Economic Substance Regulations: Executive Decree No. 32

Scope for Multinational Groups and Passive Income

The Republic of Panama approved Law No. 526 of May 28, 2026, which introduces rules and requirements of economic substance in Panama, applicable only to entities that are members of Multinational Groups that obtain passive income from foreign sources (the “Law”). This law was regulated by Executive Decree No. 32 of September 2, 2026. All these regulations will enter into force as of the 2027 fiscal period.

Below, we answer the most relevant questions for those who maintain Panamanian companies, foundations or trusts regarding the scope of application of this new Law.

1. Scope of the Law

To whom does the Law apply?

It applies to entities (companies, foundations or trusts) that: (i) are members of multinational groups, (ii) have been incorporated or are domiciled in Panama, and (iii) obtain passive income from foreign sources. A multinational group is defined as a group of two or more entities, linked by ownership or control, tax