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EU publishes list of non-cooperative tax jurisdictions

Overview- What is it?

On 5 December 2017 the EU published a list of non-cooperative tax jurisdictions. The new list is “part of the EU's work to clamp down on tax evasion and avoidance”.

According to an EU Commission press release, Member States agreed that a single EU list would “hold much more weight than a medley of national lists and would have an important dissuasive effect on problematic third countries.”

17 “blacklist” countries have been named and the EU have put a further 47 on notice on a “grey” list. Countries on the “blacklist” were those that did not make sufficient commitments to the EU to change their current practices and those who failed to meet international standards. The blacklist includes countries such as the Republic of Korea and the United Arab Emirates while Hong Kong and the Cayman Islands have been included on the “grey” list.  

What is the impact of being blacklisted?

The full impact of the being placed on the “black” or “grey” list is yet to be determined. However, the Commission has indicated that placement on the lists will be linked to EU legislative acts and such may not be eligible for funds from the bloc, except where it is to aid development.

The Commission has also made reference to the list in other relevant legislative proposals. For example, the public Country-by-Country reporting proposal includes stricter reporting requirements for multinationals with activities in listed jurisdictions. In the proposed transparency requirements for intermediaries, a tax scheme routed through an EU listed country will be automatically reportable to tax authorities. The Commission is also examining legislation in other policy areas, to see where further consequences for listed countries can be introduced.

The Commission has also encouraged Member States to agree on coordinated sanctions to apply at national level against the listed jurisdictions. Member States have agreed on a set of countermeasures which they can choose to apply against the listed countries. These include measures such as increased monitoring and audits, withholding taxes, special documentation requirements and anti-abuse provisions.

As of now the impact of the blacklist remains unclear but investors and investment managers operating in, investing in or otherwise engaging with residents of blacklist jurisdictions should be aware of the increased focus on these jurisdictions from an EU perspective.

We will update you as more information becomes available.
 

Next Steps…

The code of conduct group will continue dialogue with relevant jurisdictions to promote tax transparency, fair taxation and implementation of anti-BEPS standards and will continue to work on analysis of defensive measures that could be further defined and applied to non-cooperative jurisdictions in a co-ordinated manner, without prejudice to Member States’ obligations under EU and international law.

In respect of the 47 countries listed on the watch list, developed countries have until the end of 2018 to deliver on their commitments to reform while developing countries have been given an additional year before they will be put on the blacklist where their commitments are not sufficiently met.  

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