The European Union has removed Panama from its list of non-cooperative jurisdictions for tax purposes, following reforms aimed at improving the country’s compliance with international tax standards.
The decision was approved by EU finance ministers on October 9, 2026, ending Panama’s inclusion on the blacklist, where it had remained since February 2020.
However, Panama has not been removed from the EU’s tax monitoring process entirely. The country has been transferred to Annex II, which includes jurisdictions cooperating with the EU while addressing outstanding commitments.
Why Was Panama Removed from the List?
According to the Council of the European Union, Panama has reformed its foreign-source income exemption regime, which had been one of the EU’s concerns regarding the country’s tax framework.
The reforms include new economic substance legislation and implementing regulations introduced in 2026. These measures establish requirements for certain multinational group entities receiving foreign-source passive income to demonstrate genuine economic activity in Panama.
The EU acknowledged these legislative changes and Panama’s continued cooperation with European authorities as reasons for revising its classification.
What Does Panama’s New Status Mean?
Panama’s transfer to Annex II means it is no longer classified by the EU as a non-cooperative tax jurisdiction.
The change also means that defensive measures associated with its Annex I classification will be lifted. These measures may include additional tax and administrative requirements imposed by EU member states.
However, Panama must still undergo a review by the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes.
The review will assess the country’s compliance with international standards for exchanging tax information upon request. A rating of largely compliant or fully compliant would allow Panama to be removed from Annex II as well.
Panama’s Next Steps
Panama’s President José Raúl Mulino welcomed the decision, describing it as the result of continued diplomatic and technical efforts to address international concerns about the country’s tax system.
The Panamanian government expects the change to strengthen international confidence and support its efforts to attract investment. However, any broader economic benefits will depend on market conditions and individual investment decisions.
The EU currently lists eight jurisdictions under Annex I, following the removal of Panama and Vietnam. Its next scheduled review will take place in February 2027.
For Panama, the October decision represents progress in its tax cooperation with the EU, while the pending OECD review will determine whether the country can complete the next stage of the process.
