Spain approves new list of non-cooperative jurisdictions

Background

In July 2021, the Spanish government published new provisions to prevent and combat tax fraud, including a new definition of non-cooperative jurisdictions, extending the definition of tax haven following reviews carried out by the EU and OECD. These provisions anticipated that the old list of tax havens would be updated with a new dynamic list to ensure a robust and up-to-date response to the use of these territories for tax purposes.

The new black list of tax havens

The new list of non-cooperative jurisdictions published on 10 February 2023 identifies twenty-four countries and territories. The features considered by the Ministry of Finance for inclusion in the list are: (i) the existence of offshore regimes aimed at attracting profits without real economic activity or through the existence of low or zero taxation or through their lack of transparency, (ii) the lack of mutual assistance regulations on the exchange of tax information, (iii) the absence of an effective exchange of tax information agreement with Spain, or (iv) the outcome of the evaluations carried out by the Global Forum on Transparency and Exchange of Information for Tax Purposes on the effectiveness of exchange of information.

The countries and territories considered non-cooperative jurisdictions under the new list are:

1. American Samoa
2. Anguilla
3. Bahrain
4. Barbados
5. Bermuda
6. British Virgin Islands
7. Cayman Islands
8. Dominica
9. Falkland Islands
10. Fiji
11. Gibraltar
12. Guam
13. Guernsey
14. Isle of Man
15. Jersey
16. Mariana Islands
17. Palau
18. Samoa
19. Seychelles
20. Solomon Islands
21. Trinidad and Tobago
22. Turks and Caicos Islands
23. US Virgin Islands
24. Vanuatu

The updated list includes new territories such as Barbados, Guam, Palau, American Samoa, Trinidad and Tobago (quite surprising given that both Barbados and Trinidad and Tobago have in force a Convention to Avoid Double Taxation with Spain) and Samoa (this last one only as regards the harmful offshore tax regime). The new territories included in the list will be considered non-cooperative jurisdictions six months after the day following its publication in the Spanish Official Gazette.

The list continues to include territories such as the Cayman Islands, Jersey and Guernsey despite their participation in the OECD Convention on Mutual Administrative Assistance in Tax Matters and the existence of draft tax information exchange agreements between those territories and Spain, and regardless of the fact that none of them are considered non-cooperative jurisdictions by the OECD and the EU. Gibraltar is in a similar situation where the specific cooperation agreement signed between Spain and the UK in the context of Brexit seems not to be enough to release the territory from the black list.

Finally, some relevant territories have been removed from the tax haven list, including Jordan, Lebanon, Liechtenstein, Monaco, Mauritius and Seychelles.

The list of non-cooperative jurisdictions will be reviewed and updated periodically as part of a growing trend of increased scrutiny of tax practices by the Spanish government, which appears determined to take a closer look at the activities of individuals and corporations in tax havens.

Comment

There are a number of very different and adverse tax implications which derive from being blacklisted as a tax haven jurisdiction, which may impact not only the relevant individuals or entities based in those territories, but also both Spanish entities and individuals dealing with them. For example, these include: implications related to tax residency status, deductibility of expenses, transfer pricing obligations, application of CFC rules, as well as a number of restrictions in the application of tax benefits such as (i) the participation exemption, (ii) tax neutrality regime, (iii) ETVE regime, (iv) tax exemption for interest and royalties, and (v) restriction of the new carried interest regime, etc.

Individuals and corporations should be aware of the list and carefully monitor any adverse tax implications for their interests in Spain. It is highly recommended that persons should seek professional advice on transactions involving non-cooperative territories in order to make informed decisions.