Amendment of low tax jurisdictions blacklist of the European Union

On 2 October 2018 the Council of the European Union (EU) has amended the blacklist of non-cooperative jurisdictions for tax purposes: Palau has been de-listed.

This blacklist was published on 5 December 2017 and included 17 jurisdictions that do not cooperate in matters of exchange of tax information and establish preferential tax regimes (zero or low taxation), and also do not comply with common standards of tax transparency. Jurisdictions that express an intention to bring their tax legislation, main directions of tax and financial policies and judicial system to accordance with common standards of tax transparency were not included in this blacklist.

The Council of the EU has provided an opportunity to be excluded from the blacklist for jurisdictions that initially figured in the blacklist but have proclaimed on high political level their initiative to participate in an international process of tax transparency and implementation of common standards of the taxation.

12 January 2018 eight jurisdictions that were initially listed have been excluded from the blacklist. Afterwards, the Council of the EU amended the blacklist several times: on 13 March 2018 and 25 May 2018 some jurisdictions were listed and some were de-listed. Finally, the last version of blacklist was approved on 2 October 2018 and the difference in comparison with the previous one is that Palau was de-listed.

The blacklist includes following countries and territories at the moment:

• American Samoa;
• Guam;
• Namibia;
• Samoa;
• Trinidad and Tobago;
• US Virgin Islands.

Mandatory measures applicable to entities from such jurisdictions on the EU level are not designed at the moment. Council Conclusions on the EU list of non-cooperative jurisdictions for tax purposes establishes only the right of member states of the EU to apply the following measures:

1. Non-deductibility of costs;
2. Controlled Foreign Company (CFC) rules;
3. Withholding tax measures;
4. Limitation of participation exemption;
5. Switch-over rule;
6. Reversal of the burden of proof;
7. Special documentation requirements;
8. Mandatory disclosure by tax intermediaries of specific tax schemes with respect to cross-border arrangements.

In the light of all mentioned above it is possible to conclude that EU business must be aware of such blacklist, especially when choosing contractors and partners and making transactions.