation to the Investor Assistance Directorate of the Panama Pacifico Agency.
If you need any advice, proposal for the preparation of this obligation, we are at your disposal.

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