EU List of third country non-cooperative jurisdictions for tax purposes and possible implications
In last February the ECOFIN Council updated the EU list of third country non-cooperative jurisdictions for tax purposes (the so-called EU ‘blacklist’) and the list became official upon publication in the Official Journal on 26 February 2021.
The EU list of non-cooperative jurisdictions for tax purposes is a tool to tackle:
- tax fraud or evasion: illegal non-payment or under payment of tax
- tax avoidance: use of legal means to minimise tax liability
- money laundering: concealment of origins of illegally obtained money
The updated EU ‘blacklist’ includes the following jurisdictions:
- American Samoa
- Trinidad and Tobago
- US Virgin Islands
The EU has previously decided that, as from 2020, the list will be updated twice a year.
Various defensive measures are currently being enacted by EU Member States which should negatively affect entities resident in jurisdictions on the EU ‘blacklist‘. These defensive measures include increased withholding taxes (WHT), stricter CFC rules, denial of deductibility of expenses, denial of participation exemption, increased monitoring and audits, special documentation requirements etc.
From a Cyprus tax angle, it is noted that the Cypriot Ministry of Finance recently submitted to Parliament a draft bill (currently having an effective date as from 1 July 2021) which introduces WHT for certain payments to companies in the EU ‘blacklist’ jurisdictions, as follows:
- For payments of dividends, WHT at the rate of 17%;
- For payments of passive interest, WHT at the rate of 30%; and
- For payments of royalties, WHT at the rate of 10%.
Finally, increased DAC6 reporting obligations may apply to certain related party transactions between companies in the EU and the EU ‘blacklisted’ jurisdictions, as the relevant Hallmark can be met irrespective if the Main Benefit Test is also satisfied.
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Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information.