Panama had been on the EU's blacklist for tax purposes without a break since February 2020. On 9 October 2026 the Council of the European Union removed it. Panama is not simply off the hook, though: it moves to Annex II, the list of cooperative jurisdictions with outstanding commitments. For anyone who lives in Panama, owns a company there or does business with Panamanian companies, this is the biggest tax news of the year.
At the same time, it is easy to overstate. The removal changes nothing about Panama's territorial tax system, nothing about your visa and nothing about where you yourself are taxable. What it changes above all are the defensive measures that countries have attached to the list, and not even those overnight. For an overview of the country as a whole, see our Panama country page.
What the Council decided on 9 October
At their meeting in Luxembourg, the finance ministers adopted the conclusions on the revised EU list (Council document 13854/26). The European Commission summarises the outcome in its announcement of the same day:
Panama announced the step itself on the same day. The Ministry of Economy and Finance (MEF) writes that placement in Annex II means the EU regards Panama as cooperative but still sees outstanding commitments on transparency and good tax governance. The EU will continue to monitor compliance.
Why Panama was on the list
The Commission's overview of the evolution of the list shows Panama in Annex I from the revision of 18 February 2020, and then in every version up to February 2026. The Council conclusions of 17 February 2026 state the most recent grounds in two points:
The first point is the core. Panama taxes on the territorial principle: income earned abroad generally stays untaxed in Panama. The EU did not object to the principle as such, but to the fact that Panamanian companies of multinational groups could receive passive foreign income tax-free without carrying on any real activity in Panama.
What Panama changed: Ley 526
The answer is in the Gaceta Oficial No. 30534 B of 28 May 2026. Ley No. 526 adds a new chapter to the Código Fiscal with Articles 707-A to 707-Ñ: economic substance rules for certain passive foreign income. The key points:
Who is affected. Only companies incorporated or resident in Panama that belong to a multinational group. The term is defined narrowly: two or more related entities that are tax resident in different countries, with a parent, subsidiaries and permanent establishments, where inclusion in consolidated financial statements is the main test (Art. 707-B).
Which income. Dividends, interest, royalties, capital gains, income from real estate and other investment income from abroad (Art. 707-C).
What substance means. Adequate, paid and qualified staff and suitable premises in Panama, strategic decisions taken in the country, and ongoing operating expenses incurred locally (Art. 707-E). Pure holding companies and companies that only hold real estate need only meet the staff and premises condition and the reporting obligations. Outsourcing to service providers is allowed, but only within Panama (Art. 707-G).
What happens without substance. The foreign income concerned is taxed, by way of exception, at a flat, final rate of 15% on the net amount (Art. 707-D). Tax paid abroad can be credited up to the amount of the Panamanian tax (Art. 707-H). On top of that come an anti-abuse clause (Art. 707-K), exemptions for regulated banks, insurers, securities firms and fund managers, and special rules for merchant shipping.
From when. Article 6 is unambiguous: the law applies from the 2027 tax year.
Important for you as an individual: Article 707-A states expressly that the new rules are an exception to Panama's territorial principle, not its abolition. Individuals without a group structure fall outside its scope.
What Annex II means
Annex II is not a sin bin; it is a list of unfinished homework. The Commission explicitly calls it the list of cooperative jurisdictions. The defensive measures that countries attach to the EU list are generally tied to Annex I, the non-cooperative jurisdictions.
For Panama, Annex II point 1.2 contains just one entry: the country is awaiting an in-depth review by the Global Forum on exchange of information on request, together with Montenegro and Viet Nam. The outcome of that review is still open. The list is revised twice a year. A jurisdiction in Annex II that fails to keep its commitments can slide back into Annex I in a later round. The current decision shows the reverse case with Anguilla, which did not meet its commitments on exchange of information and stays in Annex I.
What it means where you are tax resident
The list's sharpest consequences come not from Brussels but from national law. Several countries link defensive measures to non-cooperative jurisdictions: denying deductions for payments, tougher controlled foreign company rules, withholding taxes on certain payments, the loss of exemptions on dividends and extra reporting duties. Whether any of this applies to you, and when the removal takes effect, depends on your country. Where a country applies its measures through its own national list or regulation, that list has to be amended before anything changes, and the date from which the relief applies is set there, not in the Council conclusions. Until then, do not base payments, distributions or tax returns on an amendment that has not yet been published.
The same applies to reporting duties for cross-border arrangements: in EU member states, payments to a recipient in a listed jurisdiction can be a reporting trigger in their own right. For new payments to Panama, the EU list no longer provides that trigger. Arrangements from the period when Panama was in Annex I should be reviewed separately with your adviser rather than quietly treated as settled. What your home country does with the list, and how it taxes a Panamanian company you hold, depends on where you are tax resident:
What the removal does not change
The territorial principle for you as a person. Ley 526 applies only to companies that belong to a multinational group. If you live in Panama and receive income from abroad, what applied before still applies to you. How the tax system works in everyday life is covered in our guide to moving to Panama.
Your visa. The EU list is a tax list. It has no effect on residence permits. For the routes to residency, what is set out in our overview of the Panama residence permit still applies, and for the investor visa, the new Decree 17 with its USD 300,000 and USD 500,000 thresholds: USD 300,000 for a new build bought directly from the developer, USD 500,000 for a resale property.
Your tax liability at home. Whether you remain taxable in your home country depends on your residence there, not on lists drawn up in Brussels. Keeping a home in your old country can keep you fully taxable there, however Panama is classified.
Ordinary controlled foreign company rules. Even without the list, many countries tax the passive income of low-taxed foreign companies held by their residents. A Panamanian company that receives foreign income tax-free will often count as low-taxed under such rules. The removal only takes away the list-based, tougher layer, and only once the national rules reflect it.
What you should check now
If you hold a Panamanian company while tax resident elsewhere: have your adviser check which list-based measures have been applied in your returns so far, and keep an eye on whether your country's own list or regulation is amended, and from which date.
If your Panamanian company is part of a group: from the 2027 tax year you need substance in Panama for passive foreign income, or you pay 15%. From 2027, Ley 526 is the more important part of the story than the list itself.
If you simply want to move to Panama: for you, the removal is above all a signal. In the EU's logic, Panama now counts as a cooperative country with outstanding commitments, no longer as a tax haven. The visa and the territorial principle for individuals stay the same.
If you are comparing Panama with other countries in the region: Costa Rica is also debating whether to tax foreign investment income in future, and the draft is described in our article on the planned tax on foreign investment income in Costa Rica. Panama has answered the pressure from Brussels with a narrow solution limited to multinational groups. Whether that is enough will be shown by the Global Forum review that Panama, now in Annex II, is waiting for.