Panama passes law imposing stricter requirements on multinational firms

(Corrects attribution of quote ‌in second ​bullet ​point to National Assembly, not the Ministry of Economy and Finance)

PANAMA CITY, May 27 (Reuters) - 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)

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Realty Income closes $1B convertible notes offering
• Explainer-How has the US-South Korea relationship evolved under Trump?
• US 30-year yields hit highest level since 2007 as war, oil worries fester