The EU Council has released details of the first EU list of non-cooperative jurisdictions for tax purposes.
The article below has been updated to reflect changes made to the blacklist following the 13 March 2018 ECOFIN meeting.
The EU black list of tax jurisdictions has been published by the EU Council as part of its Conclusions on the EU list of non-cooperative jurisdictions for tax purposes. The blacklist currently contains nine jurisdictions, including the Bahamas and US Virgin Islands. However, a larger number of jurisdictions, which have committed to agreeing necessary legal changes with the EU, are included on a second grey list, including Jersey, Guernsey, Isle of Man, Switzerland, Bermuda and Cayman Islands.
Member States are encouraged to apply additional administrative measures for tax purposes to transactions or structures involving jurisdictions on the black list. In addition, financing from the European Fund for Sustainable Development is not available to such jurisdictions and further defensive measures are likely to be added in the future.
In 2015, the EU Commission released a somewhat controversial (and error strewn) publication of Member States’ black lists. This was followed in 2016, as part of the EU Anti-Tax Avoidance Package, by an updated listing and a commitment to agree common EU criteria for blacklisting third countries to encourage good governance and transparency outside the EU. In the meantime, the EU Code of Conduct Group on Business Taxation has carried out a screening process on relevant jurisdictions.
The black list
The black list contains those jurisdictions which are deemed “non-cooperative” based on the EU Criteria which are set out in the Council’s Conclusions and covering compliance with international standards of tax transparency, fair taxation and implementation of anti-BEPS measures.
The black list originally contained 17 countries, including Panama and the United Arab Emirates. However, several of these jurisdictions have since been removed whilst others have been added.
As a result of these changes, nine jurisdictions remain on the list as of 13 March 2018, namely: American Samoa, Bahamas, Guam, Namibia, Palau, Samoa, Saint Kitts and Nevis, Trinidad and Tobago and the US Virgin Islands.
The black list will be updated at least once per year, but the Code of Conduct Group can recommend an update at any time.
The grey list
The grey list contains a number of different lists of jurisdictions in relation to which the EU Code of Conduct Group identified concerns during its screening process. However, the jurisdictions identified on the grey list have all committed to address these concerns by introducing relevant changes in their tax legislation in order to comply with the EU criteria. These jurisdictions are all, for the time being, regarded as “cooperative”, subject to the successful delivery of their commitments, which will be monitored by the Code of Conduct Group. It is expected that most jurisdictions will implement the necessary changes by the end of 2018, with developing countries being given an extra year until the end of 2019.
Countries on the grey list include Hong Kong (transparency and fair taxation), Turkey (transparency and fair taxation), Switzerland (fair taxation), Bermuda, Cayman Islands, Guernsey, Isle of Man and Jersey (all under fair taxation).
EU defensive measures
Beyond the mere stigma of being added to the EU black list, the only direct EU impact of being on the black list involves denial of EU financing from the European Fund for Sustainable Development, though further measures may be added in the future.
In addition, from a tax perspective, the EU encourages Member States themselves to apply either reinforced measuring of transactions involving blacklisted jurisdictions and/or increased audit risks for taxpayers benefiting from regimes in these jurisdictions or using structures involving these jurisdictions. In addition, Member States are encouraged to introduce other “defensive” measures such as withholding taxes, controlled foreign corporation (CFC) rules and further administrative measures targeted at such transactions involving such jurisdictions.
Further details of the EU black list and grey list can be found on the EU Council website.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.