The EU Economic and Financial Affairs Council, which is made up of the economics and finance ministers of all member states, has approved the EU Commission’s recommendations on a unified EU list of non-cooperative jurisdictions in taxation matters, more familiarly referred to as a blacklist.
Inclusion in the list is based on three sets of agreed criteria regarding tax transparency, fairness of taxation and implementation of anti-base erosion and profit shifting measures. The list is intended to be continuously reviewed and updated at least once per calendar year.
The approved final list of non-cooperative jurisdictions comprises American Samoa, Bahrain, Barbados, Grenada, Guam, Republic of Korea, Macao SAR, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and United Arab Emirates.
The Council recommends that inclusion in the list should trigger the application of defensive measures by member states, including at least one of the following:
- Reinforced monitoring of certain transactions;
- Increased audit risks for taxpayers benefiting from the regimes at stake;
- Increased audit risks for taxpayers using structures or arrangements involving these jurisdictions.
The Council also suggests that member states might apply additional domestic anti-avoidance measures such as non-deductibility of costs, CFC rules, withholding tax measures, limitation of participation exemption, switch-over rule, reversal of the burden of proof, special documentation requirements and mandatory disclosure by tax intermediaries of specific tax schemes with respect to cross-border arrangements involving the jurisdictions on the list.
In addition to the primary list the Council has also published a second list of 47 jurisdictions where deficiencies have been identified but which have avoided being placed on the blacklist by giving commitments to amend their legislation in order achieve compliance with the required criteria. This list includes Bermuda, Cayman Islands, Guernsey, Hong Kong SAR, Isle of Man, Jersey, Liechtenstein, Malaysia, Maldives, Mauritius, Oman, Qatar, San Marino, Seychelles, Switzerland, Taiwan and Turkey.
Progress on implementing these commitments will be monitored and the Council expects implementation to be completed by the end of 2018 for most jurisdictions, with developing countries being allowed a further year to fulfil their commitments as regards the transparency criteria and the anti-BEPS measures.
The evaluation process for several jurisdictions in the Caribbean area (Anguilla, Antigua and Barbuda, Bahamas, British Virgin Islands, Dominica, Saint Kitts and Nevis, Turks and Caicos Islands, and US Virgin Islands) was not completed because of the natural disaster that affected the region in September 2017. The Council’s working group is required to resume work on these jurisdictions by February 2018 and complete the evaluations by the end of that year.