On 5 December 2017, the Member States of the European Union (EU) approved the list of countries and territories that do not cooperate with the EU in sphere of tax information exchange.
Tax authorities of the majority of countries apply a “black list” of states that have low tax regime, do not cooperate with other countries in the exchange of tax information and meet other criteria of offshore jurisdictions. Now the EU as a union of states has applied such a list for the first time in its history in order to fulfil the requirements of the 4th EU Directive on prevention of money laundering and combating the financing of terrorism.
The “black list” of the EU at the moment includes the following countries and territories: American Samoa, Bahrain, Barbados, Grenada, Guam, the special administrative district of Macao (China), Marshall Islands, Mongolia, Namibia, Palau, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia, the Republic of Korea, Panama and the United Arab Emirates.
The main criterions for making a decision to include countries in the “black list” are the features of the tax policy of states related to joining the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters, application of OECD standards to combat the tax base erosion and profit shifting (BEPS), establishing a preferential tax regime. At the same time, only those countries and territories that would not take action to change their tax policy in relation to non-compliance with the tax transparency criteria before 31 December 2018 were included in the list.
At this stage, the mechanism for applying mandatory measures against countries included in the “black list” is not designed yet. The Conclusion of the Council of Europe stipulates that the Member States are entitled to:
- limit tax deductions;
- apply controlled foreign companies rules (CFC rules);
- withhold taxes;
- limit the participation exemption;
- request additional documents.
Some mandatory measures applicable to countries from the “black list”, their residents, related persons, contractors are expected to be designed and implemented in the nearest future. Such measures can be applied both by the bodies and structures of the EU, as well as by the Member States.
The list is subject to revision and change if it would be necessary.
Thus, all companies from the EU should take into account the publication of such a list in their activity, in selection of contractors and making transactions.