Consejo in This Edition José Javier Rivera Editorial Giovana Del C

Consejo In this edition José Javier Rivera Editorial Giovana del C. Miranda Garzola Rafael Fernández Lara José Galindez Frida Medrano Cebrián Araceli De Gracia Roger Durán Rosemary Piper Ninotshka Tam Milena Vergara José Javier Rivera J. Giovana del C. Miranda G. Design & Layout: Gabriela Melgar Rivera, Bolívar y Castañedas @rbcabogados @rbcweb Editorial DECEMBER 2020 5 A YEAR TO REFLECT Content 55. Politics THE CONVULSED PRESIDENTIAL PERIOD 1948 – 1952 IN PANAMA 60. Panamanian Economy 65. World Economy MAIN MONTHLY ECONOMIC INDICATORS: JANUARY- LATIN AMERICA AND THE CARIBBEAN WILL HAVE OCTOBER 2019-20 POSITIVE GROWTH IN 2021, BUT WILL NOT BE ABLE TO RECOVER PRE-PANDEMIC LEVELS OF ECONOMIC ACTIVITY 76. Environmental Capsule THE PHENOMENON OF LA NIÑA WILL EXTEND UNTIL THE YEAR 2021 Invited Writer 8 A DECADE OF TRANSFER PRICES IN PANAMA LABOR PERSPECTIVE, PANAMA 2020 BALANCE SHEET AND CHALLENGES FOR SOCIAL DIALOGUE BETWEEN ACTORS FROM THE PRODUCTIVE SECTOR 11 Content Norms of Interest GRADUAL REIMBURSEMENT OF EMPLOYEES 37 Legislación y Economía December 2020 José Javier Rivera - Attorney Editorial [email protected] A year to reflect n December 2019, the country was facing and unemployment had risen to 7%, which was the first five months of the current administration, worrying. We all remember that, in mid-February, whichI had been characterized by an ambitious the world began to inform itself about a mysterious government plan and by an exceptional negotiation disease that had its origin in the Wuhan region of of a financing for two billion dollars to face imminent Popular China and what was shown was surprising. maturities. Within this environment, the choice of the Comptroller of the Republic for the five-year The Chinese authorities, faithful to their culture, period was proposed and, surprisingly, the Assembly took radical actions isolating the population and chose Mr. Gerardo Solís, who, upon assuming office, prepared their health system to take in those who promised to maintain high levels of efficiency, were infected, since the virus called Covid-19 accountability, independence and transparency. had devastating effects on human anatomy. With beginning of 2020, there was an inventory of At first, we were all apprehensive to consider that this projects that would generate high levels of jobs, virus would have a global spectrum and the response 5 since model of the past decade had already run out of the western world to this scourge was gradual Legislación y Economía December 2020 and we haven’t seen any coherence to nine months that we suffer from, has been suspended, among since the declaration of the Pandemic by the WHO. other things because it has generated a universal fear of going to hospitals, clinics and doctor’s This moment is not to relate what we have all lived offices. through, but to reflect on some universal and other local features that have ruined countries, individuals, families, 5. I see that, universally, we now have greater the elderly, children, companies and dreams of each. concern for health and for the first time in many years, we have seen death and its consequences 1. In general terms, government management very close; both family and friends, as well as us has been highly flawed, both in the measures who are in the third age, the population that has implemented, in the lack of information to the the highest percentage of fatality. population about their relevance, in leadership during critical periods, in the control and 6. For our grandchildren and in general for those supervision of costs and investments. to attend who are still in schools and universities with the pandemic. physical presence, the blow has been devastating, particularly for those who have had to drop out 2. In the same vein, most health systems have of the educational system because they lack the collapsed because they do not have the strength means to face this education virtual. to meet the demand that Covid-19 has produced and at the same time the other diseases that 7. In the case of workers in general, the number cause death. Fortunately, the lethality of the of unemployed reaches hundreds of millions disease is low. and many have been with suspended contracts without any certainty about the so-called 3. Almost universally, countries have had to resort economic recovery, because the pandemic has to borrowing from multilateral organizations, produced several periods of total closure of cities, because there were no reserves for an abrupt activities and companies. drop in production, consumption, and an increase in health care costs.. 8. In many countries the percentage of informal, micro and medium entrepreneurs, exceeds 90% 4. In the scientific field, we must recognize and therefore when economic activity is canceled that advances in the study of diseases and also in large sectors, the damage is enormous and how international laboratories have responded irreversible, including those economies that with great urgency to the needs of having one are based on aviation, tourism, entertainment, or more vaccines to meet the needs of the gastronomy, arts, fashion and other segments world population that exceeds the eight billion that generate employment, investment, creativity, inhabitants. Also applaud the great debate that emotion. has been generated, not only regarding efficacy of vaccines; rather, to use of a battery of drugs 9. The pandemic has confined us for long periods and products to improve body immunity and and has diminished our ability to manage a 6 attack the viral load of the first moments of the multiplicity of problems, debts, quality of life and disease. Curiously, the long inventory of diseases as a consequence of them, from children to the Legislación y Economía Diciembre 2020 elderly, today we are struggling in thinking about the present and the future . 10. Only the development of virtual communication media, the avalanche of seminars, talks, concerts, films, series have been able to mitigate some of the effects of the pandemic. Now, what do we do? 1. Preserve health. 2. Keep our body and mind healthy. 3. Be attentive to our families, especially the elderly and children. 4. As Einstein said: “If we do the same we cannot expect different results.” We have to make an effort to rethink our ideas, our convictions and get out of the static zone and pessimism. 5. We must maintain a citizen oversight over all movements, contracts, statements of our authorities and political, union, religious, scientific, cultural, sports, musical, thinkers and opinion leaders. At the end of the day, respect our environment, be supportive, tolerant, persistent, questioning, participating and especially humble. This battle requires an agreement, beyond the borders to ensure its success, but that result will be gradual, although technological development will allow us to advance faster than we think at the moment. It will dawn and we will see...L&E 7 Legislación y Economía December 2020 Invited Writer A DECADE OF TRANSFER PRICES IN PANAMA José Galindez / Frida Medrano Cebrián [email protected] he transfer pricing regime is introduced in Panama jurisdictions ensure that these prices agree with as of 2010 and is contained in Articles 762-A to 762- market prices to ensure that the income declared TL of the Tax Code. In addition, there is regulation on in their jurisdiction and tax paid, are appropriate. the matter through Decree No. 390 of 2016 and as of This concept of matching transfer prices to the 2019, the adoption of the report country by country. prices agreed upon by independent parties is known as the “Full Competition Principle” or “Arm’s Length Transfer prices are known in the tax world as the Principle” and it is the international standard prices agreed in transactions between related parties. adopted by the countries to control the erosion of bases. taxable as a result of intra-group flows. Unlike a price agreed between independent parties, the common interest that the parties have in this type of In the case of Panama, the legislation has transaction may cause prices not to reflect the functions adopted the international criteria contained in the performed and the risks assumed by each of the parties. Transfer Pricing Guidelines of the Organization for Economic Cooperation and Development When it comes to a multinational group, with (OECD), among which are the linkage criteria, subsidiaries located in different jurisdictions, with the definition of the subjects required, methods, 8 different tax rates and that carry out transactions statistical measures and comparability factors to between them, the tax authorities of these validate compliance with the arm’s length principle. Legislación y Economía December 2020 In addition, the legislation establishes the documentary of September 10, 2020 being the most important obligations before the General Directorate of Revenues ruling in terms of the amount reached and the (DGI) and the sanctions for non-compliance. development of technical criteria discussed by the TAT. Within jurisprudence, there are some aspects During these first ten years, the regime has that can be identified as lessons learned. First, evolved and expanded its scope to now not only it is observed that both the DGI and the TAT cover cross-border operations, but also local show the inconsistencies presented by the operations in the event that one of the parties is taxpayers in their analysis of Transfer prices. located in a regime or special economic zone. These inconsistencies detected between the It has

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