Costa Rican Companies with Holdings in Panama Will Have Tax Obligations on Dividends, Interest, and Royalties

Starting in 2027, Costa Rican companies that hold operations in Panama will be subject to new tax regulations on their passive income, including dividends, interest, and royalties. This change is driven by Panama's new Economic Substance Law, which mandates that multinational groups demonstrate tangible economic activity to avoid a 15% tax.

To comply with the law and prevent the imposition of the 15% tax on passive income, companies must prove they have adequate economic substance. This includes maintaining sufficient personnel, operating from physical offices, and conducting real business activities within Panama. The law is designed to ensure that companies are not merely using Panamanian structures for tax avoidance but are genuinely engaged in economic operations.

The legislation aims to enhance transparency in financial dealings and prevent distortions in public debate that can arise from opaque corporate structures or anonymity. By requiring proof of economic substance, Panama seeks to align its tax regulations with international standards and ensure that multinational corporations contribute fairly.

Gustavo Ortega Campos, a journalist with a Master's in Communication and Journalism and extensive experience in economics reporting, contributed to the article. The publication notes that comments on the article are reserved for subscribers, promoting transparency and a more informed discussion.