Panama exits EU tax blacklist: what changes for compliance and investment

On October 9, 2026, the Council of the European Union formally removed Panama from Annex I of its list of non-cooperative jurisdictions for tax purposes, commonly referred to as the EU tax blacklist, and moved the country to Annex II, often described as the grey list.

Although Panama had already been removed from the Financial Action Task Force (FATF) grey list in October 2023, its continued presence on the EU tax list remained a significant challenge for investment attraction, competitiveness and the development of new business opportunities.

What does inclusion on the EU blacklist mean?

A jurisdiction is included in Annex I when it fails to comply with certain international standards of good tax governance and does not make sufficient commitments to reform its legislation or fails to meet previously agreed deadlines.

Several factors contributed to Panama’s continued inclusion.

Foreign income exemptions without sufficient economic substance. Panama’s tax system allowed certain multinational companies and offshore entities to receive passive foreign income — including dividends, royalties and interest — without taxation in Panama, without necessarily demonstrating substantial operations, employees or physical infrastructure in the country.

From the EU’s perspective, these arrangements could facilitate the creation of corporate structures without substantive economic activity for tax purposes.

Insufficient transparency and exchange of information. The Global Forum of the Organisation for Economic Co-operation and Development (OECD) had identified shortcomings in Panama’s compliance with certain standards for the exchange of financial and accounting information with other jurisdictions, both automatically and upon request.

The Panama Papers context. Although the 2016 leaks were not themselves a formal criterion for Panama’s inclusion on the EU list, they placed the country under substantially greater international scrutiny.

The path towards removal

The process was gradual and involved a series of regulatory reforms.

One of the most significant developments was the adoption in 2026 of an economic substance law, aimed at creating a stronger relationship between corporate structures registered in Panama and the economic activities they actually conduct.

This was accompanied by measures to strengthen tax transparency and the development of a beneficial ownership registry, designed to identify the individuals who ultimately own or control corporate entities.

These reforms also contributed to strengthening the country’s framework for preventing money laundering and terrorist financing.

It is important, however, to distinguish between the different areas of assessment.

While the FATF focuses primarily on risks related to money laundering, terrorist financing and the origin of funds, the European Union also examines tax policy, fiscal transparency and practices that can facilitate tax avoidance or evasion.

What changes for compliance?

From a compliance perspective, Panama’s removal from the FATF grey list in 2023, the EU list of high-risk third countries for anti-money laundering purposes in 2024 and now Annex I of the EU tax list represents a regulatory and reputational easing.

It does not, however, mean that controls disappear.

For banks, investment funds and international firms, the impact can mainly be seen in three areas.

Changes in risk matrices

Before these removals, transactions involving Panamanian structures could automatically trigger additional alerts within the internal risk matrices of some financial institutions and international companies because of the country’s presence on several monitoring lists.

The change in status may allow such relationships to be assessed with less emphasis on jurisdiction alone and could facilitate the approval of new commercial relationships.

This does not mean that Panama will automatically be classified as a low-risk jurisdiction. Assessments will continue to depend on each institution’s internal policies and the specific characteristics of each transaction.

Changes in due diligence procedures

Panama’s removal from the FATF grey list and the EU high-risk list had already reduced the need for enhanced due diligence based solely on jurisdiction.

Its removal from the EU tax blacklist further consolidates that shift.

In commercial, contractual and compliance reviews, geographic location alone should no longer be sufficient to justify exceptional documentation requirements.

Requests for additional information — such as evidence of the source of funds, third-party audits or repeated commercial justifications — should instead result from a combination of risk factors rather than simply from the use of a Panamanian structure.

Reduced reputational risk

Removal from the different lists also improves Panama’s reputational profile.

For multinational companies, financial institutions and global investment funds, the change in regulatory status may make it easier for Panamanian companies and structures to be reconsidered under internal investment and contracting policies that previously imposed additional restrictions.

A new stage, but scrutiny remains

Panama’s removal from the FATF grey list and, more recently, from Annex I of the European Union’s tax list represents a turning point in the country’s compliance framework and opens a new stage characterised by stronger tax transparency and regulatory consolidation.

Its change in status could gradually lead EU Member States to reduce certain defensive tax measures applied to Panama.

However, the process is not yet complete.

Panama remains in Annex II, meaning that the country continues to be subject to international monitoring and must still fulfil outstanding commitments.

It also faces a review by the OECD Global Forum concerning the exchange of information upon request, whose outcome will be relevant to determining its eventual removal from the EU grey list.

Panama’s next challenge will be to translate its improved international standing into a sustainable advantage for its financial and business sectors.

Leaving Annex I removes an important barrier, but the broader impact will depend on the country’s ability to demonstrate that the reforms already adopted can be consistently implemented and maintained over time.