Panama’s National Assembly approved a law that requires multinational entities domiciled in the country to demonstrate real local operations or face a 15% tax on passive foreign income, the Ministry of Economy and Finance said on Wednesday.
- The law is intended to help satisfy European Union tax transparency requirements and support the country’s removal from EU monitoring lists.
- “At the fiscal level, it requires multinationals to demonstrate that they have physical operations and real activity in a country, beyond just seeking tax advantage,” the National Assembly said in a separate statement on Wednesday.
- Entities that fail to prove economic substance — qualified personnel, adequate facilities, strategic decision-making and real operating expenses in Panama — face a flat 15% rate on net taxable passive foreign income.
- Passive income covered by the law includes dividends, interest, royalties, capital gains and real estate income earned abroad by members of multinational groups.
- The legislation, which President Jose Raul Mulino must sign into law, takes effect from fiscal year 2027 and gives the executive branch 90 days to issue implementing regulations.
- The law grants special treatment for income from intangible assets developed in Panama, such as patents, trademarks and copyrights, to encourage innovation.
- The merchant marine sector and financial entities supervised by the banking, securities and insurance regulators are expressly excluded from the regime.
(Reporting by Elida Moreno; writing by Brendan O’Boyle; editing by Daina Beth Solomon and Edwina Gibbs)
Was this article valuable?
Here are more articles you may enjoy.
The most important insurance news,in your inbox every business day.
Get the insurance industry’s trusted newsletter
