The EU has updated its blacklist of non-cooperative tax jurisdictions to move Anguilla, the Bahamas, and Turks and Caicos Islands to its blacklist from its “grey list”. The EU concluded that these jurisdictions did not sufficiently address recommendations for the effective implementation of substance requirements. Jurisdictions on the blacklist may face certain defensive tax measures, including more stringent reporting rules and ineligibility for certain EU funding, among other measures.
The EU also removed Bermuda and Tunisia and added Armenia and Eswatini to its grey list of jurisdictions the EU continues to monitor for follow-through on commitment to implement certain tax reforms. The revisions to both lists, agreed to on October 4, 2022, will take effect from the day of publication in the Official Journal of the European Union. The next update of the EU list of non-cooperative tax jurisdictions is expected in February 2023.
The EU blacklist is part of the EU's effort to clamp down on tax avoidance and harmful tax practices. The EU assesses jurisdictions against three main criteria when determining whether a particular jurisdiction is listed — tax transparency, fair taxation and implementation of OECD measures to prevent tax base erosion and profit shifting. The EU has recently noted 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 12 jurisdictions:
- American Samoa
- The Bahamas
- Trinidad and Tobago
- Turks and Caicos
- The U.S. Virgin Islands
The EU’s grey list now includes the following 22 jurisdictions:
- The British Virgin Islands
- Costa Rica
- Hong Kong (SAR)
- North Macedonia
- Russian Federation
For more information, contact your KPMG adviser.
Information is current to October 10, 2022. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500