Panama Stays On EU Tax Blacklist—And The Real Fight Is Over Its Business Model

The European Union has kept Panama on its list of “non-cooperative tax jurisdictions,” effectively a blacklist that signals higher risk for tax avoidance.

The decision, taken on October 10, 2025, turns on three tests the EU applies to outside countries: transparency (sharing tax data), fair taxation (no harmful regimes), and anti-avoidance rules to curb profit shifting. The next review is due in February 2026.

Panama’s president, José Raúl Mulino, says leaving the list will be slow and tedious. The government will keep the country’s territorial tax system—where most foreign-source income is exempt—but plans to modernize it.

In practical terms, that means proving “substance”: companies registered in Panama must show real operations at home, with local staff, costs, and decision-making. Authorities also say they will tighten automatic tax-information exchange with European counterparts.

The story behind the story is Panama’s role as a regional hub. Its economy relies on logistics around the Canal, free zones, and services that attract holding companies and multinationals. Territorial taxation helped build that model.

The EU’s stance challenges Panama to keep its appeal to investors while shutting the door on structures that exist only on paper.

Officials point to Costa Rica and Uruguay as examples of countries that kept territoriality but introduced strict substance rules and anti-abuse safeguards.

Remaining on the blacklist has immediate costs. European countries can apply “defensive measures” that make cross-border deals pricier and slower: extra withholding taxes, limits on deducting payments to entities in Panama, tougher controlled-foreign-company rules, and stricter bank due diligence.

Panama Navigates EU Compliance and Tax Pressure

At the EU level, access to some funds can be restricted. For Panamanian firms dealing with Europe—particularly in shipping, logistics, finance, and corporate services—this means longer onboarding, higher compliance bills, and more scrutiny of structures that lack genuine presence in Panama.

There is one bright spot: earlier in 2025 Panama was removed from the EU’s anti-money-laundering high-risk list, a separate process that eased some banking friction.

But to exit the tax blacklist, Panama will need verifiable reforms that preserve competitiveness while proving real activity at home. That is the balance to watch in the months ahead.