Panama Removed From EU Tax Haven Blacklist After a Decade of Financial Reforms

Panama has been removed from the European Union’s list of non-cooperative jurisdictions for tax purposes, marking a significant milestone in the country’s efforts to improve financial transparency and restore its international reputation a decade after the Panama Papers exposed widespread offshore secrecy.

The decision, announced by EU finance ministers in October 2026, recognizes changes to Panama’s tax regulations, corporate reporting requirements and oversight mechanisms. However, the country continues to face challenges in ensuring that its financial system is not exploited to conceal wealth, evade taxes or facilitate financial crime.

The removal represents a notable reversal for a country that became internationally synonymous with offshore financial secrecy following the publication of millions of leaked documents in 2016. While subsequent reforms have addressed several longstanding concerns, experts warn that maintaining international confidence will require effective enforcement, not simply the adoption of new legislation.

The Panama Papers and the exposure of offshore secrecy

The Panama Papers investigation, published in 2016, was based on 11.5 million leaked financial and legal records examined by international journalists. The investigation revealed how offshore corporate structures could be used to conceal the ownership of assets, obscure financial transactions and make it more difficult for tax and law enforcement authorities to trace wealth.

At the center of the revelations was a Panama-based law firm that had registered approximately 214,000 shell companies across more than 200 countries. These companies provided legal structures through which individuals and businesses could obscure their financial affairs and the ownership of assets.

The disclosures drew global attention to weaknesses in the international financial system and intensified scrutiny of jurisdictions whose corporate and tax regulations allowed companies to operate with limited transparency.

Luis Moreno, an economist with the Global Alliance for Tax Justice and international taxation director at Latindadd, said the revelations had highlighted fundamental regulatory shortcomings.

“The Panama Papers revelations exposed weaknesses in the global financial system, with a particular focus on Panama and the lax regulations regarding transparency that were in place there at the time,” Moreno said.

He added that the country had subsequently responded to recommendations intended to strengthen its tax transparency framework.

“After the Panama Papers, Panama addressed various recommendations — including those from the OECD regarding tax transparency — which is precisely why it has now been removed from the ‘blacklist,'” Moreno said.

The consequences of the investigation extended beyond reputational damage. Panama came under pressure from international organizations and governments to bring its financial reporting arrangements into line with international standards and to demonstrate that its corporate structures would no longer provide an easy route for hiding assets from authorities.

International pressure and the EU’s changing position

In the aftermath of the investigation, the Organisation for Economic Co-operation and Development (OECD) intensified its criticism of Panama’s financial transparency arrangements. Following the publication of the findings, the organization described Panama as “the last major holdout that continues to allow funds to be hidden offshore from tax and law enforcement authorities.”

An OECD review called on the country to adopt international tax-reporting standards, participate in multilateral agreements for exchanging financial information and improve the records identifying the beneficial owners of companies — the individuals who ultimately own or control them.

The European Union subsequently made Panama part of its first blacklist of non-cooperative tax jurisdictions, introduced in December 2017 in response to growing concerns about offshore tax practices following the Panama Papers.

That initial designation proved short-lived. Panama was removed from the blacklist just one month later and transferred to a so-called grey list, which generally identifies jurisdictions that have committed to addressing concerns but remain under scrutiny.

The decision attracted criticism from transparency advocates, who questioned whether the EU was applying sufficient pressure to secure meaningful and lasting reforms.

Panama was returned to the EU blacklist in 2020 after European authorities concluded that it had failed to implement promised transparency measures. The renewed designation underscored the gap between making commitments to reform and meeting the standards required by international partners.

Reforms aimed at rebuilding financial credibility

Over the following years, Panama introduced a series of legislative and regulatory changes intended to address concerns about tax evasion, corporate ownership and the use of offshore entities.

In 2019, the country voted to make tax evasion a criminal offence, strengthening the legal framework for tackling conduct that had previously drawn international criticism.

After its return to the EU blacklist in 2020, the Panamanian government also established a beneficial ownership registry. The system requires information to be disclosed about the people who control companies, helping authorities identify the individuals behind corporate structures that might otherwise obscure ownership.

Such registries are an important component of efforts to combat tax evasion and financial crime because shell companies can make it difficult to establish who benefits from particular assets or transactions. Their effectiveness, however, depends on the accuracy of the information collected and the ability of authorities to verify and use it.

More recently, Panama moved to address concerns about whether companies have genuine economic operations in the country rather than merely maintaining a legal presence there.

In May 2026, Panama’s Congress approved legislation known as the Economic Substance Law, which applies to companies belonging to multinational groups. Under the measure, affected companies must demonstrate that they have substantive operations in Panama, including staff, facilities and strategic decision-making activities.

Companies that fail to meet the requirements face a 15% tax rate on their income.

The law is intended to distinguish businesses conducting genuine economic activity in the country from entities established primarily to benefit from a favourable tax or corporate regime without a corresponding operational presence.

Taken together, the reforms address several of the issues raised in international assessments of Panama’s financial system. They also help explain why the country has now secured removal from the EU blacklist.

Government welcomes the decision as an opportunity for investment

The Panamanian government welcomed the EU’s announcement, presenting it as an important step towards strengthening the country’s standing among international investors.

President José Raúl Mulino celebrated the decision in a social media post, declaring that Panama was now “opening the door to new investments.”

Removal from the list could help improve perceptions of Panama as a destination for legitimate international business by reducing concerns associated with its previous classification. The change also signals that European authorities consider the country’s progress sufficient to warrant a different regulatory status.

Nevertheless, removal from a blacklist should not be interpreted as a declaration that all risks have disappeared. It reflects an assessment of compliance with the relevant international tax standards, rather than a blanket endorsement of every aspect of a country’s financial system.

The challenge for Panama will be to ensure that the measures introduced over the past decade function effectively in practice and continue to meet evolving international expectations.

Financial oversight faces new challenges in the cryptocurrency era

Despite welcoming the progress made, Carlos Barsallo, a lawyer and former president of Transparency International’s Panama chapter, warned that the country must remain vigilant to avoid being placed back on the EU list.

Barsallo said the next phase of financial regulation would involve challenges that extend beyond traditional offshore companies and tax arrangements. Among the emerging concerns are virtual assets and the expanding cryptocurrency economy, which can introduce new complications for financial oversight and the investigation of suspicious transactions.

“What are the areas of concern that could lead to that? These are now global issues. Panama is not alone in this: virtual assets and everything related to the ‘crypto-economy,’” Barsallo said.

His comments highlight the increasingly international nature of the problem. Digital assets can move across borders quickly, while the parties involved in transactions may operate through complex networks of platforms and intermediaries. Regulators must therefore adapt their supervisory systems as financial technologies evolve.

Barsallo also emphasized the difference between passing legislation and establishing a framework capable of delivering results.

“Simply passing a law is not enough, there must be a mechanism in place to combat fraud involving these new virtual assets.”

The warning reflects a broader principle underlying international efforts to improve financial transparency: legislation must be supported by effective monitoring, enforcement and institutional capacity if it is to prevent abuse.

A milestone, but not the end of scrutiny

Panama’s removal from the EU blacklist marks a significant development ten years after the Panama Papers exposed weaknesses in its approach to corporate transparency and offshore financial secrecy.

The country has since introduced criminal penalties for tax evasion, created a beneficial ownership registry and adopted legislation requiring certain multinational companies to demonstrate genuine economic substance. These measures, alongside changes responding to OECD recommendations, have contributed to its improved standing with European authorities.

Yet the history of Panama’s shifting status on the EU list also illustrates how difficult it can be to secure lasting confidence in a financial system. The country was initially blacklisted, removed shortly afterwards and later listed again after authorities determined that promised reforms had not been fully implemented.

Its latest removal therefore represents both recognition of progress and a continuing obligation to maintain standards.

The next test will be whether Panama can consistently enforce its transparency rules, prevent corporate structures from being used for illicit purposes and respond to emerging risks associated with digital finance.

For the government, the decision offers an opportunity to strengthen international business relationships and attract investment. For financial regulators and transparency advocates, the priority remains ensuring that the reforms produce measurable results.

A decade after the Panama Papers brought offshore secrecy into the global spotlight, Panama has made substantial changes to its regulatory framework. Whether it can preserve its newly improved standing will depend on its ability to turn those changes into sustained, effective oversight.

By fLEXI tEAM