24 Apr, 2020

Taxation: revised EU list of non-cooperative jurisdictions

The Economic and Financial Affairs Council (“the Council”) on 18 February 2020 adopted revised conclusions on the EU list of non-cooperative jurisdictions for tax purposes (“the EU list”).  The EU list (Annex I) includes non-EU countries or territories which had not made sufficient commitments in response to the EU‘s concerns about taxation arrangements.  The State of play section (Annex II) lists the jurisdictions which had responded with sufficient commitments.  Therefore, the jurisdictions that do not yet comply with all international tax standards but have committed to reforms are included in Annex II.  These countries need to take effective actions to avoid being listed in the future.  Once a country meets all its commitments, it will be removed from both lists.  The EU list helps EU member states to deal more resolutely with countries that encourage abusive tax practices.  The aim is not to name & shame countries, but to encourage positive change through cooperation and promote tax good governance worldwide by monitoring developments and established reforms in these countries.

The Council adopted the first EU list on 5 December 2017.  Since then it has been revised several times. In 2020, the list has been already updated on 18 February.  In addition to the eight jurisdictions that were already listed, the EU also decided to include four additional jurisdictions.  As of 27 February, which is the date of publication in the Official Journal, Annex I includes the following countries:

  1. American Samoa – does not apply any automatic exchange of financial information, has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance (“the OECD Multilateral Convention“) as amended, did not commit to applying the BEPS minimum standards and did not commit to addressing these issues.
  2. Cayman Islands – does not have appropriate measures in place relating to economic substance in the area of collective investment vehicles.
  3. Fiji – is not a member of the Global Forum on transparency and exchange of information for tax purpose (“the Global Forum”), has not signed and ratified the OECD Multilateral Convention as amended, has harmful preferential tax regimes, and has not become a member of the Inclusive Framework on BEPS or implemented OECD anti-BEPS minimum standard.
  4. Guam – does not apply any automatic exchange of financial information, has not signed and ratified the OECD Multilateral Convention as amended, did not commit to applying the BEPS minimum standards, and did not commit to addressing these issues.
  5. Oman – does not apply any automatic exchange of financial information, and has not signed and ratified the OECD Multilateral Convention as amended.
  6. Palau – does not apply any automatic exchange of financial information, and has not signed and ratified the OECD Multilateral Convention as amended.
  7. Panama – does not have a rating of at least “Largely Compliant” by the Global Forum for exchange of information on request.
  8. Samoa – has a harmful preferential tax regime and has not committed to addressing this issue.  Furthermore, Samoa committed to complying with criterion 3.1 by the end of 2018 but has not resolved this issue yet.
  9. Trinidad and Tobago – do not apply any automatic exchange of financial information, have a “NonCompliant” rating by the Global Forum, has not signed and ratified the OECD Multilateral Convention and have harmful preferential tax regimes.
  10. US Virgin Islands – does not apply any automatic exchange of financial information, has not signed and ratified the OECD Multilateral Convention, has harmful preferential tax regimes, did not commit to applying the BEPS minimum standards, and did not commit to addressing these issues.
  11. Vanuatu – does not have a rating of at least “Largely Compliant” by the Global Forum for exchange of information on request, facilitates offshore structures and arrangements aimed at attracting profits without real economic substance.
  12. Seychelles – has harmful preferential tax regimes.

The EU aims to aid fair and effective corporate taxation in a single market.  Given the global nature of tax competition and aggressive tax planning, this also means addressing external challenges to the tax bases of EU countries.  The EU is working to improve tax governance on a global level.  It is doing this to energetically curb tax fraud or evasion, tax avoidance, and money laundering.  The EU list is part of the EU’s external strategy for effective taxation.  By identifying at the EU level countries that facilitate abusive tax practices, member states can act in unison to push for reform and the list helps them to coordinate defensive taxation measures.  The EU list and its defensive measures should send a strong signal to the jurisdictions concerned, thus encouraging positive change leading to their removal from the list.

The EU list is now regularly updated as part of a dynamic monitoring and revision process. The next revision of the EU list is expected in October 2020.

Authors: Ognjen Colić and Žarko Popović