Puma Energy Bahamas SA is engaged in the wholesale of petroleum products, accessories and rolling stock in general in Panama.
Following a thorough audit carried out by the Tax Administration in Panama, where discrepancies and inconsistencies had been identified between the transfer pricing documentation and financial reports and other publicly available information, an assessment was issued for FY 2013 and 2014 of additional taxable income of $39 million resulting in additional taxes and surcharges of approximately $ 14 millions.
Puma Energy Bahamas SA disagreed with the assessment and brought the case before the Administrative Tax Tribunal.
In 2020 the Administrative Tribunal decided in favor of the tax authorities with a minor adjustment in the calculations for 2014.
“…we consider that the Tax Administration adhered, in this case, to the powers conferred by law, and that there is no defenselessness, since it was verified that, in the course of the audit, several requests for information were made (as evidenced in the minutes of the proceedings in the background file), and then, in the governmental channel, after notification, the evidence requested by the plaintiff was admitted and practiced, in the first instance, having carried out the corresponding procedural stages.”
“In view of the above, we consider that the taxpayer should have been consistent in the handling of the financial information used, and calculate the gross margin in accordance with the guidelines established in our legislation…”
“In this sense, it is noteworthy that a method was chosen that weighs the margins, rather than the price of the product, when the part analysed is exclusively dedicated to the distribution of oil, a product that has a public market price, and in the Panamanian case, there is a suggested price for its purchase and sale to the consumer.”
“Based on the calculations described in the previous point, no adjustment would be necessary to the calculation of the additional settlement for the period 2013, as it coincides with the work carried out by the tax authorities (see Table n.). 40 to sheet 309 of the background file). Therefore, we will only proceed with the adjustment of the taxpayer’s financial information for the 2014 period, specifically the cost of sales, in order to bring it to the median of the interquartile range, reflecting, for clarity, a comparative analysis of the adjustment made in the first instance, with the findings described in this resolution”
An appeal was then filed by Puma Energy Bahamas SA with the Supreme Court.
Notice
The Supreme Court upheld the decision of the Administrative Tribunal and ruled in favour of the tax authorities.
Consequently, ruling TAT-RF-062 of the Administrative Tax Tribunal (TAT) of September 10, 2020, on the transfer pricing adjustment for purchases made with its related parties abroad for $39 million corresponding to the periods 2013 and 2014, is confirmed.
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