Panama tax reform ushers in new economic substance rules

As governments around the world continue to tighten international tax rules, Panama has introduced significant new economic substance requirements for multinational groups with passive foreign-source income.

In the latest bulletin from Eduardo Montufar of MGI Montúfar & Asociados, members with interests in Panama can find a practical overview of what the changes mean and how affected businesses can prepare.

The bulletin explains the key provisions of Law 526 of 2026, including:

• New economic substance requirements for multinational entities domiciled in Panama.
• Rules covering passive foreign-source income, including dividends, interest, royalties, capital gains and real estate income.
• The conditions businesses must meet to retain favourable tax treatment, including qualified personnel, local decision-making and appropriate operational costs.
• The consequences of non-compliance, including the potential application of a 15% tax on net taxable passive income.
• The timeline for implementation, with the new rules taking effect from the 2027 fiscal year.

Download the full bulletin HERE for a detailed explanation of the new legislation and practical guidance on preparing for the changes.

For more information, visit MGI Montúfar & Asociados' profile page or website.

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