The Transfer Pricing Department of the General Directorate of Revenue of the Ministry of Economy and Finance, through Resolution 201-1429 of 24 October 2014, decided to sanction the taxpayer Chevron Products Antilles, LTD, now Chevron Panama Fuels Limited, with a fine of one million balboas (B/. 1,000,000.00), for failure to file the Transfer Pricing Report-Form 930 for the 2012 tax period. As a result of the issuance of the resolution mentioned in the previous paragraph, Chevron’s legal representative filed an appeal for reconsideration with the tax authority, which was resolved by Resolution 201-1321 of 1 March 2016, through which the accused act was maintained in all its parts. This resolution was notified to the taxpayer on 8 April 2016. Chevron then filed an appeal before the Administrative Tax Court, which by Resolution TAT-RF-057 of 22 May 2019, confirmed the provisions of the main administrative act and its confirmatory act, being notified of this appeal ruling on 18 June 2019, thus exhausting the governmental channels. Chevron then appealed to the Third Chamber, on 30 July 2019, in order to declare null and void, as illegal, the administrative resolution through which the General Directorate of Revenue of the Ministry of Economy and Finance, decided to sanction Chevron Products Antilles, LTD, now Chevron Panama Fuels Limited, with a fine of one million balboas (B/. 1,000,000.00), and that as a consequence of such declaration, it be resolved that Chevron has not failed to comply with the obligation to file the transfer pricing report-form 930 for the fiscal period 2012; that it should not pay any fine or sanction; and that, in the event that its principal had paid the fine, the amount of money should be returned to it. In support of its claim, Chevron points out that the contested administrative act does not recognise the right of its principal to be exempt from paying income tax, due to its location in an oil-free zone and for carrying out foreign operations, whose costs and expenses come from foreign sources; in other words, it is excluded from taxable income. In addition to the above, Chevron alleges that by not reporting transactions with related parties abroad, which have the effect of income, costs or deductions in the determination of the taxable base for the calculation of income tax, is under no obligation to file the transfer pricing report (form 930); for which reason, the sanction imposed violates the principles of due process and strict legality. The Judgement of the Court The court dismissed the appeal of Chevron and upheld the fine issued for not filing tranfer pricing documentation. Excerpt: “From the foregoing, it follows that the plaintiff, Chevron Panama Fuels Limited, was obliged to include in the income tax return filed, the data relating to operations with related countries tax residents of other jurisdictions together with the submission of the transfer price report-form 930, within six (6) months after the date of the close of the tax period, a requirement stipulated in article 762-I of the Tax Code, which states the following: “Article 762-1. Transfer pricing report. Taxpayers must submit, on an annual basis, a report of the operations carried out with related parties, within six (6) months following the closing date of the corresponding tax period, under the terms established in the regulations to be drawn up for this purpose. Failure to submit the report shall be punishable by a fine equivalent to 1% of the total amount of the related party transactions. For the purpose of calculating the fine, the gross amount of t he transactions shall be considered, regardless of whether they represent income, costs or deductions. The fine referred to in this paragraph shall not exceed one million balboas (B/.1,000,000.00). The sworn income tax return shall include the data related to related operations, as well as their nature or other relevant information, under the terms provided therein. The Directorate General of Revenue shall adapt the internal administrative procedures in order to comply with this regulation”. (Emphasis added). It is for the above reasons that the Directorate General of Revenue imposed the corresponding fine on the plaintiff taxpayer, Chevron Panama Fuels Limited, since it failed to file the transfer pricing report form 930, within six (6) months after the closing date of the tax period, as required by article 762-I of the aforementioned Tax Code.” Click here for English translation Click here for other translation ...

In May 2018 the final report on corporate tax avoidance in Australia was published by the Australian Senate. The report contains the findings, conclusions and recommendations based on 4 years of hearings and investigations into tax avoidance practices by multinationals in Australia ...