Corporate Tax News Issue 64 - November 2022

Three jurisdictions added to list of noncooperative jurisdictions for tax purposes

During an Economic and Fiscal Affairs Council (ECOFIN) meeting held on 4 October 2022, the Council of the European Union completed its biannual review of the EU list of noncooperative jurisdictions for tax purposes, adding three jurisdictions to the blacklist and making a few changes to the “grey list” (also known as the “state of play” document).

The noncooperative tax jurisdictions includes jurisdictions 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 specific reforms relating to tax transparency, fair taxation and implementation of international standards designed to prevent tax base erosion and profit shifting (tax good governance standards). The grey list reflects the countries that have committed to reform their legislation to adhere to tax good governance standards but remain subject to monitoring while they execute on their commitments.

The Bahamas (previously on the list in 2018) and Turks and Caicos Islands have been moved from the grey list to the noncooperative jurisdiction list and Anguilla has returned to the blacklist after having been removed in 2021. According to the Council press release, the three jurisdictions—all of which have a zero or nominal corporate income tax rate—are attracting profits without any real economic activity and have failed to address recommendations relating to the enforcement of economic substance requirements, which they had committed to do.

In addition, the Council made the following changes to the grey list:

  • Bermuda and Tunisia have been removed from the list as they have fulfilled their commitments relating to the implementation of economic substance requirements and country-by-country reporting requirements, respectively.
  • Costa Rica is removed from the list as it fulfilled its commitment to amend its special economic zones regime, but it still needs to make changes to its foreign-source income regime by 31 December 2022.
  • Armenia and Eswatini have been placed on the grey list until they amend or abolish their preferential tax regimes, which they have committed to do by 31 December 2023.

The noncooperative list now stands at 12 jurisdictions: American Samoa, Anguilla, Bahamas, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, Turks and Caicos Islands, U.S. Virgin Islands and Vanuatu. The grey list has 22 jurisdictions: Armenia, Barbados, Belize, Botswana, British Virgin Islands, Costa Rica, Dominica, Eswatini, Hong Kong, Israel, Jamaica, Jordan, Malaysia, Montserrat, North Macedonia, Qatar, Russia, Seychelles, Thailand, Turkey, Uruguay and Vietnam.

The EU introduced the list of noncooperative tax jurisdictions in 2017 and has been revising it bi-annually for the last five years. The next update will be in April 2023.

Frederik Boulogne