Economic Substance Regime For Multinational Groups

Scope of application and main effects of Law 526 of May 28, 2026

The Republic of Panama enacted Law 526 of 2026, which introduces economic substance requirements for Panamanian entities that are members of multinational groups and that derive passive income from foreign sources. The statute, effective as of fiscal year 2027, does not apply generally to all Panamanian companies or foundations, but only to those that meet the specific requirements set forth therein.

Introduction

The Republic of Panama enacted Law No. 526 of May 28, 2026 (“Law 526”), which introduces new economic substance rules applicable to certain Panamanian entities that form part of multinational groups and that derive passive income from foreign sources. The statute, which will enter into force as of fiscal year 2027, represents a relevant development within the Panamanian tax framework, particularly for corporate and wealth-planning structures with cross-border components.