Panama Removed from the EU Tax Blacklist

Panama Moves to Annex II Following New Economic Substance Rules

By decision of the Council of the European Union (ECOFIN) dated October 9, 2026, Panama was removed from Annex I of the EU list of non-cooperative jurisdictions for tax purposes and moved to Annex II, which groups cooperative jurisdictions with pending commitments.

The decision recognizes Law 526 of May 28, 2026, regulated by Executive Decree No. 32 of September 2, 2026, which adds Articles 707-A through 707-Ñ to the Fiscal Code. This law provides that, beginning in 2027, entities incorporated or domiciled in Panama that are part of a multinational group and earn foreign-source passive income must demonstrate economic substance in order to retain their non-taxable treatment.

Panama has committed to undergo a new review by the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, which will begin in the first quarter of 2027. Panama must obtain a minimum rating of “Largely Compliant” on exchange of information on request, with a deadline of February 15, 2027. The EU reviews its list twice a year; the next update is scheduled for February 2027.

It should be noted that Panama has not been fully removed from the European Union list. It has left Annex I but will remain in Annex II until the Global Forum confirms its compliance with the standard on exchange of information on request.

One of the effects of the removal from Annex I is that EU Member States will no longer apply to Panama the defensive measures, primarily tax-related, provided for listed jurisdictions. The restriction on EU funds being channeled through Panamanian entities is also lifted.

Panama’s removal from Annex I will help strengthen the country’s competitiveness and promote its economic development.