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Consequences of Registering a Company in a Jurisdiction from the EU Blacklist
Continuing the trend of combating tax havens, in July the European Commission made recommendations to the EU member states not to provide financial support to companies associated with jurisdictions from the EU’s list of non-cooperative tax jurisdictions, for instance, a company registered in the UAE. It is also proposed to extend the restrictions to companies involved in serious financial crimes, including financial fraud, corruption and tax violations. The recommendations aim to provide member states with a template, in line with the EU law, on how to prevent the use of state support in tax fraud, tax evasion or money laundering and terrorist financing schemes.
In particular, they proclaim that companies with links to jurisdictions on such EU List (for example, if the company is a resident for tax purposes in such a jurisdiction) should not be provided with government support.
However, the Commission also recommends exceptions to these restrictions that should be applied to protect honest taxpayers. Even if a company has links to jurisdictions in the EU Non-Cooperating Tax Jurisdictions List, under certain circumstances it must still have access to financial support. As an example, exceptions are possible for companies that can prove that they have paid adequate tax in a member state for a certain period of time (say, over the last three years), or if the business has real economic substance in the specified country.
In addition, the EU member states are obliged to inform the Commission about the measures that they will take in accordance with the recommendation and the EU principles of good governance. The Commission will publish a report on the impact of this recommendation within three years.
We remind you that at the moment the following countries are in the EU Non-Cooperating Tax Jurisdictions List:
American Samoa (no automatic exchange of financial information, no signed or ratified OECD Multilateral Convention, no minimum BEPS standards applied)
Belize (has committed to repeal/amend the harmful preferential tax regime by the end of 2019)
Dominica (automatic exchange of financial information does not apply)
Fiji (harmful preferential tax regimes not abolished)
Guam (no automatic exchange of financial information, no signed or ratified OECD Multilateral Convention on Mutual Administrative Assistance, no BEPS minimum standards applied)
Marshall Islands (facilitating offshore structures and mechanisms aimed at generating profits without observance of subordination)
Oman (no automatic exchange of financial information, no signed or ratified OECD Multilateral Convention on Mutual Administrative Assistance)
Samoa (has a harmful preferential tax regime and does not assume any obligations to resolve this issue)
Trinidad and Tobago (rated “non-compliant” by the Global Forum on Transparency and Information Exchange for Tax Purposes and Information Exchange on Request)
United Arab Emirates (promotes offshore structures and agreements aimed at generating profits with no real economic purpose)
United States Virgin Islands (no automatic exchange of financial information, no signed or ratified OECD Multilateral Convention on Mutual Administrative Assistance, has harmful tax regimes, no BEPS minimum standards applied)
Vanuatu (promotes offshore structures and mechanisms aimed at attracting profits with no real economic purpose)
The revision of the list is planned for October 2020.