EU list of non-cooperative jurisdictions for tax purposes updated

On 8 October 2024, the EU Commission announced further changes to the EU list of non-cooperative jurisdictions for tax purposes, moving Antigua and Barbuda to the "grey list". The black list now contains eleven jurisdictions.

A number of jurisdictions, which have committed to agreeing necessary changes to their tax systems with the EU, remain on a second "grey list" (or state of play document). The grey list currently contains nine jurisdictions.

Background

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 carried out a screening process on relevant jurisdictions, which led, eventually, to the publication in December 2017 of the EU black and grey lists of jurisdictions by the EU Council as part of its Conclusions on the EU list of non-cooperative jurisdictions for tax purposes.

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.

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 seventeen countries, however several of these jurisdictions have since been removed whilst others have been added. Following the announcement on 8 October, the list now contains eleven jurisdictions namely: American Samoa, Anguilla, Fiji, Guam, Palau, Panama, Russia, Samoa, Trinidad and Tobago, US Virgin Islands and Vanuatu.

Antigua and Barbuda was removed from the black list in the latest update after being granted a supplementary review by the Global Forum on Tax Transparency and Exchange of Information with regard to exchange of information on request. It has been added to the grey list pending the outcome of the review.

The black list will be updated at least twice per year, but the Code of Conduct Group can recommend an update at any time. The next revision is due in February 2025.

The grey list (or state of play document)

The grey list originally contained a large number of different lists of jurisdictions in relation to which the EU Code of Conduct Group identified concerns during its screening process. These jurisdictions 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 regarded as cooperative, subject to the successful delivery of their commitments, which are monitored by the Code of Conduct Group.

It was originally expected that most jurisdictions would implement the necessary changes by the end of 2018, with developing countries being given an extra year until the end of 2019. Several jurisdictions were given an extension until the end of 2020 (and in some cases 2021) to deal with remaining concerns and in view of the COVID-19 global pandemic. It now appears that the Commission has recognised that the grey list will remain in place as a "state of play of the cooperation with the EU with respect to commitments taken by cooperative jurisdictions to implement tax good governance principles".

The grey list currently contains nine jurisdictions, namely: Antigua and Barbuda, Belize, British Virgin Islands, Costa Rica, Curaçao, Eswatini, Seychelles, Turkey and Vietnam. Turkey remains on the list due to its Turkey failure to exchange information with Cyprus.

The EU has previously concluded that the USA can be regarded as fulfilling the necessary conditions regarding automatic exchange of information and effective exchange on request despite not having ratified the Protocol amending the OECD Multilateral Convention on Mutual Administrative Assistance.

EU defensive measures

Beyond the mere stigma of being added to the EU black list, the main direct EU impact of being on the black list involves denial of EU financing from the European Fund for Sustainable Development. However, the list has also become relevant to the disclosure of cross-border tax planning arrangements under DAC 6. In particular, inclusion of a jurisdiction on the EU list of non-cooperative jurisdictions will be relevant the question whether the category C hallmark arrangements apply (cross-border transactions). In addition, from 2024, inclusion on the black list is also relevant to EU public CbCR obligations as these will require country-by-country information to be separately reported for each jurisdiction on the black list and for each jurisdiction that has been on the grey list for a minimum of two years.

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.

In particular, a December 2019 ECOFIN meeting recommended at least one from a series of additional defensive measures should be adopted by Member States from 2021, such as denying a deduction for costs and payments directed to entities or persons in a black listed jurisdiction, applying additional or higher withholding taxes, applying CFC rules or limiting the benefits of a participation exemption for payment from subsidiaries in black listed jurisdictions. For further details, see EU black list: further defensive measures recommended.

Further details

Further details of the EU black list and grey list can be found on the EU Commission website.