The European Union extends list of non-cooperative tax jurisdictions

The European Union published a "black list" of countries and territories for tax purposes

On 12 March 2019 the European Commission published a press release informing that 10 jurisdictions (Aruba, Barbados, Belize, Bermuda, Dominica, Fiji, Marshall Islands, Oman, United Arab Emirates, Vanuatu) have been added to the list of non-cooperative tax jurisdictions (also known as “the EU offshore blacklist”)

The reason for adding the said countries to the EU blacklist is their failure to implement the commitments they had made to the EU by the agreed deadlines.

At the moment the list includes 15 countries and territories:

  • American Samoa
  • Barbados
  • Guam
  • Samoa
  • Trinidad and Tobago
  • US Virgin Islands
  • Aruba
  • Belize
  • Bermuda
  • Dominica
  • Fiji
  • Marshall Islands
  • Oman
  • United Arab Emirates
  • Vanuatu

The blacklist is one of the tools of the EU external strategy in the field of taxation aimed at countering tax evasion. The main purpose of the list is to improve tax governance globally and ensure the situation where the European Union’s foreign partners adhere to the same standards as the EU member states do, namely:

  • transparency (does the jurisdiction comply with international information exchange standards);
  • fair tax competition (does the jurisdiction have harmful tax practices or regimes; does it apply BEPS action plan measures for countering tax base erosion and profit shifting);
  • real economic activity (whether the tax rules of the jurisdiction encourage creation of artificial structures without real economic substance).

The EU analyzes tax systems of the third countries, which, based on the results of negotiations, enter into commitments to eliminate the identified issues. The countries that do not accept such commitments or do not meet them within the agreed timeframes, are entered into (or remain in) the blacklist. According to the results of continuous monitoring kept by the EU, the list is subject to adjustment at least once a year.

The EU member states can apply the following measures to the countries remaining in the black list:

  • continued enhanced monitoring of their tax systems;
  • special withholding tax rules for payments to such countries;
  • special documentation requirements for transactions;
  • prohibition of transit of funds from the EU through entities in the blacklisted countries;
  • other anti-abuse measures.
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