The Panamanian Parliament has passed a new law requiring multinational companies registered in the country to prove that they have real economic activities in the territory, or face a 15% tax on their foreign passive income.
According to the Panamanian Ministry of Economy and Finance, this reform aims to meet the European Union's tax transparency requirements and to facilitate Panama's removal from European watch lists related to tax havens.
In a statement, the National Assembly explained that multinationals will now have to demonstrate that they have a genuine economic presence in the country, with qualified staff, suitable facilities, real operational expenses and strategic decision-making carried out locally.
Panamanian authorities are thus seeking to limit the use of the country as a mere platform for tax optimization without concrete economic activity.
Companies that are unable to prove this "economic substance" may be subject to a 15% tax on certain passive income from abroad.
Panama has been under international pressure for several years regarding financial transparency and the fight against tax evasion, particularly since the revelations of the "Panama Papers" in 2016.
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