EU adds four new jurisdictions to blacklist of non-cooperative tax jurisdictions

The EU has updated its blacklist of non-cooperative tax jurisdictions to include the British Virgin Islands, Costa Rica, the Russian Federation and the Marshall Islands. Jurisdictions may be placed on the blacklist where they do not meet the EU’s criteria for tax good governance principles and, as a result, may face more stringent reporting rules and ineligibility for certain EU funding, among other measures.

The EU also amended its related “grey list” that identifies jurisdictions that do not currently meet the criteria, but have committed to implement tax good governance principles. Specifically, the EU added Albania, Aruba and Curaçao to its grey list, and removed Barbados, Jamaica, North Macedonia and Uruguay for fulfilling their previous commitments. In addition, the British Virgin Islands, Costa Rica, the Russian Federation are no longer on the grey list now that they have been moved to the blacklist.

The next update of the EU list of non-cooperative tax jurisdictions is expected in October 2023.

The EU instituted a blacklist as part of its efforts to curtail tax avoidance and harmful tax practices. When determining whether a particular jurisdiction is listed, the EU assesses jurisdictions against three main criteria— tax transparency, fair taxation and implementation of OECD measures to prevent tax base erosion and profit shifting. The EU has indicated that it is considering additional criteria, which could include measures to ensure a minimum level of taxation in jurisdictions in line with the OECD’s Pillar Two solution, beneficial ownership and misuse of shell companies. The EU has revised its list several times since it was first published in 2017.

The EU also identifies grey list jurisdictions that do not yet comply with all of the EU’s criteria, but which have made sufficient commitments to implement tax good governance principles. These jurisdictions are required to follow-through on these commitments to avoid being moved to the blacklist.

Most EU countries have implemented one or more defensive tax measures targeted at non-cooperative jurisdictions on the EU blacklist, such as:
 

• Non-deductibility of costs
• Withholding tax measures
• Controlled foreign company rules
• Limitation of participation exemption on profit distribution, or
• Administrative measures
   

The EU Mandatory Disclosure requirements also include a specific reporting rule for cross-border payments between associated enterprises where the recipient is resident in an EU-blacklisted jurisdiction. Additional disclosures will also be required for countries on the EU blacklist, or on the EU grey list for two consecutive years, under the EU public country-by-country reporting rules.

Following the latest update, the EU’s blacklist now includes the following 16 jurisdictions:​​​​​​​​​​​​​​

• American Samoa
• Anguilla
• The Bahamas
• The British Virgin Islands
• Costa Rica
• Fiji
• Guam
• The Marshall Islands

• Palau
• Panama
• Russian Federation
• Samoa
• Trinidad and Tobago
• Turks and Caicos
• The U.S. Virgin Islands
• Vanuatu.

The EU’s grey list now includes the following 18 jurisdictions:

• Albania
• Armenia
• Aruba
• Belize
• Botswana
• Curaçao
• Dominica
• Eswatini
• Hong Kong (SAR)

• Israel
• Jordan
• Malaysia
• Monserrat
• Qatar
• Seychelles
• Thailand
• Turkey
• Vietnam

For more information, contact your KPMG adviser.