Countries › Panama › Guide › 5. FX and capital controls › Foreign loans into Panama: no registration, the 1 percent FECI surcharge on local loans and the 12.5 percent interest withholding
Foreign loans into Panama: no registration, the 1 percent FECI surcharge on local loans and the 12.5 percent interest withholding
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Last verified: 2026-10-29 · Status: Stable
Panama does not register foreign loans or control their repayment: principal and interest leave in dollars without approval. Local commercial and personal loans above B/.5,000 from banks and financial entities carry a 1 percent a year surcharge, the FECI, collected for an agricultural interest subsidy fund, but external loans, interbank loans and registered bond issues are excluded. Interest paid to a foreign lender bears income tax on 50 percent of the amount, 12.5 percent effective for a foreign company.
Panama's currency, the balboa (B/.), is at par with the US dollar, which circulates freely; the Superintendencia de Bancos states that the balboa's value is on a par with the US dollar and that the dollar circulates without restrictions in commercial and financial transactions (checked 29 October 2026). USD figures therefore equal the balboa figures.
Key facts
| Registration of foreign loans with a central bank or ministry | No textLey 54 de 1998 art. 2 (free repatriation of interest and capital), as of 2026-10-29 · in force |
|---|---|
| FECI surcharge on local loans | 1 % a yearLey 4 de 1994 art. 2 (Ley 98 de 2019), as of 2026-10-29 · in force |
| Loan size above which the FECI applies | 5000 PABLey 4 de 1994 art. 2 (Ley 98 de 2019), as of 2026-10-29 · in force |
| FECI on external loans | Excluded textLey 4 de 1994 art. 2 numeral 2, as of 2026-10-29 · in force |
| Effective withholding on interest paid to foreign company lenders | 12.5 %Código Fiscal art. 701 literal h, as of 2026-10-29 · in force |
| Exchange rate used for USD conversions | 1 PAB per USDBalboa at par with the US dollar (Superintendencia de Bancos); Ley 84 de 1904 art. 1, as of 2026-10-29 · in force |
The rule
1. The interest rates of local personal and commercial loans above B/.5,000 granted by banks and financial entities include and withhold a sum equal to 1 percent a year on the same amount that serves as the base for calculating interest; factoring contracts, with or without recourse, bear the same 1 percent a year on the balance owed by the invoice debtor. After compensating banks for the agricultural interest discounts, claims and up to 1 percent for the Superintendencia de Bancos' administration costs, the fund goes to the agricultural sector (100 percent from 2024).
Cost to do it: 1 percent a year of the loan balance on local loans above B/.5,000.
Example: A B/.3,000,000 local bank loan: B/.30,000 a year of FECI on top of the agreed interest. / US$3,000,000 loan, US$30,000 a year.Ley 4 de 1994 art. 2 as worded by Ley 98 de 2019 art. 3, art. 2, 2019-10-09 official text · verified 2026-10-29
Cost to do it: 1 percent a year of the loan balance on local loans above B/.5,000.
Example: A B/.3,000,000 local bank loan: B/.30,000 a year of FECI on top of the agreed interest. / US$3,000,000 loan, US$30,000 a year.Ley 4 de 1994 art. 2 as worded by Ley 98 de 2019 art. 3, art. 2, 2019-10-09 official text · verified 2026-10-29
2. Excluded from the 1 percent surcharge: (1) loans to cooperatives lending to their members and to agricultural production groups under Ley 17 de 1997; (2) interbank loans, loans secured by bank deposits, external loans, financing through bonds and securities registered with the Superintendencia del Mercado de Valores, and loans to financial entities regulated by Ley 42 de 2001; (3) loans to credit card system operators for on lending; (4) automatic policy loans on life insurance; (5) loans, credit lines and factoring financing awarded government contracts, when the Ministry of Economy and Finance requests and consents to it; and (6) factoring up to B/.5,000 by registered micro, small and medium enterprises.
Example: The same B/.3,000,000 borrowed from the foreign parent or a foreign bank as an external loan carries no FECI. / US$3,000,000 external loan, US$0 FECI.Ley 4 de 1994 art. 2 as worded by Ley 98 de 2019 art. 3, art. 2, numerals 1 to 6, 2019-10-09 official text · verified 2026-10-29
Example: The same B/.3,000,000 borrowed from the foreign parent or a foreign bank as an external loan carries no FECI. / US$3,000,000 external loan, US$0 FECI.Ley 4 de 1994 art. 2 as worded by Ley 98 de 2019 art. 3, art. 2, numerals 1 to 6, 2019-10-09 official text · verified 2026-10-29
3. The Superintendencia de Bancos administers the fund, decides FECI administrative and sanction proceedings in first instance, and a commission of the Minister of Economy and Finance, the Minister of Agricultural Development and the Superintendent sets the application criteria; reconsideration and appeal must be filed within five business days of notice.Ley 4 de 1994 art. 2 as worded by Ley 98 de 2019 art. 3, art. 2, closing paragraphs, 2019-10-09 official text · verified 2026-10-29
4. In June 2026 the FECI Commission updated its interpretation criterion No. 4, confirming that Ley 98 de 2019, in force since 14 October 2019, governs the FECI rules and that loans qualify for the agricultural discount under the conditions in force when they were disbursed.Superintendencia de Bancos, Circular SBP-DS-FECI-CIRCULAR-2026-0057, Criterion No. 4, 2026-06-08 official text · verified 2026-10-29
5. Interest, commissions and other charges on loans or financing paid or credited to a foreign creditor bear income tax at the general rates of art. 699 or 700 on 50 percent of the amount, withheld by the payer, save the exemptions of art. 708. At the 25 percent corporate rate this is 12.5 percent effective.
Example: B/.240,000 of annual interest to a foreign parent: 25 percent on B/.120,000, B/.30,000 withheld. / US$240,000 of interest, US$30,000 withheld.Código Fiscal art. 701 literal h as worded by Ley 8 de 2010 art. 13, art. 701 literal h, 2010-03-15 official text · verified 2026-10-29
Example: B/.240,000 of annual interest to a foreign parent: 25 percent on B/.120,000, B/.30,000 withheld. / US$240,000 of interest, US$30,000 withheld.Código Fiscal art. 701 literal h as worded by Ley 8 de 2010 art. 13, art. 701 literal h, 2010-03-15 official text · verified 2026-10-29
6. Foreign investors are guaranteed free repatriation of capital, dividends, interest and profits derived from their investment, which covers the repayment of loan principal and interest abroad without FX approval.Ley 54 de 1998, art. 2, 1998-07-22 official text · verified 2026-10-29
| Source | Interest | FECI | Panamanian withholding on interest | Rule |
|---|---|---|---|---|
| Local bank loan | US$240,000 | US$30,000 (1 percent) | None | Ley 4 de 1994 art. 2 |
| External loan from a foreign bank or the parent | US$240,000 | None (excluded) | US$30,000 (12.5 percent effective) | Ley 4 art. 2 num. 2; Código Fiscal art. 701 h |
| Loan secured by a deposit at the lending bank | US$240,000 | None (excluded) | None if the lender is local | Ley 4 art. 2 num. 2 |
| Bonds registered with the Superintendencia del Mercado de Valores | US$240,000 | None (excluded) | Depends on the holder and exemptions in art. 708 | Ley 4 art. 2 num. 2 |
Annual cost in Panama of a US$3,000,000 (B/.3,000,000) loan at 8 percent interest, by source of funds (before transfer pricing and treaty effects).
Worked example
- A Panamanian subsidiary needs US$3,000,000 for a warehouse. A local bank offers 8 percent plus the 1 percent FECI, which costs B/.270,000 a year in total.
- Its foreign parent lends at 8 percent instead: B/.240,000 of interest, no FECI, and the subsidiary withholds B/.30,000 (US$30,000) and wires US$210,000 to the parent, all in dollars with no loan registration.
- Whether the parent can credit the B/.30,000 at home depends on its country; Argentina has no treaty with Panama and its own FX and tax rules for lenders are covered at a high level in the Argentine guide.
Step by step
- Document the intercompany loan in writing with an arm's length rate and check the transfer pricing page for related party rules.
- Check whether the loan is external (FECI excluded) or local (1 percent a year on balances above B/.5,000).
- Withhold income tax on 50 percent of interest paid abroad and remit it within ten days.
- Keep evidence of exclusions (deposit security, registered bonds, government contract consent) in the bank file.
Common traps
- The FECI is charged on the balance, not on the interest: on a low rate loan it can be a large share of the cost.
- Factoring with a Panamanian entity bears the 1 percent a year on the invoice balance, except small MSME factoring up to B/.5,000.
- The exclusion for government contract financing needs the Ministry of Economy and Finance's request and consent; it is not automatic.
Sources
- Ley 98 de 9 de octubre de 2019, amending Ley 4 de 1994 (FECI), Gaceta Oficial 28881-B (Legispan)
- Superintendencia de Bancos, Circular SBP-DS-FECI-CIRCULAR-2026-0057 of 8 June 2026
- Ley 8 de 15 de marzo de 2010, reforms to the Código Fiscal, Gaceta Oficial 26489-A (Legispan)
- Ley 54 de 22 de julio de 1998, legal stability of investments, Gaceta Oficial 23593 (Legispan)
- Superintendencia de Bancos de Panamá, historical review (balboa at par, US dollar circulates freely)
Related pages
- fx/repatriation-of-profits-and-capital
- fx/dollarization-and-the-balboa
- taxes/withholding-on-remittances
- taxes/transfer-pricing
- https://theargentinethread.com/guide/
- /country/panama/
- /calendar/
- Live dashboard
Related: Panama country profile · live dashboard · central bank and release calendar · our posts on X · where Argentina is involved, see The Argentine Thread guide
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