Panama has a civil law legal system, ie, it is primarily based in written laws and legal codes. The highest norm is the Political Constitution of Panama, enacted in 1972. Panama recognises conventionality control; hence ratified international treaties are recognised at the same level as the Constitution.

After the Constitution, Panamanian law recognised the legal codes, law, decrees, executive decrees, resolutions and ordinances as binding laws.

Judicial order in Panama is structured as follows, from highest to lowest dependency:

• the Supreme Court of Panama;
• superior courts; and
• lower courts.

Each of these hears cases in accordance with its specific faculties and area of law.

Generally, foreign direct investment in Panama does not require prior governmental authorisation. The country maintains a liberal and investor-friendly legal framework that encourages foreign participation across most sectors of the economy. Foreign investors are generally granted the same rights and protections as domestic investors.

Nevertheless, certain sector-specific restrictions and regulatory exceptions may apply, depending on the nature of the activity or industry in which the investment is made. These limitations are typically related to national security, public interest or activities reserved exclusively for Panamanian nationals under applicable laws.

In Panama, foreign investors are generally not required to obtain prior authorisation to conduct business. However, certain regulated sectors do require specific approvals or licences, including financial services, banking and insurance, public utilities such as telecommunications, electricity and broadcasting.

If a foreign investor engages in a regulated activity without obtaining the necessary authorisation from the competent Panamanian authorities, they may be subject to administrative sanctions, including fines and the potential closure of their business operations. The applicable procedures and timelines for enforcement vary depending on the nature of the activity and the regulatory body overseeing the sector, as not all industries fall under the jurisdiction of the same authority.

Panamanian legislation imposes certain nationality-based restrictions on foreign investment in specific sectors. For example, only Panamanian nationals are permitted to practise liberal professions, such as law and medicine, in accordance with constitutional and regulatory provisions.

Although a foreigner may own a business in Panama, it is important to note that the Political Constitution of the Republic of Panama reserves retail trade to Panamanian nationals or to legal entities whose shareholders are Panamanian nationals. Retail trade is understood as the sale to consumers or the representation or agency of manufacturing or commercial companies, or any other activity that the law classifies as falling within such trade.

Furthermore, foreign investors seeking to operate in regulated sectors ‒ such as financial services, banking and insurance ‒ must obtain the appropriate licence from the relevant supervisory authority, such as the Superintendency of Banks or the Superintendency of Insurance and Reinsurance.

In the case of public utility services, including telecommunications, electricity, and broadcasting, investors are required to obtain a licence from the Public Services Authority (ASEP) prior to commencing operations.

Failure to comply with these licensing and regulatory requirements may result in administrative sanctions, including fines and the potential suspension or closure of business operations.

Foreign investors will have the opportunity to challenge the decisions made by the authority. At first instance, the foreign investor can appeal and request that the authority reconsider its decision. The next steps will depend on which authorities are responsible for authorising the investment.

Panama offers a flexible and investor-friendly legal framework for the incorporation of business entities. The two most commonly used corporate structures are Limited Liability Companies (LLCs or S. de R.L.) and Corporations (S.A.).

Limited Liability Companies

Governed by Law No 9 of 2009, LLCs require a minimum of two partners, who may be natural or legal entities. Contributions may be made in cash, in kind, or through services, with in-kind contributions required to be fully paid. While no minimum capital is mandated, a recommended amount of USD10,000 is suggested for registration purposes.

In an LLC, partners’ liability is limited to the amount of their contributions. LLCs may engage in any lawful civil or commercial activity. The Partners’ Assembly is the supreme governing body and may delegate authority to an Administrator or designated officers.

Corporations

Regulated by Law No 32 of 1927, corporations require at least two subscribers, three directors, and the appointment of officers and a legal representative. A minimum of one shareholder is required. While no minimum capital is mandated, USD10,000 is recommended for registration; this amount does not need to be paid to any entity or deposited in a bank.

Corporations are favoured for their shareholder anonymity, which may only be lifted by court order in cases involving unlawful activity. They are widely used for holding structures, real estate investments and cross-border operations, offering advantages in governance, tax planning and liability separation.

The Board of Directors manages the company’s affairs, while the Shareholders’ Meeting serves as the highest decision-making body.

Before proceeding with the incorporation of an entity in Panama, it is necessary to understand the purpose and the operation of the company, for example whether it will be an operative or non-operative entity and whether it will be an onshore or offshore entity. The incorporation of a legal entity in Panama follows the following steps.

Due Diligence (KYC)

In accordance with Law No 23 of 2015 and its modifications, it is mandatory to conduct KYC procedures to verify client identity and ensure compliance with anti-money laundering and counter-terrorism financing regulations, prior to the incorporation of the entity.

Notarisation and Registration

After completing the KYC with positive results, the articles of incorporation must be formalised before a Notary Public and registered with the Public Registry of Panama, along with payment of the corporate annual tax and registration fees. The process typically takes two to three business days.

Tax Registration

Once the company is registered in the Public Registry of Panama, a Tax Identification Number (RUC) must be obtained from the Panamanian Tax Authority (DGI). This obligation must be complied with by all entities governed by Panamanian law, regardless of whether the entity conducts operations in the country.

Commercial Licence

To operate commercially, a Notice of Operation or Commercial Licence must be obtained, depending on the business activity, in accordance with the International Standard Industrial Classification (ISIC). Certain activities are exempt, such as liberal professions. A Commercial Licence is only mandatory for those companies that will operate within or from Panamanian territory.

Municipal Registration

All operative companies must register with the Municipality where they are domiciled. Companies will pay the municipality annual taxes for the activities rendered, as well as taxes for publicity purposes.

After complying with this process, a company could be registered in Panama in four to seven business days.

Panamanian companies are legally required to report any changes to their corporate structure ‒ such as modifications to share capital, corporate purpose, registered address, board of directors, or legal representation ‒ by formalising such changes through a public deed and registering them with the Public Registry of Panama.

Entities operating in regulated sectors (eg, banking, securities) must disclose financial and shareholder information in accordance with sector-specific laws. In contrast, companies in non-regulated sectors (eg, real estate) are only required to disclose such information upon request by a competent authority during formal investigations.

Regarding beneficial ownership, Limited Liability Companies disclose their partners by default. Corporations, while benefiting from shareholder anonymity, must still report their ultimate beneficial owners through their resident agent to the Beneficial Ownership Registry, managed by the Superintendency of Non-Financial Entities, pursuant to Law No 23 of 2015 and Law No 129 of 2020.

This Registry is confidential and accessible only to competent authorities under specific legal circumstances, such as investigations related to money laundering or terrorism financing. Failure to comply with the disclosure of the beneficial owner, whether during the incorporation procedure or after any subsequent modifications, can lead to penalties as well as the resignation of the registered agent.

Corporate Governance in Panamanian Entities

In Panama, Corporations are governed by two main bodies: the Shareholders’ Meeting, which is the supreme authority, and the Board of Directors. Both bodies are required to issue prior notices for meetings, although such notice may be waived before or after issuance. These bodies typically operate independently, with the Shareholders’ Meeting issuing directives or delegating authority to the Board.

Each shareholder is entitled to one vote per share, whether the shares are registered with or without par value, or bearer shares ‒ provided the bearer presents the share certificate or complies with the bylaws.

The Board of Directors, composed of at least three individuals, is responsible for the management and administration of the company. It appoints officers (President, Secretary, Treasurer, etc) and may amend the bylaws unless otherwise restricted.

Corporations also designate a Legal Representative, who holds judicial and extrajudicial authority to represent the company before third parties.

In Limited Liability Companies, the supreme body is the Partners’ Assembly, which may adopt resolutions in writing, whether the partners are present or not. This body directs the company, appoints or removes managers, and may amend the bylaws.

The Manager, who may be one or more individuals appointed by the partners, is responsible for the company’s administration, convening partner meetings, and maintaining the partners’ registry and corporate minutes.

Under Panamanian law, directors are subject to limited liability but remain personally and jointly responsible for the diligent and lawful administration of the company. This duty applies both to the company and to third parties and is recognised in the legal framework governing both corporations and limited liability companies.

The piercing of the corporate veil is an exceptional legal mechanism, applicable only by court order and following due legal process. It allows authorities to disregard the company’s separate legal personality in cases of fraud or abuse, potentially extending liability to include criminal sanctions.

For instance, fraudulent insolvency or liquidation intended to defraud creditors may constitute a criminal offence under the Panamanian Criminal Code, punishable by five to ten years of imprisonment and disqualification from commercial activity.

These provisions reinforce the importance of transparency, good faith and legal compliance in corporate governance.

Panama’s labour law is protective of employees, as established in the Political Constitution, which recognise labour as both a right and a duty.

The legal system acknowledges the employee as the more vulnerable party in the employment relationship, warranting safeguards to ensure fair treatment.

Collective bargaining agreements require prior union recognition and aim to balance employer-employee relations.

While employment contracts are typically formalised in writing, Panamanian law presumes the existence of an employment relationship in favour of the employee even in the absence of a written agreement, where one person provides a service to another providing there is legal subordination and economic dependence.

The key characteristics of employment contracts include the following.

• Written form: employment contracts must be in writing, with certain exceptions such as domestic or agricultural work. Nevertheless, it is strongly recommended that all employment relationships be formalised in writing. This is particularly important considering that the Labour Code provides that, in the absence of a written contract, the facts alleged by the employee are presumed to be true. This legal presumption may be used by the employee to distort the facts, potentially placing the employer at a disadvantage ‒ or conversely, allowing the employer to impose excessive service obligations on the employee.
• Content requirements: the employment contract must include general information about both the employee and the employer, as well as details regarding the employee’s dependents or family members. It must clearly define the services to be rendered, the place of work, the type of employment term (fixed-term, indefinite, or for a specific project), the work schedule, and the date and place of execution. The contract must be signed by both parties.
• Formality: employment contracts must be submitted for endorsement to the Ministry of Labour and Workforce Development, or to the corresponding Regional Labour Directorate based on the place of execution. This process ensures that the contract complies with all legal requirements and is duly stamped by the relevant authority.

It is important to note that failure to comply with a written contract may trigger legal presumptions in favour of the employee. While an employment contract always governs and formalises a labour relationship, the existence of such a relationship does not depend on a written contract in order to be legally recognised.

Panamanian labour legislation does not establish a minimum number of working hours, which allows employers the flexibility to hire employees on a part-time or reduced-hour basis. However, the law does set a maximum working schedule, reflecting the principle that work must be compatible with the rest and well-being every human being requires. Maximum hours depend on the type of work schedule, as follows.

• Daytime work shifts: a maximum of eight hours per day and 48 hours weekly.
• Nighttime work shifts: a maximum of seven hours per day and 42 hours weekly.
• Mixed work shifts: a maximum of seven and a half hours per day and 45 hours weekly.

Nighttime and mixed work shifts are paid for as a daytime work shift.

Overtime Regulation

Overtime refers to any hours worked beyond the employee’s regular schedule. Overtime is regulated as follows.

• Voluntariness: overtime must be voluntary. While the employer may request additional hours, the employee must agree to provide the service beyond their regular schedule. The employee is not obligated to accept unless specific exceptions apply ‒ such as emergencies, imminent risks to human life, or threats to the existence of the company or project. Collective bargaining agreements may also impose mandatory overtime in certain cases.
• Employer authorisation: overtime must be expressly/or tacitly authorised or requested by the employer. If an employee continues working beyond their regular hours without such authorisation, the employer could impose disciplinary measures on the employee.
• Meal breaks must be respected: employees are not required to work during their designated meal or rest breaks. If an employee is on a lunch break, the employer cannot demand that this time be used for overtime work.
• Recordkeeping and compensation: overtime hours must be recorded and compensated according to the time of day they are worked. Examples include:
1. day shift overtime: a 25% surcharge on the regular hourly wage up to 6.00pm;
2. night or extended mixed shift overtime: a 50% surcharge;
3. extension of the night shift or mixed shift that begins during the night period: 75%; and
4. holiday or mandatory rest day overtime: a 150% surcharge applies.

Humanitarian Limits

For humanitarian reasons, there are limits to the number of overtime hours an employee may work: a maximum of three hours per day and nine hours per week. If these limits are exceeded, the employer must pay an additional 75% surcharge

There are also restrictions on overtime for minors under the age of 16, pregnant employees and for jobs that are inherently hazardous or unhealthy.

Termination of individual employment contracts is strictly regulated under the Labour Code and must fall within specific legal grounds, including death of the employee or employer, expiration of a fixed term, completion of a specific project, mutual consent, legal impediment, justified dismissal, or unjustified dismissal.

Justified Dismissal

Justified dismissal is permitted for disciplinary, non-attributable or economic reasons. Employers must follow due process, which includes a written notice to the employee clearly describing the circumstances of the manner, time, and place of the alleged fault committed by the employee.

Unjustified Dismissal

Unjustified dismissal is allowed under the Panamanian Labour Law; however, in addition to the acquired labour rights and severance, the following must be paid: 

• for permanent employees with less than two years of service, one month of salary in lieu of notice; and
• for permanent employees with more than two years of service, three months of accrued wages, and 25% in compensation if the company is not up to date with contributions to the unemployment fund.

Mutual Consent

Mutual consent must be in writing and cannot involve the waiver of acquired rights. Coercion is not acceptable, and the employee has the right to refuse the employer’s offer.

Resignation

Resignation can be voluntary or justified. In the case of resignation, the employee must issue a letter of resignation duly stamped by the Ministry of Labour; for voluntary resignation, 15 days’ notice must be given to the employer. 

Severance and Seniority Premium

All employees with an indefinite employment contract are entitled to receive a seniority premium of one week’s salary per year of service or its proportional amount, regardless of the reason for termination.

Severance compensation for employees with an indefinite employment contract who started employment after 14 August 1995 is calculated as follows:

• 3.4 weeks for every year worked or its proportional amount, during the first ten years; and
• every year thereafter shall be compensated with one week’s wages for every year of service.

Severance compensation for employees with an indefinite employment contract who started employment before 14 August 1995 is calculated as follows.

• For less than one year of service, compensation is equivalent to one week’s salary for every three months worked. Compensation must not be, in any case, less than one week’s salary.
• For a labour relationship of one to two years, compensation is equivalent to one week’s salary for every two months worked.
• For a labour relationship of two to ten years, compensation is equivalent to three weeks’ salary for each year worked.
• For a labour relationship exceeding ten years, compensation is equivalent to one week’s salary for each year worked.

For employees hired under a fixed-term contract, when the employment relationship is terminated without justified cause before the expiry of the employment contract, the employer will be legally obliged to pay the employee severance equivalent to the remaining salaries due until the end of the employment term.

Collective Dismissal

Collective dismissal is permitted for economic reasons such as bankruptcy, reduced production, or depletion of resources, but requires prior authorisation from the Ministry of Labour. If no decision is issued within 60 days, the dismissal is deemed justified by law. The Ministry may intervene to protect employees and ensure business continuity.

If company assets are insufficient to cover labour obligations, the Ministry is responsible for determining and overseeing the liquidation of assets to satisfy employee claims.

In Panamanian labour law, employees are not required to be represented by any individual or entity. However, if a labour union exists and the employee is affiliated with it, the union is authorised to represent the employee before the employer and/or the administrative labour authority.

If an employer intends to make decisions that collectively affect the workforce and a union is present, such matters must be submitted to the union for review. Furthermore, if the employer wishes to modify any terms previously established in a collective bargaining agreement, such changes must be negotiated with the union(s) representing the employees.

The union also has the right to negotiate a new collective bargaining agreement with the employer. The union, or a unified group of workers seeking to negotiate employment conditions or a collective agreement, must submit a written request addressed to both the employer and the administrative labour authority. If no agreement is reached, the labour authority may intervene to facilitate conciliation. Should conciliation fail, the workers have the legal right to initiate a strike. If both parties reach an agreement, a collective bargaining agreement will be executed.

Based on their employment relationship, both the employee and the employer, are subject to income tax, social security’s contributions and educational tax.

Income Tax

The employer is obligated to withhold income tax on behalf of the employee and remit it to the Panamanian Tax Authorities. The Panamanian legislation establishes that individuals will be subject to income tax at a progressive rate, as follows.

• An employee earning a salary of up to USD11,000 is exempt from paying income tax.
• An employee earning a salary ranging from USD11,000 to USD50,000 is subject to a 15% tax rate on the surplus.
• An employee earning a salary exceeding USD50,000 will be subject to a tax of USD5,850 for the first USD50,000 and a 25% rate on the surplus.

Social Security

The employer and employee are subject to the paying social security. Employers must contribute 13.25% of the salary of each employee, and employees must contribute 9.75%. With the recent change in law, the percentage of contribution by the employer will rise to 15.25% of the salary of each employee.

Additionally, the law provides for the payment of professional risk insurance which must be paid by the employer at a rate of 0.56% up to 5.67%.

Educational Tax

The educational tax is divided between the employer and the employee, with the employer being obliged to contribute 1.50% of the employee’s salary and the employee contributing 1.25% of their salary.

Both social security and educational tax contributions should be withheld by the employer.

Companies operating in Panama may be subject to several taxes, including the following.

• Corporate Income Tax: companies must pay a 25% tax on their net taxable income.
• Dividend Withholding Tax: when a company distributes dividends or profit shares to its shareholders or partners, it must withhold:
1. 10% if the income is from Panamanian sources; and
2. 5% if the income is from foreign or tax-exempt sources (eg, export activities).
• Complementary Tax: if a company is subject to dividend tax but does not distribute at least 40% of its after-tax income, it must pay a 4% complementary tax on its net earnings. If the applicable dividend withholding rate is 5%, and the company distributes less than 20% of its after-tax income, the complementary tax is 2%.
• Withholding Tax on Payments to Non-Residents: payments made by Panamanian companies to non-residents for services, royalties, licences, or similar charges are subject to a 12.5% withholding tax, provided the expense is deductible for income tax purposes in Panama.
• Value Added Tax (VAT): VAT applies to imports, transfers of tangible goods located in Panama, and services rendered within Panama, regardless of where the contract is signed or where the payment originates. The standard VAT rate is 7%.
• Passive foreign-source income: Law No 526 of 2026 introduces an exceptional tax regime applicable to certain categories of passive foreign-source income when such income is received by entities incorporated under Panamanian law, which are members of multinational groups, and which fail to demonstrate that they possess adequate economic substance in the Republic of Panama. It provides for the application of a 15% rate on the net taxable income for the relevant fiscal period, without giving rise to any additional tax, without prejudice to the provisions contained in Article 733 of the Fiscal Code.

Panama has a number of special regimes which offer a variety of tax credits and incentives designed to attract foreign investment, promote economic development and support specific industries. Some of these regimes are outlined below.

Free Trade Zones

Free Trade Zones are designated areas within Panama where domestic and foreign companies can establish operations in different sectors, including higher education centres, scientific research centres, specialised centres for the provision of health services, high-tech enterprises, assembly enterprises, finished or semi-finished product processing enterprises, service enterprises, environmental service companies, general service companies, logistics service companies, and manufacturing companies.

Currently, there are 16 Free Trade Zones in Panama and six in development, focusing on various industries. Companies established in the Free Trade Zones can benefit from tax, immigration and labour incentives.

Colón Free Zone

The Colón Free Zone is a free trade zone located at the Atlantic entrance of the Panama Canal. Companies established in the Colón Free Zone are primarily dedicated to the international purchase and sale of merchandise, forming a distribution centre from Asia to countries in South America, the Caribbean and Central America.

The most common activities of companies established in the Colón Free Zone are the import, export and re-export of merchandise received in large, duty-free volumes, which is subsequently repackaged, labelled, assembled, manufactured and reshipped in smaller quantities to customers.

The Colón Free Zone offers tax, immigration, labour and corporate advantages to companies establishing themselves in this zone. Some of the tax benefits are tax exemption on imports, re-exports, and manufacturing goods, tax exemption on re-export income, etc.

Panama Pacifico Regime

The Panama Pacifico Regime supports the development of an international business centre, attracting large multinational companies, logistics services companies, various commerce and general industries. The main objective of this regime is to attract foreign direct investment and create jobs in Panama. The Panama Pacifico Regime offers customs, immigration, labour and tax benefits to companies involved in logistics, maritime and airport services, high technology, call centres and shared services, among others.

The development of economic activities under the Panama Pacifico Regime will be open to nationals and foreigners. The requirements, criteria and review procedures for registration applications will be applied in a fair, transparent and equitable manner to all applicants, through non-discriminatory commercial treatment, respecting the principles of free competition and free market access.

Multinational Companies Headquarters (SEM) Regime

The SEM regime aims to encourage multinational business groups to establish their reginal and global operations centres in Panama. The Multinational Companies Headquarters is an office with management control in the region, providing services from Panama to related companies (parent, subsidiaries or affiliates) in other countries.

To apply to this regime, the company’s business group must have assets equal to or greater than USD200 million; or must provide services to at least seven subsidiaries of the group. The SEM regime offers tax, immigration and labour benefits. In terms of immigration and labour benefits, there is no limit on the hiring of foreigner workers under the SEM regime. Expatriates will be exempt from income tax, mandatory social security affiliation and are eligible for a special SEM visa. Moreover, the SEM regime grants a fixed income tax rate of 5%, services provided to business groups are exempt from VAT, and there is an exemption from paying withholding dividend tax and complementary tax.

Multinational Companies for the Provision of Services Related to Manufacturing (EMMA)

Companies, whether foreign or domestic, can apply to the EMMA regime, provided they operate from Panama to provide services to their parent company or to their subsidiaries, affiliates, or companies associated with entities of the same group.

These companies must provide services related to:

• manufacturing, assembly, maintenance and conditioning products, machinery and equipment, product development, research, or innovation;
• analysis, laboratories, testing, or other services related to manufacturing; and
• logistics such as storage, deployment, and distribution centres for components or parts.

Any company interested in applying for the benefits granted by this special regime must apply for the relevant licence from the Technical Secretariat of the Multinational Enterprise Licensing Commission.

By holding a licence under the special regime for the establishment and operation of multinational companies for the provision of manufacturing-related services, the company enjoys a series of immigration, labour and tax benefits. Moreover, the SEM regime grants a fixed income tax rate of 5%, services provided to business groups are exempt from VAT, and there is an exemption from paying withholding dividend tax and complementary tax.

City of Knowledge

The City of Knowledge is an international community made up of academic organisations, technology companies, and non-governmental organisations. The City of Knowledge is a knowledge platform focused on enhancing the innovative and competitive capabilities of the conglomerate’s users. It also facilitates access to a series of benefits and services tailored to user needs.

This regime grants tax benefits such as:

• exemption from all taxes, contributions, rates, or import duties on machinery, equipment, furniture, vehicles, artifacts, and supplies necessary for the development of the project;
• exemption from the Tax on the Transfer of Personal Property (local VAT) on machinery, equipment, vehicles, artifacts, and supplies acquired and necessary for the development of the project;
• exemption from the Real Estate Tax on property of this nature owned by City of Knowledge;
• exemption from any tax, fee, duty, or levy levied on the remittance of funds abroad, when such remittance or transfer of funds is carried out for the purposes of the project; and
• innovative companies that produce, assemble, or process high-tech goods or provide similar services in technology parks that may be destined for sale in the local or international market will enjoy the following benefits:
1. their activities, operations, transactions, procedures, and transfer of movable and immovable property, the purchase and import of construction equipment and materials, raw materials, equipment, machinery, tools, accessories, supplies, and all goods or services required for their operations, including capital, will be exempt from direct national taxes, including taxes on patents or licences.

In Panama, tax consolidation is not available or applicable, as it is in order jurisdictions. In Panama, each operative company is obliged to prepare and file the income tax return and pay the corresponding taxes.

Currently, in Panama there are no capitalisation rules or exact equivalent rules. However, Panama has adopted Transfer Pricing rules, under the local legislation. There is also a restriction on the interest deductibility, ie, only interest related to the operation of the business is deductible. If the loan is used for investments outside of Panama, the interest will not be deductible.

Panama applies transfer pricing rules. Cross-border intercompany transactions conducted by Panamanian taxpayers are subject to transfer-pricing obligations if the transactions result in income, costs or expenses that are considered in the determination of taxable income.

The transfer pricing rules are based in the arm’s length principle established in the Organization for Economic Co-operation and development (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.

An annual statement of transactions (Form 930) with related parties must be submitted to the tax authorities within six months of the end of the fiscal year. In addition, taxpayers must prepare a transfer pricing study and make it available to the tax authorities. If the Form 930 is not filed, a 1% fine capped at USD1 million applies to the gross amount of the transactions with related parties.

According to the Tax Procedure Code, the Panamanian Tax Authorities may disregard the adoption of legal forms when premeditated acts are carried out with the sole purpose of avoiding the payment of taxes or obtaining some type of tax advantage, thereby violating the obligation to contribute with sufficient will and knowledge.

Moreover, Panamanian legislation defines tax avoidance as the performance of acts or transactions for a purpose other than that established by law, and with no justification other than to reduce the tax burden of the person performing them, including to obtain undue tax credits, or, in general, some tax benefit in violation of the tax law.

Currently, Panama uses the Harmonized System (HS) to classify goods, and a large portion of products have low or zero tariffs. Panama participates in free trade agreements, such as the Trade Promotion Agreement with the USA and the Agreement with the EU, allowing for preferential tariffs.

In Panama, the highest tariffs apply to agricultural products and some industrial goods, and the tariffs applicable can range from 15% to 30%.

Under the Consumer Protection and Competition Defense Law, mergers and acquisitions must be notified in cases that qualify as an economic concentration. To be considered as such, the merger or acquisition must occur between suppliers or potential suppliers, customers or potential customers, or other economic agents that are actual or potential competitors.

When assessing the impact, consideration may be given to whether the merger or acquisition promotes or includes, as part of its objectives, the increase in production or distribution of goods and/or services in the local or global market, stimulates technical or economic progress, or fosters the competitive development of an industry or sector. In such cases, the benefits must be verifiable.

Economic concentrations whose effects are or may be detrimental to free economic competition in the country are prohibited.

However, the notification system in Panama is voluntary and not mandatory to complete a transaction. Nevertheless, if an economic concentration has not been the subject of prior verification, the Authority might initiate an investigation within three years following the closing date of the transaction.

In Panama, there is no specific statutory deadline for the notification of mergers and acquisitions under the framework of competition and consumer protection law.

The economic agent may submit a notification of the economic concentration to the authority prior to its entry into effect ‒ that is, before the merger or acquisition is completed.

The interested party must submit the notification in writing, accompanied by a copy of the relevant legal instrument, whether it concerns a merger or an acquisition.

Within 20 days of receiving the notification, the Consumer Protection and Competition Defense Authority may request additional documentation. The Authority then has 70 days from the date of receipt of the notification ‒ or from the date on which additional information or documents are received, as applicable ‒ to issue its resolution.

As part of the review process, the competent authority will examine the financial statements of the parties involved in the transaction, copies of relevant business valuation or investment projection documents, and a description of the goods and/or services produced or offered by each economic agent, among other requirements, to ensure that the economic concentration does not adversely affect the market.

In this regard, the authority will assess the market share of the participating agents within the relevant market in relation to their competitors and customers, the likelihood that the concentration may restrict free competition, or whether it may facilitate unilateral price increases without current or potential competitors being able to effectively counteract such market power.

Anti-competitive practices are regulated under Law No 45 of 2007 and include the following:

• any intentional or wilful act that creates confusion regarding the services or commercial or industrial activities of a competitor;
• any false statement made during trade that discredits the commercial or industrial activities of a competitor;
• any deceptive action intended to divert, for personal benefit or that of another, the clientele of a business or industry;
• any misleading indication that may confuse or deceive consumers regarding the origin, characteristics, production process, method of use, or the quality, quantity, or cost of a seller’s goods or services; and
• any other act that, by any means, results in a restriction of trade, a reduction in production aimed at increasing prices, or the establishment of uniform prices or rates for products and services, to the detriment of fair competition and consumer welfare.

Article 16 of Law No 45 of 2007 prohibits unilateral acts, combinations, arrangements, or agreements that have the purpose of unreasonably displacing other competitors or preventing their access to the market, in the following cases:

• between economic agents that are not competitors, the fixation, imposition, or establishment of the exclusive distribution of goods or services, by reason of the subject, geographic location, or for a determined period of time;
• the imposition or fixing of prices;
• the sale or transaction conditioned upon the purchase, acquisition, sale, or provision of another additional good or service;
• the sale or transaction being subject to the condition of not using or acquiring, selling, or providing goods or services produced, processed, distributed, or marketed by a third party;
• unilateral conduct consisting of refusing to sell or provide to certain people goods or services that are available and normally offered to third parties;
• any act that unreasonably damages or impedes the process of free economic competition and free market participation in the production, processing, distribution, supply, or commercialisation of goods or services; and
• any other cases set forth and regulated under Panamanian law.

Patents are granted to those inventions that are patentable subject matter and meet with the requirements of novelty and non-obviousness. The procedure is requested before the General Directorate of Intellectual Property (DIGERPI) accomplishing with all the required documents which, if the documents are issued abroad, must be duly apostilled and translated into Spanish by an authorised public translator.

Panama is a member of the Patent Cooperation Treaty (PCT), therefore international applications are allowed. During the national phase from a PCT application, the same requirements and procedure as with any other PCT member state will apply. There is no extension to the deadline for entering the national phase in Panama.

Protection Term and Supplementary Protection

Patents are granted for 20 years. This term is not extendible, unless the DIGERPI has incurred an imputable delay in the application process and the applicant files a request for supplementary protection within the six months of obtaining the patent.

If the application procedure lasts more than five years from the filling date or three years from the date of the request for a substantive examination, this will be considered an imputable delay to the PTO. Supplementary protection will depend on the specific case and delay and, in any case, will not be granted for more than seven years and six months.

Remedies

Patents grant the right to the rightsholder to prevent third parties from:

• manufacturing the product;
• promoting, offering for sale, using, importing or storing the product for any of these purposes, including when patented procedures are used to obtain a product; and
• use the patented process.

Panamanian law establishes civil and criminal remedies in the case of patent infringement. The civil procedure for patent infringement is handled under a special procedure established in the Industrial Property Law. The Criminal Code establishes a penalty of four to six years for patent infringement. While cease and desist letters are not binding or recognised by law, they are commonly used in practice and are acceptable.

Industrial property law has a wide scope when classifying distinctive signs that might be protected by trade marks such as words, images, 3D forms, colours, sounds, colours or flavours, indication of origin and geographical indications.

Application Process

Trade mark application is handled at the Directorate of Intellectual Property (DIGERPI). Since Panama is a member of the Trademark Law Treaty, the process does not require major formalities, for example a soft copy without any legalisation of the power of attorney is sufficient for the application. Availability searches are not mandatory, but are highly recommended.

After submitting application, it usually, takes between nine to 12 months to obtain a trade mark in Panama. The application will first undergo an examination of the form and subject matter requirements, during which the examiner can issue a request to amend the application or a rejection if there is a lack of subject matter or if the trade mark incurs one of the causes that impedes protection. In the case of a rejection, the applicant can request a reconsideration before the same examiner or appeal to the decision to the Minister of Commerce and Industry.

If no rejection or request to amend is filed, the application will be published for two months, which commences the opposition procedure. After publication, any third party that considers their right, whether registered or not, is affected by the application, has the right to file an opposition. Once an opposition is filed, this procedure will be resolved in the Judicial branch in the Commerce and Competition Courts. Opposition proceedings may take a minimum of one year to be resolved.

If there is no opposition within the opposition term, the trade mark will be granted for a period of ten years, renewable for the same period. Renewal must be done before the expiration date, if not a grace period of six months is granted. Failure to comply with this period will result in the expiration of the trade mark.

It is important to note that applicants might apply for a trade mark for a period of five years instead of ten years.

Special Registrations

Even though the trade mark registration is given by the PTO, it is important to also register the trade mark in key zones and authorities to proactively tackle counterfeit products within the commerce or importation, exportation or transit throughout Panama.

Registration of the trade mark title, as well as specimens of the products, with the Trade Zones and the National Authority of Customs enables entities to promptly identify counterfeit products and to stop them before they reach their destination or enter Panamanian commerce. Once the products are seized, the trade mark owner can start a counterfeit procedure in Panama. It is important to note that not having registered the trade marks in these authorities will not affect the ability of the trade mark owner to take measures against counterfeits, however, such a measure provides another source of enforcement.

Remedies

All remedies in Panama are resolved in the judicial branch in the Commerce and Competence Courts. Cease and desist letters are commonly used but not recognised by law. Trade mark owners are able to start procedures such as infringement procedures, cancellation actions for non-use and nullity procedures. Also, non-authorised use of a trade mark and/or copying constitute a crime under the Criminal Code, which could be subject to prosecution.

In Panama, industrial designs and models are recognised and protected under the Industrial Property Law.

These two categories differ primarily in their dimensional characteristics. Both are eligible for legal protection provided they meet the statutory requirements.

An industrial model refers to any three-dimensional form that serves as a prototype or pattern for the manufacture of an industrial product, giving it a distinctive appearance. Meanwhile, an industrial design, on the other hand, consists of any combination of figures, lines or colours incorporated into an industrial product for ornamental purposes.

To qualify for protection, both must meet the criteria of novelty and industrial applicability. If these conditions are met and the design or model has been disclosed without prior registration, it will be granted a protection period of three years from the date of its first disclosure in Panama, what is known as unregistered industrial designs.

Additionally, protection may be obtained through formal registration, which grants exclusive rights for a period of ten years from the filing date in Panama. Upon request by the rights holder, this term may be renewed for an additional five years.

Copyright law is primarily focused on works of a literary, scientific or artistic nature. It is a declarative process rather than a constitutive one, meaning that rights arise from the creation of the work itself and not from its registration.

The duration of copyright protection depends on the type of work; however, as a general rule, it is recognised for the lifetime of the author and for 70 years following their death.

All remedies in Panama are resolved in the judicial branch in the Commerce and Competence Courts. Cease and desist letters are commonly used but not recognised by law. Copyright owners are permitted to start infringement proceedings in the civil and criminal branch.

The intellectual property protection applicable to software in Panama is governed by Law No 64 of 10 October 2012. This statute regulates copyright and related rights. Chapter II of the Law specifically addresses computer programs (software) and provides that they are protected under the same terms and conditions applicable to literary works. Furthermore, the Law establishes that such protection extends to any successive versions of the software, as well as to any derivative works created from it.

In addition, Law No 35 of 10 May 1996, which establishes provisions relating to industrial property, provides in Article 1 that one of its purposes is the protection of, among other rights, industrial and trade secrets.

In this regard, Title IV of said Law, entitled “Industrial and Trade Secrets,” provides that an industrial or trade secret is any information of an industrial or commercial nature that is maintained as confidential by a natural or legal person, which enables such person to obtain or maintain a competitive or economic advantage over third parties in the conduct of business activities, and with respect to which sufficient measures or mechanisms have been adopted to preserve its confidentiality and restrict access thereto. 

Data protection is regulated under Law 81 of 2019, which is further regulated by the Executive Decree 285 of 2021. Data privacy laws in Panama describe data as any source of information that identifies or makes identifiable a natural person. The scope of application applies either to public and private entities, whether they are lucrative or not, as well as any other person involved in data treatment.

Scope of Application of the Data Privacy Law

The Data Privacy Law applies to all databases domiciled in the Republic of Panama, as well as to any processing activities carried out by data controllers domiciled in Panama. The Law establishes the guiding principles, data subject rights, lawful bases for processing, rules on data transfers, and exceptions applicable to the processing of personal data.

Lawful Bases for Data Processing

The processing of personal data shall be deemed lawful if it is based on one of the following legal grounds:

• the data subject expresses consent;
• processing is necessary for the performance of a contract to which the data subject is a party;
• processing is necessary for compliance with a legal obligation to which the data controller is subject; or
• processing is authorised by a special law or by regulations issued pursuant thereto.

Data Subject Rights (ARCO Rights)

Panamanian legislation recognises the following rights of data subjects, commonly referred to as ARCO rights.

• Right of Access – to obtain confirmation as to whether personal data concerning them is being processed and to access such data.
• Right to Rectification – to request the correction of inaccurate or incomplete data.
• Right to Erasure (Cancellation) – to request the deletion of data when it is no longer necessary or is being processed unlawfully.
• Right to Object – to object to the processing of their data on legitimate grounds.
• Right to Data Portability – to receive their personal data in a structured, commonly used, and machine-readable format and to transmit it to another controller.

The data controller must ensure that the exercise of these rights is facilitated in a free and easily accessible manner. Depending on the nature of the request, the controller must respond within five to ten business days.

Data Transfers

The transfer of personal data, whether domestic or cross-border, is permitted if it is carried out under one of the lawful conditions established by law. These include, among others:

• the data subject’s consent;
• the recipient country ensures an adequate or higher level of data protection; and
• the transfer is made to an entity within the same corporate group as the data controller, provided that the purpose of the processing remains the same.

In the case of intra-group transfers, it is essential to implement appropriate safeguards to ensure compliance with data protection regulations. Such measures may include maintaining records of transferred databases, adopting Binding Corporate Rules (BCRs), or implementing other enforceable self-regulatory mechanisms.

Unlike other jurisdictions, Panamanian data protection regulations apply exclusively to databases domiciled within the territory of the Republic of Panama or in cases where the data controller is domiciled in Panamanian territory.

However, it is important to note that the protection of personal data is also enshrined at the constitutional level, through the recognition of the right of access to information, the inviolability of correspondence, and the constitutional remedy of habeas data.

Failure to comply with personal data protection provisions may result in administrative fines ranging from USD1,000 to USD10,000.

In Panama, the competent authority responsible for overseeing compliance with data protection regulations is the National Authority for Transparency and Access to Information (Autoridad Nacional de Transparencia y Acceso a la Información – ANTAI), acting through its Directorate for the Protection of Personal Data.

This entity plays a fundamental role in monitoring adherence to data protection laws and holds administrative sanctioning powers to enforce compliance.

By means of Law No 508, dated 12 February 2026, the approval of the agreement between the government of the Republic of Panama and the government of the Republic of Ecuador for the exchange of information on tax matters (hereinafter, “Law No 508 of 2026”) was enacted.

Among the information contained in Law No 508 of 2026 that the authors consider to be of relevance, the following may be noted.

• All information that is foreseeably relevant for the determination, assessment, and collection of taxes, the recovery and enforcement of tax claims, or the investigation or prosecution of tax-related matters.
• The applicable taxes in accordance with each jurisdiction are as follows:
1. Republic of Panama: all national taxes. Notwithstanding the foregoing, this shall not apply to taxes imposed by municipalities or other political subdivisions.
2. Republic of Ecuador: Income Tax and other taxes whose collection is the responsibility of the Central Government.

• This Agreement shall have effect with respect to tax matters for all fiscal periods commencing on or after 1 January of the calendar year immediately following its entry into force. Notwithstanding the foregoing, the contracting states may request information relating to the six fiscal years preceding the date of entry into force of the Agreement.