Panama Regulates Law 526: How Companies Must Demonstrate Economic Substance
Executive Decree No. 32 of 2026 regulates Law 526 on economic substance for passive income. We explain the five criteria covering personnel, facilities, decision-making, expenses and documentation that multinational group entities must meet from fiscal year 2027, and the 15% rate applied when they fall short.
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Panama’s Law 526: The Three Economic Substance Requirements
The law is clear in its structure. What remains to be defined is its practical interpretation — and that is precisely where companies need to prepare with information, not assumptions.
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Passive foreign-source income under Law 526: which categories apply to your structure?
The law does not apply to all income generated by a Panamanian entity. The second threshold is the type of income — and that analysis must come before the substance analysis.
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Does Law 526 Apply to Your Structure? The Analysis to Complete Before August
Law 526 has a specific applicability threshold. Before analyzing any pillar of economic substance, there is a prior question that determines whether everything else applies.
Continue ReadingPrivate Interest Foundations and Law 526: What the Family Office Client Needs to Know
Law 526 changed Panama’s tax landscape, but it did not eliminate patrimonial planning tools. The Private Interest Foundation remains valid — when you understand its position in the new framework.
Continue ReadingPanama’s Economic Substance Law: What Your Business Needs to Know
A fundamental reform that changes the rules for multinational groups in Panama — and that is already in force.
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