PANAMA Law and Practice Contributed by: Anna Cristina Valdés, Edgar Herrera, José Manuel Motta and Ramón Arias, Galindo, Arias & López
4.3 Pillar Two Panama has not yet implemented the global minimum tax. 4.4 Specific Features or Deviations of Pillar Two Panama has not yet implemented the global minimum tax. 4.5 Digital Services Tax Panama has not yet implemented a specific tax on digital products or digital services. 5. Anti-Avoidance and Anti-Evasion Measures 5.1 Definition and Identification of Tax Fraud, Evasion, Tax Avoidance and Abusive Schemes Under the Panamanian Tax Procedure Code (Law 76 of 2019), tax evasion and tax fraud involve intentional and fraudulent conduct aimed at avoiding or reducing the payment of taxes in violation of the law. Indicators of such conduct may include: • material irregularities in accounting records; • false bookkeeping entries; • the issuance or use of false invoices; • the destruction of mandatory records; • simulated transactions; and • the intentional failure to remit taxes that have been withheld. By contrast, tax avoidance ( elusión ) refers to the exe - cution of acts or transactions that depart from the purpose intended by the law, without a valid economic or legal justification other than reducing the tax burden or obtaining undue tax benefits or credits. Unlike eva - sion, avoidance does not necessarily involve the ele - ment of criminal intent ( dolus ), but rather an improper use of legal forms or structures. Furthermore, the Panamanian Tax Authority may recharacterise simulated or artificial transactions and apply a general anti-avoidance approach, disre - garding legal forms that are manifestly improper and designed solely to obtain a tax advantage.
5.2 Anti-Avoidance Mechanisms Panama’s primary procedural anti-avoidance mecha - nisms include: • the power to recharacterise simulated or sham transactions, taxing the acts effectively carried out rather than their formal appearance; and • a general anti-avoidance rule (GAAR) that allows the Panamanian Tax Authority, within the frame - work of a tax audit, to disregard legal forms that are manifestly improper and prearranged solely to avoid taxation or obtain an undue tax benefit. In such cases, the burden rests on the Tax Authority to substantiate the existence of fraud or improper conduct under tax law. These tools are complemented by the Tax Authority’s broad audit and verification powers, including on-site inspections, review of accounting books and support - ing documentation, and examination of electronically stored information. The system is further reinforced by a sanctions regime addressing both formal non-com - pliance and substantive violations, including adminis - trative tax evasion and criminal tax fraud. In addition, the Panamanian Tax Procedure Code establishes a formal whistle-blower mechanism for reporting tax evasion or criminal tax fraud, including a statutory reward calculated as a percentage of the amounts effectively collected as a result of the report. 5.3 Blacklists and Non-Cooperative Jurisdictions Panama does not hold a list of non-cooperative or high-risk jurisdictions for tax purposes, but it does have a mechanism and a formal list of countries to which it may apply retaliatory measures, which is dis - tinct from tax blacklists used by other jurisdictions. The legal basis for this is Law 48 of 26 October 2016 (which replaced an earlier retorsion law), under which Panama can publish a list of states that “discriminate against the Republic of Panama”, and then consider reciprocal or retaliatory actions.
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