The Ministry of Economy and Finance of the Republic of Panama published on May 27, 2019 Executive Decree No. 46, which establishes the regulatory framework for the Country-by-Country Report (CbCR). The decree was signed by then-President Juan Carlos Varela Rodríguez and Minister Eyda Varela de Chinchilla, and entered into force on the same date it was promulgated in Official Gazette No. 28782-A.

The measure responds to commitments made by Panama since October 31, 2016, when it joined the Inclusive Framework for implementing the recommendations of the G20 and the Organisation for Economic Co-operation and Development (OECD) under the Base Erosion and Profit Shifting (BEPS) project. In particular, Action 13 of that project requires large multinational groups to document and report their tax presence in each jurisdiction where they operate.

The decree establishes that every ultimate parent entity of a multinational group that is resident for tax purposes in Panama and whose consolidated revenues exceed seven hundred fifty million euros is required to file an annual Country-by-Country Report with the Directorate General of Revenue. The report must include, for each jurisdiction in which the group has a presence: the amount of revenues, profits or losses before income tax, taxes paid and accrued, stated capital, retained earnings, number of employees, and tangible assets other than cash. Additionally, each constituent entity of the group must be identified along with its jurisdiction of legal incorporation if that differs from its jurisdiction of tax residence, and the nature of its principal activity.

The document must be filed in XML format through the electronic portal designated by the Directorate General of Revenue, within twelve months following the close of the relevant fiscal period. The decree includes a transitional paragraph that designated fiscal year 2018 as the first period subject to the obligation. Every constituent entity of a multinational group that is tax-resident in Panama must also notify the Directorate General of Revenue in advance of the identity and tax residence of the reporting entity, as well as the fiscal period used by the group.

The regulation protects the confidentiality of the information collected. The Directorate General of Revenue is required to guarantee such confidentiality in accordance with the mechanisms provided under the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, approved by Law 5 of February 21, 2017, and Law 51 of October 27, 2016. The report may not be used as a standalone conclusive tool to determine transfer pricing adjustments; its use is limited to high-level risk assessment in that area and to economic and statistical analysis. Failure to comply with the obligations established by the decree carries the penalties set out in Article 756 of the Fiscal Code of the Republic of Panama.