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Taxes in Panama 2026: Guide to the New Economic Substance Law and Net Income for Investors

The fiscal landscape for international investors in Panama is undergoing an unprecedented technical transformation in 2026. The recent approval of the first block of changes to the economic substance bill marks a turning point for those managing foreign capital from the isthmus.

  • TL;DR: Key updates
  • The 15% tax will be applied to net income, not gross, allowing for strategic deductions.
  • The concept of “other passive income” is redefined as “movable capital income” for greater legal certainty.
  • Service outsourcing will now be measured by execution hours, requiring rigorous traceability.
  • A 90-day period is established for full regulation, reducing operational uncertainty for offshore companies.

From Gross to Net Income: A Relief for Corporate Structure

One of the biggest fears among the investment community was the imposition of a tax on total income. However, after intense consultations with the private sector, the Committee on Economy and Finance has corrected course.

What does this mean for your company in Panama? By taxing net income, the system allows for the deduction of necessary operating expenses incurred to generate that income. This aligns Panama with international OECD standards without destroying the competitiveness that characterizes us as a financial hub.

“The shift from calculating 15% on gross income to net income responds to a solid technical argument to protect investment and employment.”

Clarity on Movable Capital Income

The replacement of the generic term “other passive income” with “movable capital income” is not just a technicality. It is a legal protection. Do you receive dividends, interest, or royalties? Now the rules of the game are more specific, preventing arbitrary interpretations by the Directorate General of Revenue (DGI).

Comparison: The New Substance Regime in Panama

To understand the real impact on your taxes in Panama, we have prepared this technical comparison between the initial proposal and the text adopted in 2026:

Concept Original Proposal Adopted Text (2026)
Taxable Base Gross Income (Total income) Net Income (Income minus expenses)
Tax Rate 15% 15% (with applicable deductions)
Outsourcing Measurement Ambiguous / Per contract Based on man-hours
Definition of Income Generic Passive Income Movable Capital Income

Economic Substance and Outsourcing: The Challenge of Hours

How does a company demonstrate economic substance in Panama if it doesn’t have a massive physical office? The law now allows outsourcing but with close scrutiny on working hours. This compels management firms to be much more meticulous in their compliance reporting.

If you manage your assets through a Panamanian Anonymous Society (Corporation), is your service provider prepared to audit these hours? The regulation, which must be ready in less than 90 days, will define the exact forms for this substance report.

The Opinion of Our Experts at PanamaWay

At PanamaWay, we view this evolution as an opportunity for the sophisticated investor. It’s no longer just about “having a company,” but about managing it correctly under the umbrella of tax residency in Panama.

Case Study: Last month, we advised a European digital entrepreneur who sought to relocate his movable investment holding company. Initially, he was concerned that the 15% tax would erode his cash flow.

Thanks to the transition to net income, we structured his operation so that administrative management costs and legal advisory fees in Panama were deductible. Result: His effective real rate remained significantly low, fully complying with the new substance requirements and securing his Friendly Nations Visa without setbacks.

Have you checked if your current structure complies with the hourly measurement for outsourcing? Most old structures will become obsolete if not adjusted before the end of the year.

Conclusion: Panama Remains a Safe Haven

This reform does not seek to penalize capital, but rather to equip it with legal armor against international pressures. By clearly defining who is excluded and how the tax is calculated, Panama strengthens its position as the preferred destination for business relocation in Latin America.

If you are considering relocating your assets or company, do not leave your compliance to chance. At PanamaWay, we offer 360º consulting that covers everything from tax planning to immigration and banking management.

Ready to secure your future in Panama? Contact our senior advisors today and ensure your transition to the new tax regime of 2026.

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