The EU ECOFIN blacklist of non-cooperative jurisdictions and its implications
October 2023
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I. Introduction
On October 17, 2023, the EU Economic and Financial Affairs Council, represented by EU finance ministers, held its meeting and established changes to its ‘list of non-cooperative jurisdictions’ for anti-tax avoidance purposes.
In November 2016, the Council mandated the Code of Conduct Group (business taxation), a special group established by the Council, to carry out the preparatory work to establish the above-mentioned list. The Code of Conduct Group started with the screening of 92 jurisdictions, selected on the basis of their economic ties with the EU, their institutional stability and the importance of the country’s financial sector. The group’s screening and assessment report was submitted to the Council, and based on the report, the EU’s first ‘country blacklist’ was adopted on 5 December 2017. Since then, the Council releases an update a list twice a year.
- Blacklisted jurisdictions
As of October 17, 2023, the following three jurisdictions were added to the list:
- Antigua and Barbuda,
- Belize, and
- Seychelles
were found not to be sufficiently in compliance with the Organization for Economic Cooperation and Development (OECD) standards on exchange of information on request (criterion 1.2).
Furthermore, the following jurisdictions are continuously listed:
- American Samoa
- Antigua and Barbuda
- Anguilla
- Bahamas
- Belize
- Fiji
- Guam
- Palau
- Panama
- Russia
- Samoa
- Seychelles
- Trinidad and Tobago
- Turks and Caicos Islands
- US Virgin Islands
- Vanuatu
Notably, three out of four jurisdictions added to the list in the previous council meeting in February 2023 were found to have sufficiently amended their regimes and were removed again from the blacklist in this month’s council meeting:
British Virgin Islands was removed from the list as it has amended its framework on exchange of information on request (criterion 1.2) and will be reassessed in accordance with the OECD standard.
Costa Rica was delisted because it has amended the harmful aspects of its foreign source income exemption regime (criterion 2.1)
Marshall Islands was delisted as it has made significant progress in enforcement of economic substance requirements (criterion 2.2).
II. Measures against blacklisted jurisdictions
Possible ‘defensive measures’ against blacklisted jurisdictions include:
- Denying deduction of costs and payments that otherwise would be deductible, when these costs and payments are treated as directed to entities or persons in blacklisted jurisdictions.
- Including in the taxpayer company’s HOME tax base the income of an entity resident or a permanent establishment situated in a blacklisted jurisdiction, in accordance with the Anti-Tax Avoidance Directive rules for controlled foreign companies.
- Applying a withholding tax at a higher rate on payments such as interest, royalties, service fee or remuneration, when these payments are treated as received in blacklisted jurisdictions.
- For those member states with rules that permit excluding or deducting dividends or other profits received from foreign subsidiaries, denying or limiting these ‘participation exemptions’ if the dividends or other profits are treated as received from a blacklisted jurisdiction.
The next revision of the list is expected in February 2024.
We hope that the information provided in this newsletter was helpful for you.
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