From 2027, multinationals' Panama companies need real substance or face 15%

From 2027, Panama companies inside multinational groups need real substance—or face 15% on foreign passive income

If you keep a Panamanian S.A., SRL, foundation, or trust that sits inside a cross-border corporate group and collects foreign dividends, interest, royalties, capital gains, foreign rental income, or other foreign movable-capital income, September’s regulation matters—even though the tax year at stake is 2027.

Executive Decree No. 32 of 2 September 2026, published in Gaceta Oficial 30603-B, implements Law 526 of 28 May 2026. It does not abolish Panama’s territorial system for ordinary individuals or for standalone local companies. It adds a condition for a narrower set of entities: Panama-formed or Panama-domiciled vehicles that are part of a multinational group and earn covered foreign-source passive income (Gaceta Arts. 1 and 3).

A multinational group, in the summaries used by Panama counsel (and consistent with the decree’s group framing), means two or more related entities with tax residence in different countries (including parents, subsidiaries, and permanent establishments)—typically those consolidated, or that should be consolidated, in group financials.

What “substance” means in practice

The regulation distinguishes two tracks:

Reduced substance for entities whose main activity is holding equity interests and/or holding or occasionally disposing of real estate. Gaceta Art. 8 (and counsel summaries) say these may satisfy the people test with at least one remunerated Panama-resident director, officer, or administrator with suitable experience, plus adequate documented Panama premises (owned, leased, or shared).
Full substance for other covered entities: qualified paid personnel tied to the core activity, adequate Panama facilities, at least two in-person board (or equivalent) meetings per year in Panama with minutes (Gaceta Art. 6)—and those strategic decisions cannot be outsourced—plus proportional local operating costs backed by contracts and invoices.

Human resources, facilities, and some operating costs can be outsourced to Panama-based providers if work is actually done here under the entity’s supervision (Gaceta Art. 11). Board-level strategic decisions cannot. Time of a shared provider’s staff generally cannot be counted twice for two entities.

Banks, insurers, certain securities intermediaries, fund/pension administrators, and specified Panama-flag shipping operators are carved out under the conditions set in the law—subject to regulatory confirmation.

If you fail the test

A covered entity that does not qualify is treated as a non-qualified entity. Covered net foreign passive income can then face a flat definitive 15% income tax under Law 526 / Fiscal Code art. 707-D, plus possible surcharges, interest, and fines under the Fiscal Code. Foreign-tax credit rules exist (Gaceta Art. 12) but need apostilled/legalized proof and do not create open-ended carryforwards. Documentation must be kept in Panama (physical or digital) for five years (Gaceta Art. 10) and produced in Spanish when requested (Art. 19).

Timing

Rules apply to fiscal years beginning on or after 1 January 2027 (Gaceta Art. 20). The first ISR filing that must show substance for FY2027 is ordinarily due in 2028 (typically March, subject to extensions). Late 2026 is the window to map group charts, residency of directors, lease/office files, and outsourcing contracts—not a reason to panic about your 2025 personal pension deposit.

Bottom line for expats: a Canadian pension paid to you personally is not this regime. A Panama holdco parked inside a multi-country family or investment group that books foreign passive income may be. Treat this as a structure review with a Panama tax attorney—not DIY.

News reporting based on Gaceta Oficial 30603-B (verified 23 Sep 2026) and published counsel summaries. Not legal or tax advice.

Key points

Applies only to Panama entities in a multinational group with covered foreign passive income—not ordinary personal foreign wages/pensions.
FY from 1 Jan 2027; first substance-linked ISR filing typically 2028.
Fail → 15% definitive tax on relevant net foreign passive income; keep docs 5 years in Spanish.
Holdco / occasional real-estate vehicles may use reduced substance; board meetings for full substance are not outsourceable.

Sources

Gaceta Oficial 30603-B / Decreto Ejecutivo 32 (2 Sep 2026)
Infobae (3 Sep 2026)
Icaza, González-Ruiz & Alemán
Morgan & Morgan (3 Sep 2026)
Plan B Expat explainer (context)