On May 28, 2026, Panama enacted Law No. 526, amending its Tax Code for income tax purposes and introducing an economic substance framework applicable to certain foreign-source passive income, effective from fiscal year 2027.
Among the changes introduced by the Law, entities that are part of multinational groups will be required to meet economic substance criteria and report in their annual tax returns the income derived from such passive income. Non-compliance will result in the entity being treated as a non-qualified entity, subject to a single and definitive 15% tax on net taxable income for the relevant fiscal year.
