On 5 December 2017, the Economic and Financial Affairs Council of the EU (ECOFIN) issued a list of non-EU non-cooperative jurisdictions for tax purposes. The list includes 17 jurisdictions which are ‘black listed’, 47 jurisdictions which are ‘grey listed’ and 8 jurisdictions which will be assessed at a later stage (as they have been recently affected by hurricanes).
The issuance of the list is part of the EU’s efforts to address tax avoidance and harmful tax practices with a common approach by EU Member States towards third country jurisdictions. The aim is to replace the blacklists lists currently maintained by individual EU countries with a single EU listing system.
The non-EU jurisdictions under review where assessed based on the following criteria:
- tax transparency, which includes fulfilment of the international standards on the automatic exchange of information (Common Reporting Standard), ratification of the OECD Multilateral Convention or bilateral agreements with all Member States, and the facilitation of the exchange of information.
- fair taxation and the absence of harmful tax regimes, and
- implementation of the BEPS minimum standards
Non-Cooperative ‘blacklisted’ jurisdictions
As a result of the screening process, ECOFIN placed the following 17 countries on the EU list of non-cooperative jurisdictions which will be updated annually:
American Samoa, Bahrain, Barbados, Grenada, Guam, Korea (Republic of), Macao SAR, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and United Arab Emirates.
The above jurisdictions are encouraged to make the relevant legislative changes in order to be removed from the list.
Non-Cooperative ‘grey listed’ jurisdictions
Moreover, the following 47 jurisdictions committed to address the deficiencies that were found during the screening process and to improve their transparency standards. The commitments related to the criteria used in the listing process as follows:
|Improve Transparency Standards||Armenia; Bosnia & Herzegovina; Botswana; Cape Verde; Hong Kong SAR; Curaçao; Fiji; Former Yugoslav Republic of Macedonia; Jamaica; Jordan; Maldives; Montenegro; Morocco; New Caledonia; Oman; Peru; Qatar; Serbia; Swaziland; Taiwan; Thailand; Turkey; Vietnam.|
|Improve Fair Taxation||Andorra; Armenia; Aruba; Belize; Botswana; Cape Verde; Cook Islands; Curaçao; Fiji; Hong Kong SAR; Jordan; Labuan Island; Liechtenstein; Malaysia; Maldives; Mauritius; Morocco; St Vincent & Grenadines; San Marino; Seychelles; Switzerland; Taiwan, Thailand, Turkey; Uruguay; Viet Nam.|
|Introduce substance requirements||Bermuda; Cayman Islands; Guernsey; Isle of Man; Jersey; Vanuatu.|
|Commit to apply OECD BEPS measures||Albania; Armenia; Aruba; Bosnia & Herzegovina; Cape Verde; Cook Islands; Faroe Islands; Fiji; Former Yugoslav Republic of Macedonia; Greenland; Jordan; Maldives; Montenegro; Morocco; Nauru; New Caledonia; Niue; Saint Vincent & Grenadines; Serbia; Swaziland; Taiwan; Vanuatu.|
Jurisdictions to be reviewed at a later stage
The following Caribbean jurisdictions which have been affected by tropical storms in September 2017 will be reviewed at later stage: Anguilla, Antigua and Barbuda, Bahamas, British Virgin Islands, Dominica, Saint Kitts and Nevis, Turks and Caicos Islands, US Virgin Islands.
What will be the impact?
At an EU level, the Commission stated that the following measures will be applied to black listed countries:
- EU funding cannot be channeled through entities in listed countries.
- Stricter reporting requirements (Country-by-Country reporting) for multinationals with activities in listed jurisdictions.
- In the proposed transparency requirements for intermediaries (EU initiative not yet activated), a tax scheme routed through an EU listed country will be automatically reportable to tax authorities.
At the level of the individual Member States, at least one of the following administrative measures are expected to apply: stricter monitoring of transactions, increased audit risks for taxpayers benefiting from the disputed regimes or using structures or arrangements involving blacklisted jurisdictions. Each Member State may take additional tax measures, such as the non-deductibility of payments, withholding taxes and other measures.
Even before the issuance of the EU list, a significant number of EU countries maintained their own lists of blacklisted non-EU jurisdictions for tax purposes. The EU list aims to impose additional pressure on the blacklisted jurisdictions in order for them to apply the global standards on transparency and other measures of a tax nature. It remains to be seen whether the EU list will go beyond tax purposes and affect other dealings with the blacklisted jurisdictions such as banking (i.e. prevent payments to banks or entities situated in the blacklisted).
Should you have any queries, do not hesitate to contact us to discuss the above development.
Head of Tax Services