2 years after the Council of the European Union removed Panama from its black list of non-cooperative jurisdictions for tax purposes and a number of compliance laws were approved which destroyed the local casinos, keep hotels with high vacancy rates and lowered the price of real estate, the EU again has included Panama in its list. These laws were imposed by the troika of the Organisation for Economic Co-operation and Development (OECD), Financial Action Task Force (FATF) and the EC- none of which grants Panama voting power on their decisions.
The list includes now:
American Samoa
Cayman Islands
Fiji
Guam
Oman
Palau
Panama
Samoa
Seychelles
Trinidad and Tobago
US Virgin Islands
Vanuatu
Ironically, it does not include Iran, Syria or North Korea which are known trade partners of several European countries despite sanctions set up by the U.S. The EU claims this process is meant to establish tax good governance worldwide but fails to contribute any funds to the non-financial entities gathering information for the tax collection efforts they demand from black-listed countries.
- Press release
- 18 February 2020
- 10:32
Taxation: Council revises its EU list of non-cooperative jurisdictions
The Council today adopted revised conclusions on the EU list of non-cooperative jurisdictions for tax purposes.
In addition to the 8 jurisdictions that were already listed, the EU also decided to include the following jurisdictions in its list of non-cooperative tax jurisdictions:
- Cayman Islands;
- Palau;
- Panama;
- Seychelles
These jurisdictions did not implement the tax reforms to which they had committed by the agreed deadline.
16 jurisdictions (Antigua and Barbuda, Armenia, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cabo Verde, Cook Islands, Curaçao, Marshall Islands, Montenegro, Nauru, Niue, Saint Kitts and Nevis, Vietnam) managed to implement all the necessary reforms to comply with EU tax good governance principles ahead of the agreed deadline and are therefore removed from Annex II.
Read full text in https://www.consilium.europa.eu/en/press/press-releases/2020/02/18/taxation-council-revises-its-eu-list-of-non-cooperative-jurisdictions/
Economic and Financial Affairs Council, 18 February 2020
EU list of non-cooperative jurisdictions
The Council today adopted revised conclusions on the EU list of non-cooperative jurisdictions for tax purposes.
Read full text in https://www.consilium.europa.eu/en/meetings/ecofin/2020/02/18/
OUTCOME OF PROCEEDINGS
From: General Secretariat of the Council
To: Delegations
No. prev. doc.: 6050/20 FISC 61 ECOFIN 82
Subject: The Council conclusions on the revised EU list of non-cooperative
jurisdictions for tax purposes
Delegations will find in the Annex the Council conclusions on the revised EU list of noncooperative jurisdictions for tax purposes, adopted by the Council at its meeting held on
18 February 2020
Council conclusions
on the revised EU list of non-cooperative jurisdictions for tax purposes
ANNEX I
The EU list of non-cooperative jurisdictions for tax purposes
7. Panama
Panama does not have a rating of at least “Largely Compliant” by the Global Forum on
Transparency and Exchange of Information for Tax Purposes for Exchange of Information on
Request and has not resolved this issue yet.
Read full text in https://www.consilium.europa.eu/media/42596/st06129-en20.pdf
Taxation: EU list of non-cooperative jurisdictions
What is the EU list of non-cooperative jurisdictions?
Read full text in https://www.consilium.europa.eu/en/policies/eu-list-of-non-cooperative-jurisdictions/
COMMUNICATION FROM THE COMMISSION
on new requirements against tax avoidance in EU legislation governing in particular
financing and investment operations
V. Aligning Implementing Partners' internal policies to new EU tax requirements
Identification of beneficial owners
When reviewing the structure of an operation to determine potential issues in terms of tax
governance, the Implementing Partners generally use a minimum threshold of ownership,
direct or indirect, of the relevant entities, to determine the significance of the presence of an
entity in the shareholding structure. In this context, further consideration should be given to
the proper identification of who ultimately owns or controls the beneficiary or beneficiaries of
the funds, i.e. the ultimate beneficial owners. Consistency with the customer due diligence
requirements from the anti-money laundering directive (Directive 2015/84932) is considered
good practice. In the case of legal entities or legal arrangements, reference should be made to
the beneficial ownership definition stemming from Article 3(6) (a) (b) (c) of Directive
2015/849 which is set on internationally agreed standards. In particular, Implementing
Partners should at least identify the natural persons having a controlling ownership interest in
a legal entity by considering the indicative threshold of 25% direct or indirect ownership - or
having control through other means (i.e. consideration of lower threshold and other means of
control). The Commission recommends that this assessment should be made for corporate
entities even below such 25% threshold and ideally aiming at a 10% minimum threshold.
After having exhausted all possible means and provided there are no grounds for suspicion,
Implementing Partners can consider the natural person holding the position of senior
managing official as the beneficial owner. In any case, Implementing Partners should record
the actions taken in order to identify the beneficial owner. Where there is a remaining risk of
tax avoidance linked to the identification of ultimate beneficial owners, the Commission
recommends that Implementing Partners perform tax avoidance checks on all relevant entities
involved in the project, whereby the relevant entities are defined under section IV (1).
ST 15117 2018 INIT04-12-2018
Panama's Foreign Owned Call Centres (PA005)
Final description and assessment
OUTCOME OF PROCEEDINGS
From: General Secretariat of the Council
To: Code of Conduct Group (Business Taxation)
Subject: Panama's Foreign Owned Call Centres (PA005)
‒ Final description and assessment
I/ STANDSTILL REVIEW PROCESS (DECEMBER 2017)
1
:
a. Description
The Panamanian Call Centre Regulation Law (Law No. 54 of October 25, 2001) provides tax and
other special economic zone benefits to call centres established in Panama by foreign investors.
However, the special tax exemption is limited to foreign companies who have “commercial use”
call centres based in Panama.
For telecommunications, Law 54 of 2001 offers Call Centres the same incentives granted to export
processing zones by Law 25 of 1992. The most relevant incentives are similar to those granted to
export processing zones:
- No income tax, sales tax, import duty or any other national taxes levied on call centres export
operations;
- Special employee stability regime (three years);
- Market fluctuations as a justified cause for labour contract termination.
Any person exploiting call centre activities duly authorized by the Panamanian Authority of Public
Services may benefit from the tax benefits granted to companies operating in ‘export processing
zones’. Activities benefiting are those considered ‘export’ services (e.g. the final destination of
telecommunication services provided used outside the Panamanian territory).
II/ ROLLBACK REVIEW PROCESS2
:
On 4 September 2018, Panama informed the Code of Conduct Group that the Parliament approved
the draft law to reform the Call Centre regime to ensure compliance with EU Code of Conduct
criteria. The Group agreed that the rollback is sufficient at its meeting of 21 September 2018: see
analysis below of the legislation provided.
The Panama Call Centres reform was signed into Law by Panama's President on 17 October 2018,
and published in the Official Gazette two days later:
https://www.gacetaoficial.gob.pa/pdfTemp/28637_A/GacetaNo_28637a_20181019.pdf
Gateway criterion - Significantly lower level of taxation:
The general tax rate in Panama is 25%. However, pursuant to the new law adopted to regulate the
activity of Call Centre for Commercial Use (Call Centres) a full tax exemption on CIT is granted to
authorised call centres, although other special tax measures apply. Therefore, the measure provides
for a significant lower level of taxation and deserves an assessment under the Code.
Criterion 1 – Targeting non-residents:
The law adopted on 4 September 2018 does not distinguish between transactions with resident and
non-resident in order for the tax reduction to be granted.
For what concerns the de facto effects of the measure, the information provided by Panama on the
use of the regime before the reform are only partial. Panama explained that more information could
not be provided as it was not requested to companies under the previous regulation.
Criterion 2 – Ring-fencing:
The law adopted on 4 September 2018 does not exclude residents from the scope of the
beneficiaries of the preferential tax treatment.
Overall Assessment
In the light of the assessment made under all Code criteria, the regime is considered as overall not
harmful.
Read full text in https://data.consilium.europa.eu/doc/document/ST-15117-2018-INIT/en/pdf
See other assessments in https://www.consilium.europa.eu/register/en/content/out?typ=SET&i=ADV&RESULTSET=1&DOC_TITLE=Final+description+and+assessment&DOC_SUBTYPE=%22OUTCOME+OF+PROCEEDINGS%22&DOC_LANCD=EN&ROWSPP=25&NRROWS=500&ORDERBY=DOC_DATE+DESC
, Vol. V, No. 1, 1994). Panama Section of 
