Main errors in the Affidavit of Income
Panama City, March 17, 2023
Transfer pricing is a complex and constantly evolving area of taxation in Panama. It is important to be aware of the potential pitfalls associated with transfer pricing when preparing to file an Affidavit of Income. These errors often include misreporting the price of goods or services between related entities, failure to provide sufficient documentation of transfer pricing, and misclassification of transactions on the Tax Return.
Lack of knowledge about international tax compliance regulations and requirements can also lead to errors. It is important that taxpayers understand transfer pricing regulations and properly document the prices of goods and services between related entities to avoid costly errors.
That is why taxpayers should seek guidance from a qualified tax professional to ensure transfer pricing is consistent and accurate. Taking the time to understand transfer pricing regulations and ensuring accurate documentation can help taxpayers avoid costly mistakes and ensure compliance with international tax regulations.
One of the most common errors related to transfer pricing involves the incorrect allocation of the prices of goods or services between related entities. This can occur when a related entity charges an inflated price for goods or services, or when the prices of the goods or services are not properly documented.
This can result in tax evasion or avoidance, as inflated prices can be used to reduce the taxable income of related entities. To avoid this, taxpayers must ensure that prices of goods or services between related entities are documented and reported in accordance with international tax regulations.
Another of the most common errors related to transfer pricing tables is the use of incorrect or missing information. This can lead to the submission of a false statement, or the omission of important details that could affect the outcome of the assessment.
For example, if the transfer pricing tables are filled out incorrectly, the company may be subject to additional taxes or penalties. Additionally, if the Affidavit of Income is not complete, the company may not be able to claim all deductions and credits associated with transfer pricing. Another common mistake related to transfer pricing charts is incorrect valuation. Transfer pricing involves the valuation of goods, services, and other assets for tax purposes. If the valuation is not accurate, the company may be responsible for additional taxes and penalties.
In addition, incorrect valuations can lead to miscalculation of profit margins, which could affect the company’s overall tax liability. A third mistake related to transfer pricing is not providing an accurate description of the goods and services being transferred.
For more information, contact us at rhurtado@tpconsulting.com or by phone (507) 203-6771 | (507) 203-6770 | (507) 221-8664.
