Amendment of low tax jurisdictions blacklist of the European Union

Amendment of low tax jurisdictions blacklist of the European Union 04.04.2018

On 13 March, 2018 the Council of the European Union (EU) has amended the blacklist of non-cooperative jurisdictions for tax purposes. Several jurisdictions were de-listed, as somejurisdictions were included to the 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. On 12 January 2018 eight jurisdictions that were listed initially have been excluded from the 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, Bahrain, Marshall Island and Saint Lucia have been de-listed from the blacklist of 9 non-cooperative jurisdictions due to their efforts or intents to eliminate the reasons of non-cooperation. Bahamas, Saint Kitts and Nevis and US Virgin Islands have been listed for the first time.

The blacklist includes following countries and territories at the moment:

  • American Samoa;
  • Bahamas;
  • Guam;
  • Namibia;
  • Palau;
  • Samoa;
  • Saint Kitts and Nevis;
  • Trinidad and Tobago;
  • US Virgin Islands.

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 mentioned above it is possible to conclude that EU business must be aware of such blacklist, especially when choosing contractors and partners and making transactions.

Tags: exchange of tax information

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