March 1, 2021
Panama remains on EU list of non-cooperative jurisdictions with no immediate consequences
Although Panama remains on the European Union (EU) list of non-cooperative jurisdictions, there are no immediate consequences for Panama. Provided no defensive measures are taken against Panama, the treatment of corporate structures including Panama and the application of double tax treaties signed with Member States of the European Union will remain the same.
On February 22, 2021, the Council of the European Union (the Council) updated the EU list of non-cooperative jurisdictions for tax purposes (the EU list) and kept Panama on the list. For more information on the inclusion of Panama on the list, see Tax Alert 2020-0398.
The list includes jurisdictions worldwide that either have not engaged in a constructive dialogue with the EU on tax governance or have failed to deliver on their commitments to implement the reforms necessary to comply with a set of objective "tax good governance" criteria related to tax transparency, fair taxation and the implementation of international standards to prevent tax base erosion and profit shifting.
The changes to the list take into consideration the ratings recently released by the OECD Global Forum for Transparency and Exchange of Information (Global Forum) on the exchange of information on request.1 For purposes of the list, the EU requires jurisdictions to be at least "largely compliant" with the international standard on transparency and the exchange of information.
Panama was included on the EU list of non-cooperative jurisdictions for tax purposes by the Council on February 18, 2020, and remains on the list because of the Council's conclusions made on February 22, 2021. The Council concluded that Panama does not have a rating of at least "largely compliant" by the Global Forum and has not resolved this issue yet.
Barbados was added to the EU list in October 2020 after it received a "partially compliant" rating from the Global Forum. It has now been granted a supplementary review by the Global Forum and has therefore been removed from Annex I and moved Annex II (State of play of the cooperation with the EU with respect to commitments taken by cooperative jurisdictions to implement tax good governance principles).
The Council also added Dominica to Annex I of the EU list of non-cooperative jurisdictions2 because it received a "partially compliant" rating from the Global Forum and has not yet resolved this issue.
With the February 22, 2021 update, there are 12 jurisdictions on the list of non-cooperative jurisdictions (Annex I): American Samoa, Anguilla, Dominica, Fiji, Guam, Palau, Panama, Samoa, Seychelles, Trinidad and Tobago, the US Virgin Islands and Vanuatu.3 The following countries are included under Annex II: Australia, Botswana, Eswatini, Jordan, Maldives, Morocco, Namibia, Saint Lucia, Thailand and Turkey.
Even though the list was adopted by the Council, there are no immediate consequences for Panama as a result of its inclusion on the list of non-cooperative jurisdictions. Therefore, the application of double tax treaties currently between Panama and the Czech Republic, Italy, France, Luxembourg, Netherlands, Portugal, Spain and the United Kingdom will not be affected by the inclusion of Panama on the list. The operation of corporate structures that include Panama also will not be affected.
Because of Panama's inclusion on the EU list of non-cooperative jurisdictions, EU Member States may include Panama on their lists of non-cooperative jurisdictions for tax purposes under their domestic laws and may apply defensive measures. Under the CCG's "Guidance on defensive measures in the tax area towards non-cooperative jurisdictions" and Council conclusions previously issued as part of a list of non-cooperative jurisdictions, Member States should apply at least one of the following administrative measures in the tax area4:
Additionally, Member States also should use the EU list to apply at least one of the following legislative measures5:
The EU transparency rules also were updated and include new reporting requirements for tax schemes involving listed countries.
The Council updates the list two times a year and is expected to update the list in October 2021.6
1 2020 Global Forum Annual Report — Tax Transparency and Exchange of Information in time of COVID-19 (OECD).
2 6329/21, FISC 33, ECOFIN 153, Outcome of Proceeding from General Secretariat of the Council to Delegations, Brussels, February 22, 2021, Annex I, page 5.
3 Taxation: EU list of non-cooperative jurisdictions. Please see the following link: https://www.consilium.europa.eu/en/policies/eu-list-of-non-cooperative-jurisdictions/
4 14114/19, FISC 444, ECOFIN 1005, Report from General Secretarial of the Council to the Permanent Representatives Committee/Council, Brussels, November 25, 2019, ANNEX 4, paragraph 11, page 45.
5 14114/19, FISC 444, ECOFIN 1005, Report from General Secretarial of the Council to the Permanent Representatives Committee/Council, Brussels, November 25, 2019, ANNEX 4, paragraph 12, page 45.
6 6329/21, FISC 33, ECOFIN 153, Outcome of Proceeding from General Secretariat of the Council to Delegations, Brussels, February 22, 2021, page 3, Paragraph 7.