PANAMA Law and Practice Contributed by: Anna Cristina Valdés, Edgar Herrera, José Manuel Motta and Ramón Arias, Galindo, Arias & López
Galindo, Arias & López Scotia Plaza, Floor 11 Federico Boyd Avenue and 51st Street
0816-03356 Panamá Republic of Panamá Tel: +507 303-0303 Email: gala@gala.com.pa Web: gala.com.pa
1. Sources and Principles 1.1 Domestic Sources of International Tax Law International tax law in Panama is shaped by three main sources: • legislation; • administrative regulations; and • constitutional principles. Together, these sources define the framework for cross-border taxation, treaty application and interna - tional tax compliance. Legislation The primary statutory framework is contained in Law 8 of 1956 (Fiscal Code), as amended, which establishes the foundations of the Panamanian tax system. Given that the cornerstone of the Panamanian tax system is the territoriality principle, the legislation regulates: • the taxation of Panamanian-source income; • withholding tax obligations on cross-border pay - ments; • transfer pricing rules; • definitions of tax residence and permanent estab - lishment; and • procedures applicable to international transactions, among others. Panama has also incorporated international standards through specific amendments to its tax legislation, particularly in response to OECD and BEPS develop - ments.
Tax Administrative Regulation The Panamanian Tax Authority issues administrative resolutions for guidance on interpreting and clarifying the application of domestic tax law in international matters. These regulations commonly address pro - cedures for requesting treaty benefits, transfer pricing compliance and adjustments, and the issuance of tax residence certificates. While administrative regulations do not override statu - tory law, they play a significant role in shaping compli - ance and enforcement standards. Constitutional Principles The Political Constitution of the Republic of Pana - ma plays a fundamental role in the international tax framework, guaranteeing principles such as legality of taxation, equality and due process. Furthermore, the Constitution establishes the hierarchy of legal norms, under which international treaties approved and ratified by Panama rank above ordinary legisla - tion. Consequently, tax treaties prevail over domestic tax legislation in case of conflict. Panama has developed a strategically targeted treaty network, designed primarily to support its position as an international services and logistics hub. Panama - nian tax treaties are generally based on the OECD Model Tax Convention, but adapted to reflect Pan - ama’s territorial taxation system. The Panamanian treaty network includes agreements with countries in Europe, Latin America, the Middle East and Asia.
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