4 October 2022, the Council of the European Union added Anguilla, the Bahamas and the Turks & Caicos Islands (TCI) to the EU list of non-cooperative jurisdictions for tax purposes, the so-called ‘blacklist’.
The Council said it regretted that these jurisdictions were non-cooperative on tax matters and invited them to engage with the EU Code of Conduct Group to resolve the identified issues. The TCI is listed for the first time. The Bahamas was previously listed in 2018 and Anguilla in 2020.
Jurisdictions are assessed on a set of criteria laid down by the Council, which covers tax transparency, fair taxation and implementation of international standards designed to prevent tax base erosion and profit shifting (BEPS). The Council’s decisions are prepared by the Council’s Code of Conduct Group, which is also responsible for monitoring tax measures in the EU member states.
The three new jurisdictions were included on the list because all have a zero or nominal only rate of corporate income tax and are deemed to be attracting profits without real economic activity – criterion 2.2 of the EU list. In particular, the Code of Conduct Group found they had failed to adequately address a number of recommendations of the OECD Forum on Harmful Tax Practices (FHTP) in connection with the enforcement of economic substance requirements.
The list is set out in Annex I of the Council conclusions on the EU list of non-cooperative jurisdictions for tax purposes. The conclusions also include a state-of-play document – Annex II or the ‘grey list’ – identifying cooperative jurisdictions that have made further improvements to their tax policies or related cooperation.
With these additions, the EU blacklist now consists of 12 jurisdictions: American Samoa, Anguilla, Bahamas, Fiji, Guam, Palau, Panama, Samoa, Trinidad & Tobago, the TCI, US Virgin Islands and Vanuatu.
“This revised EU list of non-cooperative tax jurisdictions (Annex I) includes countries that either have not engaged in a constructive dialogue with the EU on tax governance or have failed to deliver on their commitments to implement the necessary reforms,” said Zbyněk Stanjura, Minister of Finance of Czechia.
“Those reforms should aim to comply with a set of objective tax good governance criteria, which include tax transparency, fair taxation and implementation of international standards designed to prevent tax base erosion and profit shifting.
“I believe all 12 countries on the list will deliver on their commitments and carry out the necessary reforms in the field of taxation as soon as possible, so that they can be deleted from this list when we will next revise it in six months’ time,” he added.
In addition to the list of non-cooperative tax jurisdictions, the Council also approved the updated Annex II, which reflects the ongoing EU cooperation with its international partners and the commitments of these countries to reform their legislation to adhere to agreed tax good governance standards.
The commitment of Bermuda with regard to the OECD FHTP recommendations on the effective implementation of substance requirements was deemed fulfilled, resulting in its complete removal from Annex II.
Bermuda Premier and Minister of Finance David Burt said: “Bermuda prides itself on being a transparent jurisdiction and always compliant with EU standards. We committed to addressing the recommendation in Annex II and are pleased with this positive decision. As always, Bermuda remains committed to cooperating with the OECD FHTP and EU Code of Conduct Group (Business Taxation) in implementing tax governance standards.”
Tunisia also fulfilled its commitment relating to the country-by-country reporting minimum standard (BEPS Action 13) and has been removed from Annex II.
Costa Rica fulfilled its commitment to amend its Special Economic Zones regime, which was considered harmful by the FHTP, and has been removed from the relevant section in Annex II. However, the reference to Costa Rica under the section on foreign-source income exemption (FSIE) regimes is maintained. The deadline for fulfilling this commitment, which was also made by four other jurisdictions, is 31 December 2022.
Annex II also features two new commitments in the context of the work of the FHTP on harmful preferential tax regimes: both Armenia and Eswatini have committed to abolish or amend their preferential tax regimes by 31 December 2023. The rest of Annex II remains unchanged.
Work on the list is a dynamic process. Since 2020 the Council updates the list twice a year. The next revision of the list is scheduled for February 2023.