IMPORTANT – Law 526 of 2026: Economic Substance Requirements for Foreign-Source Passive Income

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Category: Labor and employment

  • Permanent Work Permit in Panama

    PERMANENT WORK PERMIT IN PANAMA

    Who are eligible to apply?

    Foreigners with ten (10) years or more of legal residence in Panama may apply for an Permanent Work Permit.

    The ten-year period is counted from the date of the resolution issued by the National Immigration Service granting the Provisional Residence Permit.

    In addition to the general requirements, the applicant must submit:

    • An Immigration Movement Certificate.
    • Any of the following documents:
      • Employment letter and Social Security Fund (CSS) registration record.
      • Income Tax Return.
      • Business License (Notice of Operation) in a personal capacity.

    When a foreigner enters the country as a “minor,” the ten-year period is counted from the date of entry into the national territory, which must be established by the Certificate of Migration Status, including the general requirements.

    This permit is classified as equivalent to local labor, meaning that hiring such individuals does not count toward the foreign worker quotas established by the Labor Code. Therefore, for employment and payroll purposes, the holder of an Indefinite Work Permit is treated similarly to a Panamanian worker.

    Main Benefits

    The following are the main benefits:

    • It does not count toward the company’s foreign worker quota.
    • It expands employment opportunities.
    • It provides greater freedom in the workplace, as it is not tied to a specific employer.

    Limitations

    It is important to point out that even if considered local labor, the foreigner may not practice professions reserved by law exclusively for Panamanian nationals, nor those that require professional qualifications that they cannot legally obtain.

  • The Importance of Having Internal Work Regulations

    THE IMPORTANCE OF HAVING INTERNAL WORK REGULATIONS

    In accordance with the Labor Code, every company with 10 or more employees is required to adopt Internal Work Regulations.

    In this regard, the Internal Work Regulations sets out the mandatory conditions to which the employer and their employees must adhere in the context of the employment relationship.

    Among the advantages offered by Internal Work Regulations, the following are worth mentioning:

    • Creates rights and obligations for both employees and the employer.
    • Provides greater legal certainty by setting out clear rules governing the employment relationship.
    • Facilitates human resources management establishing procedures for vacations, leaves, leave of absence, disciplinary measures and other employment-related situations.
    • Facilitates standards on health and safety at the work place, establishing measures to mitigate these risks.
    • Establishes a works council for workplaces with 20 or more employees. The works council is the body within the company responsible for hearing disciplinary cases against employees; it is composed of two employer representatives and two representatives of unionised employees. If the company has no trade union, the employees shall elect their own representatives.

    In conclusion, Internal Work Regulations help to prevent labour disputes and workplace accidents; it is an essential tool for protecting the rights and obligations of both parties; and it strengthens human resources management, amongst other benefits.

  • Administrative Career in Panama: Merit-Based System or Bureaucratic Labyrinth?

    Administrative Career in Panama: Merit-Based System or Bureaucratic Labyrinth?

    Administrative Career in Panama: Merit-Based System or Bureaucratic Labyrinth?

    A Merit-Based System or a Bureaucratic Labyrinth?

    The idea of working for the Panamanian government often brings to mind a mix of job instability and good salaries. But is the Administrative Career a merit-based system, or simply a bureaucratic labyrinth?

    The answer to this question lies in the fundamental goals of the Administrative Career: To depoliticize public service and ensure that access, permanence, and promotion of public servants are based on merit, ability, and suitability. The purpose is clear: to have a professional, efficient, and skilled workforce that does not depend on the political-electoral cycle that occurs every five years.

    What benefits does the system offer?

    Accreditation in the Administrative Career is very attractive for public officials, as it gives them job security. Those who are accredited cannot be dismissed without a just cause and due process. Additionally, the system offers:

    • Competitive salaries.
    • Labor benefits.
    • Continuous training.

    Is accreditation in the Panamanian State Administrative Career truly transparent?

    Despite the objectives, it is often questioned whether the selection processes are truly objective or if political influences continue to weigh on the decisions. The accreditations aim to ensure that the personnel are technical and specialized, responding to the need for experts in crucial areas such as finance, law, health, education, and engineering. For this to work, it is crucial that the accreditation processes are evaluated by an independent body, with the participation of academia.

    The Administrative Career is vital for the government not to lose its institutional memory. Without it, the valuable “know-how” that the government invests time and resources in training would be lost. The idea is for accredited public servants to provide continuity to state programs and projects, regardless of the administration in office. This is crucial for the construction of a modern and efficient state.

     

    Gladys Bandiera Pittí Lawyer

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  • Importance of the Employment Contract in Panama

    Importance of the Employment Contract in Panama

    Importance of the Employment Contract in Panama

    The employment contract in Panama is essential to consolidate the labor relationship, between the employer and the employee. Its importance can be summarized in the following points:

    1. Legal requirement compliance: It is mandatory according to the Panama Labor Code and must be executed in writing at the beginning of the labor relationship.
    2. Defines rights and obligations: It establishes the conditions of employment, protecting the employee against arbitrary changes.
    3. Proof in case of conflict: It serves as evidence before the Ministry of Labor or the labor courts.
    4. Legal stability: Gives certainty to both parties about the terms of the employment relationship, avoiding misunderstandings and reducing the risk of litigation.
    5. Social security and benefits: It is key for the employer to make contributions to the Social Security Fund and Unemployment Fund, and allows the employee access to benefits such as vacations, leaves of absence, 13th month, etc.
    6. Adaptation to different modalities: It may be for a definite term, indefinite term or for a specific job, depending on the nature of the work.

    In essence, the employment contract is not only a legal requirement, but an essential tool to protect the rights and obligations of both parties and strengthen the employment relationship.

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  • My Secure Retirement: Social Security Fund Digital Tool in Panama

    My Secure Retirement: Social Security Fund Digital Tool in Panama

    My Secure Retirement: Social Security Fund Digital Tool in Panama

    On August 6th last, the Social Security Fund made available to its beneficiaries in “MI CAJA DIGITAL” the functionality ‘MI RETIRO SEGURO’ to digitally calculate and compare benefits which correspond to each particular case, between the Disability, Old Age and Death Risk systems provided for in the Organic Law of the Social Security Fund.

    By Resolution No.474-2025-D.G., the Social Security Fund extended by five months the deadline for beneficiaries of the Defined Benefit Subsystem and beneficiaries of the Mixed Subsystem who retire before 1 March 2032 to exercise the option of switching to the Solidarity Capitalization Contributory Component.  During the period granted, the beneficiaries may freely and voluntarily change their minds.  The maximum extended date for switching to the new system is 18 August 2026.

    In accordance with the Unified Text of the Social Security Fund Law, beneficiaries enrolled in the Exclusively Defined Benefit Subsystem may expressly opt to participate in the Solidarity Capitalization Contributory Component, counting with a period of one year from the enactment of the reform of the Social Security Fund Law to exercise their option.

    In the same way, beneficiaries of the Mixed Subsystem who retire before 1 March 2032 may expressly opt to participate in the Solidarity Capitalization Contributory Component, counting with a period of one year from the enactment of the reform of the Social Security Fund Law to exercise their option.

    The five-month period that it took the Social Security Fund to develop and implement the ‘MI RETIRO SEGURO’ tool cannot reduce nor limit the one-year period for beneficiaries enrolled in the Defined Benefit Subsystem and beneficiaries enrolled in the Mixed Subsystem who retire before 1 March 2032 to exercise their option to switch to the Solidarity Capitalization Contributory Component.

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  • Panama Joins Mercosur as an Associated State: New Opportunities for Trade and Investment

    Panama Joins Mercosur as an Associated State: New Opportunities for Trade and Investment

    Panama as a New Associated State of Mercosur

    On the 6th of December 2024, Panama became an Associated State of Mercosur. The incorporation of Panama marks a strategic milestone for the regional integration and the economic strengthening of the country. By becoming an Associated State, Panama significantly expands its trade opportunities by joining one of the main economic platforms in Latin America. This step not only consolidates its position in the region but also allows it to participate in the exchange of trade, customs, and productive policies alongside full members such as Brazil, Argentina, Uruguay, Paraguay, and Bolivia, as well as fellow Associated States such as Chile, Peru, Colombia, Ecuador, Guyana, and Suriname.

    One of the main benefits for Panama is serving as a hub for exports between South and North America. As President José Raúl Mulino stated during a press conference on Thursday, July 17, Mercosur countries are especially interested in leveraging Panama’s logistics platform to boost their exports and reexports to markets in Asia, North America, Europe, and the Caribbean, which translates into new business opportunities, investments, and jobs for the country.

    Furthermore, Panama strengthens its appeal as a destination for foreign direct investment by offering greater legal certainty and access to regional value chains. Its association may also foster the transfer of technology, technical cooperation, and the development of regional infrastructures.

    There is no doubt, that the participation of Panama in Mercosur consolidates its role as a strategic bridge of the Americas.

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  • Panama Enacts New Special Regime for Banana Industry Workers and Independent Producers

    Panama Enacts New Special Regime for Banana Industry Workers and Independent Producers

    New Special Regime for Workers of Banana Companies and Independent Banana Producers

    Law 471 of 16 June 2025 establishes a new special regime for workers of banana companies and independent banana producers. 

    The main features of this new regime include:

    1. The workers of the banana companies and independent banana producers incorporated into the compulsory regime and the persons incorporated into the voluntary regime, will be entitled to economic benefits from the Social Security Fund, as a daily allowance for illness, as long as the illness causes a 30% incapacity to work, and the worker will benefit with 80% of the salary corresponding to the last two months of contribution at the time the illness occurs.
    2. To meet the benefits derived from the special pension from the Social Security Fund, the following resources will be allocated:
      1. Employers will contribute 2.5% of the salaries they pay to their employees.
      2. The State will contribute 6% of the wages paid to workers.
    3. Workers of banana companies and independent banana producers shall be entitled to early retirement due to old age when they meet the following requirements:
      1. Have reached fifty-eight years of age for men and fifty-four for women.
      2. Have worked in this activity for at least eighteen years.
      3. Have paid at least 266 contributions to the Social Security Fund.
    4. In the event of the death of the worker as a direct consequence of illnesses related to his work in the banana companies, the direct dependents (spouse, minor or disabled children) shall be entitled to a monthly pension equivalent to the basic monthly salary of the insured.
    5. The Social Security Fund will recognize a funeral allowance for those who can prove that they have paid the burial expenses, in the case of workers in banana companies and independent banana producers, provided that the insured person has paid six monthly contributions in the last twelve months prior to death.
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  • Panama: Stability and Progress in an Uncertain World

    Panama: Stability and Progress in an Uncertain World

    Panama: Stability and Progress in an Uncertain World

    In a world defined by sudden shifts —from unstable political regimes to armed conflicts, terrorist threats, and economic crises— Panama stands out as a beacon of stability, neutrality, and openness. 

    While many countries halt in the face of uncertainty, Panama keeps moving forward. Its trade-driven economy continues to grow, drawing investment from around the globe. With its strategic location, robust banking system, competitive tax regime, and world-class logistics —thanks to the Panama Canal, the Free Trade Zone, modern ports, and the submarine cable systems connecting the Americas— the country becomes an ideal base for everything from multinational headquarters to small startups.

    Panama, however, offers more than just economic advantages. It is home to a warm, resilient, and hard-working population. International studies consistently rank Panama among the happiest countries in the world, driven by its tropical climate, cultural diversity, safety, and genuine hospitality.

    Panama has earned a reputation as a reliable, neutral business hub, free from extreme ideological tensions. Here, local and international talent come together to build, innovate, and grow.

    In a constantly changing world, Panama remains steady and adapts with agility. Always open to the world and always moving forward.

    Considering expanding your business to Panama or seeking new opportunities?
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  • Mental Health at Work: Well-Being Is Part of Productivity

    Mental Health at Work: Well-Being Is Part of Productivity

    Mental Health at Work: Well-Being Is Part of Productivity

    Talking about mental health in the workplace is becoming increasingly necessary. It’s not just about being productive — it’s about living fully, even during our workdays. In the middle of meeting goals, delivering results, and staying efficient, we often forget something essential: we are human beings, not machines.

    An overwhelmed or anxious mind not only suffers in silence but also begins to affect the quality of our work and our personal life. Acknowledging this is not a sign of weakness — it’s a brave act. We all deserve healthy work environments, with pauses, empathy, and the freedom to say “I’m not okay” without fear of judgment.

    Small actions can make a big difference: validating a tired colleague, taking mindful breaks, avoiding the glorification of overwork, normalizing therapy, and understanding that rest is also part of being responsible.

    Working from a place of well-being not only improves performance, but also helps us build more human and sustainable environments. Taking care of ourselves is not selfish — it’s a way of honoring who we are.

     

  • The Fourth Bridge over the Panama Canal: Unlocking Economic Growth in Panama Oeste

    The Fourth Bridge over the Panama Canal: Unlocking Economic Growth in Panama Oeste

    The Fourth Bridge over the Panama Canal: Driving Growth in Panama West

    The construction of the Fourth Bridge over the Panama Canal represents a strategic step toward enhancing national connectivity and unlocking economic potential in one of the fastest-growing regions of the country: Panama West or in Spanish Panama Oeste.

    Once completed in 2028, this modern structure will significantly reduce travel times between Panama City and the western provinces. Improved mobility will make the area more accessible for workers, students, investors, and visitors.

    From a development perspective, the bridge is expected to serve as a catalyst for business expansion, residential growth, and tourism. With reliable infrastructure in place, Panama Oeste is poised to attract commercial activity, promote new housing developments, and strengthen the service industry.

    Beyond the direct impact on transportation, the project will generate thousands of jobs during construction and in the long term, fostering greater economic inclusion for surrounding communities.

    This bridge is more than a public work, it reflects Panama’s commitment to sustainable growth through strategic investment in infrastructure for future generations.

     

  • Gender Quota in Panama: Progress in Women’s Political Representation

    Gender Quota in Panama: Progress in Women’s Political Representation

    Gender Quota in Panama: Progress in Women’s Political Representation

    The modification of the Panamanian Electoral Code effected in the year 2007 represents a significant effort in favor of the political rights of women in Panama.  The new legislation reserves for women a quota of 30% of places within the political parties or any other position of popular election at the national level.  This regulation adds up to other efforts directed to reduce the gender gap in politics.

    In this sense, it is encouraging to know, that as a result of the recent May 5 presidential elections, out of the 71 deputies of the National Assembly elected for the new five-year period, 14 are women and 20% of other popular elected positions will also be held by women.

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    Interested in learning more about legal and political reforms in Panama? Contact ANORCO for expert guidance and insights into Panama’s legal framework.

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  • Work Permit established by special immigration conditions

    Work Permit established by special immigration conditions

    Work Permit established by special immigration conditions

    Pursuant to Executive Decree No. 6 of 2023, relevant changes are introduced in the regulation of labor immigration, including the creation of the category of Work Permit established by special immigration conditions.

    Foreigners who have one of the following immigration categories can apply for said work permit:

    1. National migrant worker from specific countries that maintain friendly, professional, economic and investment relations with the Republic of Panama;
    2. Migrant worker with a Residence Permit authorized by the General      Immigration Regularization program;
    3. Professional migrant worker;
    4. Migrant worker for family reunification for resident dependents.
    5. Students.

    Applicants must comply with the conditions of self-employed or employed, to wit:

    • Self-Employed: when the applicant is found to be properly developing a permitted income-generating activity or is self-employed directly in a condition of economic dependence or legal subordination and not developing activities that are by law for Panamanians.

    For this procedure, a Notice of Operation must be provided in the name of the applicant and the Single Taxpayer Registry and for the extension, an Income Tax Declaration must be submitted.

    • Employed: when the applicant maintains an employment relationship based to an employment contract under the conditions of legal subordination and economic dependence. In this case, the Ministry of Labor will apply the percentage rules established by law for the hiring of foreigners, i.e., 10% or 15% of the Panamanian workforce of the company that does the hiring.

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    Need assistance with your Work Permit application under these new immigration conditions?
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  • New Minimum Wage Rates in Panama: Executive Decree No. 1 of 2024

    New Minimum Wage Rates in Panama: Executive Decree No. 1 of 2024

    New Minimum Wage in Panama

    Executive Decree No. 1 of 10 January 2024 (the Executive Decree), determines the new minimum wage rates in the Republic of Panama, applicable by region and activity.

    The regions.

    • Region 1: Integrated by: Panama, Colon , San Miguelito, David, Santiago, Chitre, Aguadulce, Penonome, Bocas del Toro, La Chorrera, Arraijan, Capira, Chame, Anton, Nata, Las Tablas, Bugaba, Boquete, Taboga, San Carlos, Chepo, Guarare, Los Santos, Pedasi, Dolega, San Felix, Baru, Boqueron, Portobelo, Donoso, Santa Isabel, Santa Maria, Parita, Pese, Atalaya, Chanquinola, Chiriqui Grande, Almirante, Tierras Altas, Omar Torrijos Herrera.
    • Region 2: The rest of the country.

    The minimum wage.

    The Executive Decree increases the minimum wage in all the regions of the country.

    • The minimum wage increase applies as follows:
    • An increase of 4.5% in all small enterprises
    • An increase of 6% in all large enterprises
    • An increase of 7% applicable to all enterprises of the banana sector.
  • The Challenges and Risks of Implementing Artificial Intelligence in Law Firms

    The Challenges and Risks of Implementing Artificial Intelligence in Law Firms

    The Challenges and Risks of Implementing Artificial Intelligence in Law Firms

     

    While the benefits of AI in law firms are clear, there are also some challenges and risks associated with implementing this technology. One of the main challenges is the need for specialized knowledge and expertise in order to effectively implement AI systems. Law firms must have a deep understanding of technology and the legal industry in order to make the most of AI.

     

    Another challenge is the potential for AI systems to be biased or make mistakes. AI systems are only as good as the data they are trained on, and if this data is biased, the AI system may also be biased. This can lead to inaccurate results and decisions that are not in the best interests of clients.

     

    Finally, there is also a risk that AI systems may replace human lawyers, leading to job loss and a reduction in the overall quality of legal services. This is a real concern for many in the legal industry, and it is important for law firms to carefully consider the potential consequences of implementing AI systems before doing so.

     

    In conclusion, while the use of AI in law firms can bring many benefits, it is important to carefully consider the challenges and risks associated with this technology before implementing it. Law firms must be well-informed and prepared to make the most of AI and ensure that it is used in a responsible and ethical manner.