News & Insights

EU Updates Its Tax List: Panama and Viet Nam Move to Annex II

Implications for Cross-Border Corporate Structures and Tax Compliance

Introduction

On 9 October 2026, the Council of the European Union approved a revised EU list of non-cooperative jurisdictions for tax purposes, removing Panama and Viet Nam from Annex I and transferring both jurisdictions to Annex II.

The decision follows measures undertaken by both jurisdictions to address concerns relating to international tax standards. However, Panama and Viet Nam remain subject to monitoring pending further assessments by the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes.

For businesses operating through international corporate structures, the revision is relevant to the assessment of tax compliance obligations and the treatment of cross-border arrangements under applicable national legislation.

1. The October 2026 Revision

The EU list of non-cooperative jurisdictions for tax purposes was established in December 2017 to promote tax transparency, fair taxation and the implementation of international standards designed to prevent tax base erosion and profit shifting.

Annex I identifies jurisdictions that do not meet the relevant tax good governance criteria or have failed to fulfil their commitments within the applicable timeframe.

Annex II records the state of cooperation with jurisdictions that have undertaken commitments to address outstanding tax good governance concerns.

Following the Council’s decision of 9 October 2026, Annex I comprises eight jurisdictions: American Samoa, Anguilla, Guam, Palau, the Russian Federation, Turks and Caicos Islands, the US Virgin Islands and Vanuatu.

Panama and Viet Nam have been transferred to Annex II, which now comprises ten jurisdictions.

The Council also removed Belize from Annex II following a positive assessment by the OECD Global Forum concerning its framework for the exchange of tax information on request.

2. Why Were Panama and Viet Nam Removed?

Panama

Panama had been included in Annex I since February 2020.

According to the Council, Panama has reformed its harmful foreign-source income exemption regime and has been granted a further review by the OECD Global Forum regarding its compliance with international standards for the exchange of tax information on request.

The Council therefore decided to transfer Panama to Annex II pending the outcome of that review.

Viet Nam

Viet Nam was added to Annex I in February 2026 following an assessment by the OECD Global Forum which identified shortcomings in compliance with international standards for the exchange of tax information on request.

Following reforms undertaken by Viet Nam and the granting of a further review, the Council decided to transfer the jurisdiction to Annex II pending completion of that assessment.

Viet Nam also remains subject to commitments under Annex II concerning the implementation of the country-by-country reporting minimum standard under BEPS Action 13.

The transfer of either jurisdiction should not be interpreted as confirmation that all outstanding matters have been fully resolved.

3. Implications for Cyprus-Based Corporate Structures

The revised EU classification is relevant to businesses operating through international corporate structures, particularly where their arrangements involve companies established in jurisdictions previously included in Annex I.

Cyprus maintains targeted tax measures concerning certain dividend, interest and royalty payments involving associated companies in jurisdictions included in the EU list of non-cooperative jurisdictions for tax purposes.

The relevant legislative framework includes Law 47(I)/2025, amending the Income Tax Law, Law 118(I)/2002, and Law 48(I)/2025, amending the Special Contribution for the Defence of the Republic Law.

These measures apply differently depending on the nature of the payment, the relationship between the parties and the applicable statutory conditions.

Under the relevant Cyprus tax provisions, a jurisdiction is classified as non-cooperative where it is included both in the EU list published during the preceding calendar year and in the latest applicable version of that list, subject to the precise statutory definitions and conditions.

The Council’s decision to remove Panama and Viet Nam from Annex I is therefore relevant to the application of this cumulative requirement. However, the consequences for any particular payment must be assessed by reference to the statutory provisions governing that payment, the relevant publication and application dates of the EU list, and the specific circumstances of the transaction.

Furthermore, the classification of a non-cooperative jurisdiction and that of a low-tax jurisdiction are distinct concepts under the Cyprus tax framework.

Accordingly, the October 2026 revision should not be interpreted as automatically determining all Cyprus tax consequences associated with payments involving Panama or Viet Nam.

4. Practical Considerations for International Businesses

Businesses with existing or proposed corporate arrangements involving Panama or Viet Nam should consider whether the revised classification affects their tax compliance position.

For Cyprus-based structures, particular attention should be given to the nature and timing of cross-border payments, the relationship between the parties and the specific conditions governing the application of domestic defensive tax measures.

Any assessment should also distinguish the EU tax list from separate anti-money laundering, sanctions and other regulatory frameworks, which are governed by their own legal criteria.

The revised classification may therefore warrant a review of relevant arrangements, but it does not replace the need for a transaction-specific legal and tax assessment.

Conclusion

The Council’s decision of 9 October 2026 marks a further development in the EU’s ongoing efforts to strengthen international tax good governance.

Although Panama and Viet Nam have been removed from Annex I, both jurisdictions remain included in Annex II pending further assessment by the OECD Global Forum. Viet Nam also has outstanding commitments concerning country-by-country reporting.

For Cyprus companies and international investors, the principal consideration is whether and to what extent the revised classification affects the application of relevant domestic tax provisions to their particular arrangements.

The change in EU classification should therefore be assessed alongside the applicable Cyprus legislative framework, rather than treated as an automatic determination of the tax treatment of cross-border transactions.

Disclaimer: This publication is intended for general information purposes only and does not constitute legal or tax advice. The application of relevant EU and national tax provisions depends on the facts and circumstances of each case. Specific professional advice should be obtained where appropriate.