EC issues recommendation on making State financial support to undertakings in the Union conditional on the absence of links to non-cooperative jurisdictions
16 July 2020
On 14 July 2020, the European Commission issued a recommendation for Member States to make their financial support to undertakings in the EU conditional on the absence of links between those undertakings and jurisdictions that feature on the EU list of non-cooperative jurisdictions for tax purposes (‘Recommendation’). The foregoing list is included in Annex I of the relevant Council Conclusions on the EU list of non-cooperative jurisdictions for tax purposes (the so-called “black list”) and is regularly updated.
Under EU law, recommendations are in principle non-binding legal instruments representing a suggestion for addressees to take a certain line of action without imposing any legal obligations on the Member States concerned.
The Recommendation proposes that eligible undertakings should not:
- be resident for tax purposes in, or incorporated under the laws of, jurisdictions that feature on the EU list of non-cooperative jurisdictions;
- be controlled, directly or indirectly, by shareholders in jurisdictions that feature on the EU list of non-cooperative jurisdictions, up to the beneficial owner, as defined in article 3 point 6 of the EU Directive 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing;
- control, directly or indirectly, subsidiaries or own permanent establishments in jurisdictions that feature on the EU list of non-cooperative jurisdictions; and
- share ownership with undertakings in jurisdictions that feature on the EU list of non-cooperative jurisdictions.
Despite such considerations, the Recommendation also provides for two unique situations where, evidence-permitting, the existence of links to listed non-cooperative jurisdictions may be disregarded:
- where the level of the tax liability in the Member State granting the support over a given period of time (e.g. the last three years) is considered adequate when compared to the overall turnover or level of activities of the undertaking receiving the support, at domestic and group level, over the same period; and
- where the undertaking makes legally binding commitments to remove its ties to EU listed non-cooperative jurisdictions within a short timeframe, subject to appropriate follow-up and sanctions in case of non-compliance.
Additionally, these links may also be disregarded where the undertaking has substantial economic presence (supported by staff, equipment, assets and premises, as evidenced by relevant facts and circumstances) and performs a substantive economic activity in the listed non-cooperative jurisdiction.
Finally, the Recommendation encourages Member States to agree to reasonable requirements demonstrating the absence of links to non-cooperative jurisdictions, for instance, by means of, where appropriate, self-certifications by applicants, as well as sanctions in the case of false or inaccurate information.
Member States have been requested to inform the Commission about the measures taken further to the Recommendation.
The full text of the Recommendation may be found here.
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