The international tax landscape is undergoing one of the most significant transformations in recent decades. The historic agreement reached by 147 OECD countries to implement a 15% global minimum tax for multinational corporations has generated intense debate and numerous questions among business owners and investors. For those considering Panama as their next operational hub or tax residence, it is crucial to understand what this new era of taxation implies and how the Isthmus positions itself in this scenario. The debate surrounding the global minimum tax in Panama is key to outlining the country’s fiscal strategy in the coming years.

What Exactly is the OECD’s Global Minimum Tax?

Driven by the Organization for Economic Cooperation and Development (OECD) and the G20, the global minimum tax is a central component of the project against Base Erosion and Profit Shifting (BEPS). Its objective is simple in concept but complex in application: to ensure that large multinational companies pay a minimum level of tax on their profits, regardless of where they are headquartered or generate their income.

The agreement establishes an effective minimum tax rate of 15% for multinational groups with consolidated revenues exceeding 750 million euros annually.

This mechanism, known as Pillar Two of the BEPS framework, seeks to put an end to the so-called “race to the bottom,” where countries competed to attract investments by reducing their corporate tax rates. If a company pays a rate lower than 15% in a jurisdiction, its home country can apply a top-up tax to reach that minimum threshold, thus ensuring equitable taxation and reducing incentives to shift profits to tax havens.

Panama’s Strategic Position Regarding the Global Agreement

Panama, aware of its role as a logistical and financial hub of the Americas, formally joined this global initiative in October 2021. However, adherence to the framework does not imply immediate implementation. To date, the country has not yet adapted its internal legislation to apply the global minimum tax, a decision that reflects a prudent and strategic approach.

Panamanian authorities, including the Ministry of Economy and Finance (MEF) and the Ministry of Commerce and Industries (MICI), have established dialogue tables with the private sector, represented by the Chamber of Multinational Company Headquarters (Casem). This consultation process seeks to thoroughly analyze the implications of the tax and find the best formula for its adoption, one that complies with international standards without sacrificing the country’s competitiveness. This careful analysis of the global minimum tax in Panama demonstrates a commitment to stability and predictability for investors.

Implications for Investors and Businesses in Panama

The key question for any business owner or investor is: how does this affect me, and does Panama remain an attractive destination? The answer requires nuance, but in essence, Panama’s attractiveness remains robust, especially for the vast majority of businesses and individuals.

Who Does This Tax Directly Affect?

It is crucial to understand the scope of the tax. This regulation is designed exclusively for corporate giants:

• Multinational groups with consolidated annual revenue exceeding 750 million euros.
• It does not affect small and medium-sized enterprises (SMEs), startups, individual entrepreneurs, or private investors.
• Nor does it impact companies operating solely within Panama’s borders.

For most individuals and entities looking to establish themselves in the country, the direct impact of this measure is null. However, its implementation is an indicator of the direction international taxation is taking.

Does Panama Lose Its Competitive Fiscal Advantage?

Absolutely not. Panama’s main fiscal advantage, its territorial tax system, remains intact. This fundamental principle establishes that only income generated within Panamanian territory is subject to taxes. Foreign-source (offshore) income is, as a general rule, exempt from taxes in Panama. This is a pillar unaffected by the OECD agreement, which focuses on the global profits of large multinational corporations.

Furthermore, Panama continues to offer a very favorable business ecosystem, which includes:

• The Multinational Company Headquarters (SEM) regime, which offers significant fiscal and migratory incentives.
• Special economic zones such as the Colón Free Zone or Panama Pacifico, with specific tax regimes.
• A dollarized monetary system that eliminates exchange rate risk.
• A stable and growing economy, with first-class infrastructure.

To understand in detail how the Panamanian tax system works for foreigners and residents, you can consult our complete guide on taxes in Panama.

Legal Security: The Hidden Advantage

While the lack of immediate implementation might generate uncertainty, Panama’s active participation in the OECD’s dialogue tables sends a clear message to the world: Panama is a cooperative partner committed to international tax transparency. This proactive stance is fundamental to strengthening the country’s legal security and preventing its inclusion on discriminatory lists. For long-term investors, operating in a jurisdiction that collaborates with global standards such as those of the OECD, available on its official BEPS page, is a guarantee of stability and reputation.

Looking Towards the Future: What to Expect?

Panama’s path towards implementing the global minimum tax will be carefully considered. It is foreseeable that the country will seek a solution that balances adherence to international commitments with the protection of its attractiveness for foreign investment. This could include the adoption of a “Qualified Domestic Minimum Top-up Tax” (QDMTT), which would allow Panama to directly collect the tax from multinationals operating in its territory, instead of ceding that right to the company’s parent country.

Starting a company in the Isthmus remains one of the most strategic options for international expansion. The processes and benefits associated with starting a company in Panama remain a pillar of its value proposition.

Conclusion: Panama Adapts Without Losing Its Essence

The global minimum tax in Panama represents both a challenge and an opportunity. Far from eroding its competitiveness, the strategic management of this issue can reinforce the country’s image as a serious, transparent jurisdiction committed to international best practices, while preserving its fundamental advantages such as the principle of territoriality. For the vast majority of investors, entrepreneurs, and professionals looking to Panama, the country continues to offer an exceptionally favorable fiscal, legal, and business environment for growth.

Navigating the changing international tax landscape requires expert advice. If you are considering establishing your tax residency or company in Panama and wish to understand how these global regulations affect your particular situation, contact our team of specialists. At Panamaway, we offer you the clarity and strategy you need to make informed and secure decisions. Contact us today to start your path to success in Panama.