PANAMA Trends and Developments Contributed by: Rafael Rivera, Malvis Mina, Nicole Pérez and Carolina Lino, BDO Panama
The overarching goal of the new Code is to reduce delays and expedite proceedings. A major innovation is the introduction of oral pro - ceedings, which were previously not standard. Preliminary hearings must now be held within 20 to 60 days of the service of the complaint. Tax Procedure Code The Tax Procedure Code (CPT) of Panama was established through Law 76 on 13 February 2019, marking a significant step forward in the modernisation and organisation of the country’s tax system. The CPT provides a comprehensive legal framework to regulate interactions between taxpayers and the General Directorate of Rev - enue (DGI), the authority responsible for tax administration. Its main objective is to define clear, efficient and transparent procedures for the application of taxes, strengthening legal certainty for both the State and citizens, while promoting voluntary compliance with tax obligations. The implementation of the CPT was gradual, beginning in 2020, to allow both taxpayers and the tax administration to adjust to its provisions. Finally, in July 2024, all provisions of the Code came fully into effect. Among the innovations introduced by the CPT into Panamanian tax legislation, the following stand out: • the legal recognition of the use of the elec - tronic tax mailbox, granting digital notifica - tions the same legal validity as printed ones; • the allowance for taxpayers to offset or trans - fer tax credits, expanding tax management tools; • the requirement that any administrative action affecting the rights of taxpayers must be
properly justified and notified, which strength - ens legal guarantees; and • the provision for the reduction of penalties when taxpayers correct their errors before an audit, encouraging self-regulation instead of automatic punishment. Important Case Law in Tax The case of Colon Oil and Services S.A. (COAS - SA) before Panama’s Supreme Court of Justice involves a tax dispute concerning the refund of ITBMS (Tax on the Transfer of Movable Goods and Services). Since 2010, COASSA has oper - ated within a fuel free zone and sought a Can - cellation Power Certificate (CPC) amounting to PAB877,976.90. The company claimed this tax credit was linked to imports and purchases made between 2011 and 2014 connected to their re-export activities. The DGI rejected the claim, stating that COAS - SA should treat this tax credit as a deductible expense for Income Tax because the acquisi - tions were not exempt from ITBMS. The Tax Administrative Tribunal (TAT) supported this decision, emphasising that COASSA failed to prove its operations were intended for exports or similar activities, as outlined in Article 1057-V of the Fiscal Code. The Supreme Court of Justice, in a unanimous ruling, upheld the decisions of the DGI and TAT, finding that COASSA did not fulfil the criteria required to obtain the CPC. The Court clarified that such tax credits are only recoverable via CPC when they stem from goods and services directly linked to export or equivalent activities. Since COASSA did not properly report its export transactions in the designated sections of its tax filings, the request was denied.
636 CHAMBERS.COM
Powered by FlippingBook