EU Update on the List of Non-Cooperative Jurisdictions For Tax Purposes
The EU Council has revised the current list of non-cooperative jurisdictions for tax purposes, on 14th February 2023. The list which was established in 2017 now consists of 16 jurisdictions by adding Marshall Islands, Costa Rica, British Virgin Islands, and Russia, to the list.
The revised list includes countries that either haven’t engaged in a constructive dialogue on tax governance with the European Union, or have not acted on their commitments to implement the required reforms that aim to comply with a set of tax governance criteria, such as tax transparency, fair taxation and adaption of international standards designed to prevent tax base erosion and profit shifting.
The current list is as follows and will be updated again in October 2023.
- American Samoa
- British Virgin Islands
- Costa Rica
- Marshall Islands
- Trinidad and Tobago
- Turks and Caicos Islands
- US Virgin Islands
Impact on Businesses Operating in Cyprus
The following effects could apply to taxpayers who are based in Cyprus and perform transactions or operations with parties located in the above list of non-cooperative jurisdictions for tax purposes:
- EU Mandatory Disclosure Rules (DAC6): In accordance with Hallmark C(1)(b)(ii), arrangements involving deductible cross-border payments made between associated enterprises in situations where the recipient residing in one of the jurisdictions that is part of the EU’s list of non-cooperative jurisdictions for tax purposes, are reportable, whether or not the main benefit test is met.
- Withholding taxes may apply in Cyprus to payments of dividends, interest, and royalty payments made by businesses with tax residence in Cyprus to businesses located in a jurisdiction that is included in the EU’s list of non-cooperative jurisdictions for tax purposes (subject to conditions).
Moreover, it should be noted that there will be an additional disclosure requirement for large multinational groups that will be subject to the EU Public Country-by-Country Reporting Rules, regarding the jurisdictions that are included in the EU list of non-cooperative jurisdictions for tax purposes for two consecutive years.
Since the deadline for the transposition of the EU Public Country-by-Country reporting provisions into the domestic law of EU member states is 22 June 2023, so, currently, it is anticipated that there would be no impact for EU Public Country-by-Country reporting purposes.