European Union has excluded several countries from low tax jurisdictions blacklist

On 12 January, 2018 the Council of the European Union (EU) has excluded several countries and territories from the blacklist of non-cooperative jurisdictions for tax purposes that were included in the initial blacklist.

This blacklist was published on 5 December, 2017 and included 17 countries and territories that do not cooperate in matters of exchange of tax information and establish preferential tax regimes (zero or low taxation), and also do not comply with common standards of tax transparency. Jurisdictions that express an intention to bring their tax legislation, main directions of tax and financial policies and judicial system to accordance with common standards of tax transparency were not included in such blacklist.

The Council of the EU has also provided an opportunity to be excluded from the blacklist for jurisdictions that initially figured in the blacklist but have proclaimed on high political level their initiative to participate in an international process of tax transparency and implementation of common standards of the taxation. As a result, 8 of jurisdictions that were put in the blacklist initially (it consisted of 17 countries and territories in total) have been excluded from it due to their efforts or intents to eliminate the reasons of being listed as non-cooperative jurisdictions. Actual blacklist now includes following countries and territories:

  • American Samoa;
  • Bahrain;
  • Guam;
  • Marshall Islands;
  • Namibia;
  • Palau;
  • Saint Lucia;
  • Samoa;
  • Trinidad and Tobago.

The list of mandatory measures applicable to entities from such jurisdictions on the EU level is not designed by the moment. Council Conclusions on the EU list of non-cooperative jurisdictions for tax purposes establishes only the right of member states of the EU to apply the following measures:

1. Non-deductibility of costs;
2. Controlled Foreign Company (CFC) rules;
3. Withholding tax measures;
4. Limitation of participation exemption;
5. Switch-over rule;
6. Reversal of the burden of proof;
7. Special documentation requirements;
8. Mandatory disclosure by tax intermediaries of specific tax schemes with respect to cross-border arrangements.

In the light of all abovementioned it is possible to conclude that EU business must be aware of such blacklist, especially when choosing contractors and partners and making transactions.

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