What Happened
Panama’s Minister of Economy and Finance, Felipe Chapman, said excluding the merchant shipping sector from the economic substance requirements being discussed in the reform to the Fiscal Code is a viable move. He said he supports the idea and noted that the legislative debate is moving forward at a good pace.
Chapman made the remarks during the International Free Zones Congress in Panama City, where the government is weighing proposals from different sectors, including concerns raised by the Panamanian Maritime Law Association, Apademar.
Why the Shipping Sector Objects
Apademar has urged the National Assembly’s Commission on Economy and Finance to spell out in the law that Panamanian companies that own vessels, and the activities tied to those ships, should not be subject to economic substance requirements. The group warned that forcing maritime-linked companies to open offices in Panama or face a 15% penalty could discourage new vessels from joining Panama’s ship registry.
Chapman said adjustments can be made to the draft to avoid harm to the sector. He argued that merchant shipping already demonstrates real economic presence through the vessels that sail under the Panamanian flag.
Broader Fiscal and International Context
The discussion around economic substance comes as Panama seeks to align its tax framework with international transparency standards while preserving its territorial tax model. During the Assembly debate, Luis Eduardo Ocando B., managing partner at Deloitte, said the proposal could modernize Panama’s fiscal system without abandoning territoriality.
Ocando said countries such as Barbados, Singapore and Uruguay have updated their rules in similar ways. He added that economic substance rules can help create skilled jobs, attract genuine investment and strengthen Panama’s role as an international services platform.
He described the approach as a “Territoriality 2.0,” framing it as a way to reinforce Panama’s fiscal sovereignty while adapting to global expectations.
Brussels Trip and EU Pressure
Deputy Foreign Minister Carlos Hoyos also addressed the reform, saying it is not an imposition from the European Union but a domestic effort to update Panama’s laws and remain attractive to investment. He said the country needs to respond to transparency demands that already exist in the international system.
Hoyos announced that he will travel to Brussels on May 18 and 19 to meet with European Union foreign service authorities and present Panama’s agenda. That agenda includes the legal reforms now under discussion, as well as efforts to recover the green card for fishing and other investment-related issues between Panama and the European bloc.
Chapman said that if the reform is approved during the current extraordinary session, the European Union would have time to assess the law and Panama’s compliance, potentially helping the country move toward removal from its tax haven list.
The debate places Panama’s maritime registry, tax policy and international standing at the center of a broader effort to balance competitiveness with regulatory credibility.