EU Blacklist

by | Feb 27, 2020 | Cyprus Tax

What is the EU Blacklist?

The EU Blacklist is the newest tool to tackle the risks arising from tax abuse and unfair tax competition. It targets jurisdictions that do not meet and do not intend to meet EU tax good governance criteria. The idea was that a single EU list would hold more weight than several national lists. The EU Blacklist was officially launched on the 5th of December 2017

How is the EU Blacklist prepared?

Countries would enter the EU Blacklist if they do not meet or do not intend to meet the required criteria within an agreed timeframe. If they commit then they are monitored until compliance and then removed. 

Who updates the EU Blacklist?

The EU Finance Minister in ECOFIN would be the policy body updating the list on a going concern. Nevertheless, the EU Finance Minister would receive recommendations from the Code of Conduct Group for Business Taxation. 

Current EU Blacklist

  1. Cayman Islands
  2. Palau
  3. Panama
  4. Seychelles
  5. American Samoa
  6. Figi
  7. Guam
  8. Oman
  9. Samoa
  10. Trinidad and Tabago
  11. US Virgin Islands
  12. Vanuatu

The work on the list of non-cooperative tax jurisdictions is based on a thorough process of assessment, monitoring, and dialogue with about 70 third-country jurisdictions. Since we started this exercise, 49 countries have implemented the necessary tax reforms to comply with the EU’s criteria. This is an undeniable success. But it is also work in progress and a dynamic process where our methodology and criteria are constantly reviewed.

Zdravko Marić

Croatian Deputy Prime Minister and Minister of Finance

What is Cyprus’ position towards EU Black List?

According to one publication which I have read the European Council has invited member states to apply specific legislative measures, amongst which:

  • Denying cost deduction and payments to blacklisted jurisdictions;
  • Application of CFC rules to the income of any entity residing or a permanent establishment situated in a blacklisted jurisdiction;
  • Applying a withholding tax at a higher rate
  • Limitation of the participating exemption on profit distribution

As a response, Cyprus is considering, UNCONFIRMED, introducing a withholding tax on payment at the following rates:

  • 30% on interest
  • 17% on dividends
  • 10% on royalties

EU Blacklist Inclusions

18th of February

On the 18th of February 2020, the EU Black List was updated by the Council. In addition to the 8 jurisdictions already listed (see below), the EU has included the Cayman Islands, Palau, Panama and Seychelles in its list of non-cooperative tax jurisdictions.

The reason for the inclusion has been the non-implementation of sufficient tax reforms that have been previously committed by the agreed deadline. Further information is available below in the specific country update.

EU Blacklist Exclusions

18th of February

The Council went on to exclude 16 jurisdictions (Antigua and Barbuda, Armenia, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cabo Verde, Cook Islands, Curaçao, Marshall Islands, Montenegro, Nauru, Niue, Saint Kitts and Nevis, Vietnam) because they implement reforms complying with EU tax good governance principles ahead of the agreed deadline.

New to EU Black List

Cayman Islands
When was the Cayman Islands added to the EU Blacklist?

The Cayman Islands was one of the 47 jurisdictions initially added to the gray list of 5th of December 2017. It was added to the EU Blacklist on the 18th of February 2020. 

Why was the Cayman Islands added to the EU Blacklist?

The Cayman Islands does not have appropriate measures in place relating to economic substance in the area of collective investment vehicles

Palau
When was Palau added to the EU Blacklist?

Palau was initially added to the list on the 5th of December 2017, moved to the gray list on the 2nd of October 2018 until the 18th of February when it was returned to the EU Blacklist.

Why was Palau added to the EU Blacklist?

Palau does not apply any automatic exchange of financial information, has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance as amended, and has not
resolved these issues yet.

Page 8 of ECOFIN 87 report

Panama
When was Panama added to the EU Blacklist?

Panama was initially added to the EU Blacklist on the 5th of December 2017 and remained on that list until the 23rd of January 2018. On the 12th of March 2019, it was entirely removed from the Gray list only to return on the 18th of February 2020 on the EU blacklist. 

Why was Panama Added to the EU Blacklist?

Panama does not have a rating of at least “Largely Compliant” by the Global Forum on Transparency and Exchange of Information for Tax Purposes for Exchange of Information on Request and has not resolved this issue yet.

Page 8 of ECOFIN 87 report

Seychelles
When was Seychelles added to the EU Blacklist?

Initially added to the gray list on the 5th of December 2017 until the 18th of February 2020 when it was included in the blacklist.

Why were Seychelles added to the EU Blacklist?

Seychelles has harmful preferential tax regimes and has not resolved these issues yet.

Page 8 of ECOFIN 87 report

Existing EU Black List

American Samoa
When was American Samoa added to the EU Blacklist?

Added to the list as of 5th December 2017 and remain on the list until today.

Why was American Samoa added to the EU Blacklist?

American Samoa does not apply any automatic exchange of financial information, has not signed and ratified, including through the jurisdiction they are dependent on, the OECD Multilateral Convention on Mutual Administrative Assistance as amended, did not commit to applying the BEPS minimum standards and did not commit to addressing these issues.

Page 7 of ECOFIN 297 report

Fiji
When was Fiji added to the EU Blacklist?

Added on the EU Blacklist as of the 12th of March 2019. Fiji remains on the list until this day.

Why was Fiji added to the EU Blacklist?

Fiji has not yet amended or abolished its harmful preferential tax regimes. Fiji’s commitment to comply with criteria 1.2, 1.3 and 3.1 by the end of 2019 will continue to be monitored.

Page 8 of ECOFIN 297 report

Guam
When was Guam added to the EU Blacklist?

Added to the EU Blacklist as of 5th December 2017 and remain on the list until today.

Why was Guam added to the EU Blacklist?

Guam does not apply any automatic exchange of financial information, has not signed and ratified, including through the jurisdiction they are dependent on, the OECD Multilateral Convention on Mutual Administrative Assistance as amended, did not commit to applying the BEPS minimum standards and did not commit to addressing these issues

Page 8 of ECOFIN 297 report

Oman
When was Oman added to the EU Black List?

Added on the EU Blacklist as of the 12th of March 2019. Oman remains on the list until today.

Why was Oman added to the EU Black List?

Oman does not apply any automatic exchange of financial information, has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance as amended, and has not yet resolved these issues.

Page 9 of ECOFIN 297 report

Samoa
When was Samoa added to the EU Black List?

Added to the list as of 5th December 2017 and remain on the list until today.

The Council suspended the screening process due to devastating hurricanes that struck the Carribean nationals in 2017. In its subsequent assessment of the 4th of December 2018, Samoa remained on the EU Black List until this day. See Page 9 of ECOFIN Report 1059

Why was Samoa added to the EU Black List?

Samoa has harmful preferential tax regimes, does not apply the BEPS minimum standards and did not commit to addressing these issues by 31 December 2018.

Trinidad and Tabago
When was Trinidad and Tobago First Added to the EU Black List?

Added to the EU Black List as of 5th December 2017 and remains on the EU Black List until today.

Why was Trinidad and Tobago added to the EU Blacklist?

Trinidad and Tobago has been attributed a rating of “Non Compliant” by the Global Forum on Transparency and Exchange of Information for Tax Purposes, has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters as amended, has a harmful preferential tax regime and did not commit to addressing these issues by 31 December 2018.

 

US Virgin Islands

When were the US Virgin Islands added to the EU Blacklist?

Added to the list as of 5th December 2017 and remain on the list until today.

The Council suspended the screening process due to devastating hurricanes that struck the Carribean nationals in 2017. In its subsequent assessment of the 4th of December 2018, the US Virgin Islands remained on the EU Black List until this day. See Page 9 of ECOFIN Report 1059

Why where the US Virgin Islands added to the EU Blacklist?

US Virgin Islands was included in the EU Black List due to being classified as a harmfull tax regime and did not comply with Criterion 2.1.

Vanuatu

When was Vanuatu added to the EU Blacklist?

Added on the EU Black list as of the 12th of March 2019. Vanuatu remains on the list until this day.

Why was Vanuatu added to the EU Blacklist?

Vanuatu facilitates offshore structures and arrangements aimed at attracting profits without real economic substance and has not yet resolved this issue.

Page 10 of ECOFIN 297 report

Harris Sharpe

Harris Sharpe

Author - Photographer

For many years he has worked and devoted his skills and efforts towards building a successful career as a leading executive. From humble beginnings, his aim has always been to yield results; with a keen focus to attention to detail and client satisfaction. His experience has always been varied and not specific, at times he preferred it. With that in mind, he has dealt with CySEC on licensing and ongoing regulation, international private equity and credit fund managers, NASDAQ and NYSE listed companies occasional millionaires as well as self-made millionaires. His passion though is difficult transaction work organizing and deploying people for a common goal. Harris enjoys reading and studying the Cyprus law and sharing that information on this website.

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