¿Sigue tu ingreso del exterior sin pagar impuestos en Panamá? Lo que la Ley 526 cambió (y lo que no)

Panama's Law 526, signed on May 28, 2026, modified the treatment of certain passive income of foreign source within the Fiscal Code. The press called it "territoriality 2.0," and it raised questions among foreign residents, digital nomads and investors about whether Panama still leaves foreign income untaxed.

This article summarizes what Law 526 introduces, which aspects of the territorial system it does not modify, and a point that often stays out of the conversation: its implementing regulation has not yet been published, which leaves several practical elements undefined.

What the law introduces: economic substance requirements

Law 526 added a new chapter to the Fiscal Code with economic substance requirements for certain passive income of foreign source. The regime is set to apply from tax period 2027.

Its logic aligns with international standards against base erosion: certain entities that receive passive income from abroad must show real substance in Panama —presence, staff, expenses, effective management— and not operate as mere conduit structures. According to the text of the law, an entity covered by the regime that does not show such substance over the income concerned could be subject to a 15% tax on net taxable income, starting in fiscal year 2027.

The implementing regulation has not yet been published

A law of this nature is applied through an implementing regulation —the executive decree that develops it— which is what sets out what matters in practice: the exact scope of the regime, which entities are covered and which are excluded, how substance is demonstrated, what documentation is required, the procedures and deadlines, and the criteria by which the General Directorate of Revenue will interpret and enforce it.

As of the publication date of this article, that regulation has not been issued. Until it is, several aspects of the regime remain undefined, and conclusions about how it will affect a specific structure are necessarily preliminary. This is a relevant fact when assessing any decision: it is worth distinguishing between what the law already establishes and what will still depend on its regulation.

What Law 526 does not change

Beyond the pending regulation, the text of the law makes its limits clear. Law 526 does not alter the following:

• The territorial exemption for individuals. The principle that foreign-source income of natural persons is not taxed in Panama was not repealed.
• The investment-residency programs. The Qualified Investor Visa, the Friendly Nations Visa and the other investment-residency routes remain in force, unchanged by this law.
• The universe of covered entities. Not all Panamanian companies or foundations are included; the regime targets a limited set, not just any structure.

In practical terms, the appeal of the territorial system for individuals remains. The change is concentrated on the treatment of certain corporate structures, not on the taxation of resident individuals.

Which entities does the regime target?

Based on the text of the law, the economic substance regime is aimed mainly at entities that are part of multinational groups and that receive certain passive income of foreign source. It is not designed for the individual resident living off their investments, nor for the family using a Panamanian foundation for asset protection and succession. The fine scope —limits, exceptions and definitions— will be set by the regulation.

For that reason, the useful question is not "do I have a Panamanian structure?" but "could my specific structure fall within the scope of the regime?" The answer is technical, depends on the facts of each case, and will only be definitive once the complete regulatory framework exists.

Entry into force and potential impact

The regime is set for tax period 2027. For structures that ultimately fall within it, failing to show substance over the foreign passive income concerned could lead to the 15% tax on net taxable income mentioned above. Its concrete application, however, will depend on the criteria set by the regulation, so the window until 2027 is also the natural period to monitor its publication and organize the relevant documentation.

Frequently asked questions

Does Law 526 eliminate the exemption on foreign income?

Not in general. The territorial exemption for individuals remains in force. The law introduces substance requirements for certain foreign passive income of specific entities.

Are the compliance rules already defined?

Not fully. The regulation that sets out the scope, documentation and procedures, as well as the enforcement criteria, is still missing. Until then, analyses of specific cases are preliminary.

Does it affect the Qualified Investor Visa or Friendly Nations?

No. Investment-residency programs are not affected by Law 526, nor is the territorial exemption for individuals.

From when does the regime apply?

It is set for tax period 2027, although its practical application depends on the regulation that has not yet been published.

For more on estate planning with these structures, see the guide on the private interest foundation in Panama.

The application of Law 526 depends on the pending regulation and on the facts of each structure. For an assessment tailored to a particular situation, guidance from a professional in Panamanian tax law is advisable.

This content is informational and general in nature; it does not constitute legal or tax advice. Law 526 is pending its implementing regulation, so its application may be clarified or change once the regulation is published. Consult your situation with a professional.