EU List of Non-cooperating Countries for Tax Purposes Has Been Updated

On February 14, the European Council adopted a resolution on expanding the list of states that do not cooperate with the European Union for tax purposes. New additions include the Marshall Islands (included for the second time since 2018), the British Virgin Islands, Costa Rica and Russia (included for the first time). Thus, the updated list now consists of 16 countries:

• American Samoa
• Anguilla
• Bahamas
• British Virgin Islands
• Costa Rica
• Fiji
• Guam
• Marshall Islands
• Palau
• Panama
• Russia
• Samoa
• Trinidad and Tobago
• Turks and Caicos Islands
• US Virgin Islands
• Vanuatu

Why were new states included in the list?

Marshall Islands: This jurisdiction, which has zero or only a nominal corporate income tax rate, is likely to receive income without actual economic activity and does not comply with economic presence laws.

British Virgin Islands: Listed for unsatisfactory compliance with the OECD standard for exchange of information on request.

Costa Rica has failed to comply with its obligations to eliminate or modify harmful aspects of its foreign-source tax exemption regime.

Changes in Russian legislation, adopted in 2022, did not pass the test for compliance with the criteria of proper tax administration. In addition, the country has not fulfilled its commitment to eliminate the harmful aspects of the special regime for international holding companies. Russia’s aggression against Ukraine also does not contribute to effective negotiations on tax issues.

Which states fulfilled their obligations and received a warning?

Nevertheless, a number of states – North Macedonia, Barbados, Jamaica and Uruguay – were excluded from the list, having fulfilled the requirements for cooperation with the EU in the tax field.

A separate appeal was made to the tax authorities of Turkey to improve the work on the automatic exchange of tax information.

Hong Kong, Malaysia and Qatar have been granted an extension of the deadline to complete reforms to the foreign-source capital gains tax exemption. Albania, Armenia and Eswatini are expected to change or eliminate preferential tax regimes by the end of 2023, in line with their previous commitments.

Jurisdictions are evaluated based on a set of criteria established by the Council, which include transparency and fairness of taxation, as well as measures to prevent erosion of the tax base and the removal of profits from taxation. Since 2020, the Council has updated the list twice a year. The next inspection is scheduled for October 2023.

Source: EU list of non-cooperative jurisdictions for tax purposes