Taxation: EU list of non-cooperative jurisdictions

What is the EU list of non-cooperative jurisdictions?

The EU list of non-cooperative jurisdictions for tax purposes

The list adopted by the Council on 6 October 2020 is composed of:

American Samoa
Anguilla
Barbados
Fiji
Guam
Palau
Panama
Samoa
Trinidad and Tobago
US Virgin Islands
Vanuatu
Seychelles

The list becomes official upon publication in the Official Journal.

EU list of non-cooperative jurisdictions for tax purposes (Official Journal, 7 October 2020)

The EU is working to improve international tax governance. Given the global nature of unfair tax competition, this also means addressing external challenges to EU countries' tax bases.

The EU list of non-cooperative jurisdictions for tax purposes is a tool to tackle:

tax fraud or evasion: illegal non-payment or under payment of tax
tax avoidance: use of legal means to minimise tax liability
money laundering: concealment of origins of illegally obtained money

It lists non-EU countries that encourage abusive tax practices, which erode member states' corporate tax revenues.

By identifying these countries at EU level, member states can act together to put pressure for reform. The aim is not to name and shame countries, but to encourage positive change in their tax legislation and practices, through cooperation.

Jurisdictions that do not yet comply with all international tax standards but have committed to reform are included in a state of play document (Annex II). Once a jurisdiction meets all its commitments, it is removed from the annex.

Council conclusions on an external taxation strategy and measures against tax treaty abuse, 25 May 2016

When was the EU list established and when is it updated?

The Council adopted the first EU list on 5 December 2017. It has since been updated several times.

More substantial revisions took place in March 2019 and February 2020. These coincide with the expiry of the end 2018 and end 2019 deadlines for jurisdictions to implement their initial commitments.

From 2020, the list is updated twice a year.

The latest revision took place in October 2020. The next revision is due in February 2021.

Timeline

See full timeline

How was the list established?

In November 2016, the Council mandated the Code of Conduct group (business taxation), a Council working party, to carry out the preparatory work to establish the list.

The Code of Conduct group screened 92 jurisdictions, selected on the basis of:

their economic ties with the EU
their institutional stability
the importance of the country's financial sector

The screening and assessment report enabled the Council to adopt the first EU list on 5 December 2017. The list (Annex I to the Council conclusions) included 17 non-EU countries or territories. These jurisdictions had not made sufficient commitments in response to the EU's concerns.

A state of play document (Annex II) set out the jurisdictions which had responded with sufficient commitments. They needed to take effective action by the end of 2018, or in some cases 2019, to avoid being listed in the future.

How is the list updated?

The EU list is now regularly updated and revised as part of a dynamic monitoring of the measures implemented by jurisdictions to comply with their commitments.

This is a continuous process, which includes:

establishing criteria in line with international tax standards
screening countries against these criteria
engaging with countries that do not comply
listing and de-listing countries as they undertake (or not) reforms
monitoring developments to ensure that jurisdictions do not backtrack on previous reforms

The monitoring process follows a set of procedural guidelines, agreed in February 2018.

Defensive measures

It is important that EU member states put in place efficient defensive measures in non-tax and tax areas. Defensive measures help to protect their tax revenues, and fight against tax fraud, evasion and abuse.

When endorsing the EU list, the Council took the view that:

Effective and proportionate defensive measures, in both non-tax and tax areas could be applied by the EU and member states vis-à-vis the non-cooperative jurisdictions, as long as they are part of such list.
Council conclusions, 5 December 2017

Non-tax area defensive measures

Regarding non-tax areas, the Council invited EU institutions and member states to take the EU list into account in:

foreign policy
development cooperation
economic relations with third countries

Furthermore, certain EU funding rules now explicitly refer to the list. Funds from several EU instruments cannot be channelled through entities in listed countries, including the:

European Fund for Sustainable Development (EFSD)
European Fund for Strategic Investments (EFSI)
External Lending Mandate (ELM)
General framework for securitisation

In its conclusions of 12 March 2019, the Council welcomed the fact that the list "is being taken into account by the European Commission in the implementation of EU financing and investment operations".

Tax area defensive measures

EU member states have broad discretion on the type and scope of defensive measures they apply in the tax area. These largely depend on their national tax systems. Nevertheless, there is a certain degree of coordination.

National measures

EU countries agreed in December 2017 to apply at least one of the following administrative measures:

reinforced monitoring of transactions
increased risk audits for taxpayers who benefit from listed regimes
increased risk audits for taxpayers who use tax schemes involving listed regimes

On 5 December 2019, the Council endorsed guidance for further coordination. Member states also committed, as of 1 January 2021, to use the EU list in the application of at least one of four specific legislative measures:

non-deductibility of costs incurred in a listed jurisdiction
controlled foreign company (CFC) rules, to limit artificial deferral of tax to offshore, low-taxed entities
withholding tax measures (WHT), to tackle improper exemptions or refunds
limitation of the participation exemption on shareholder dividends

EU law

Recent EU legislation also explicitly refers to the list. For example, EU transparency rules for tax intermediaries were agreed in 2018. They introduced new reporting requirements for tax schemes involving listed countries. These rules apply as of 1 July 2020.

The Code of Conduct Group will resume reviewing the work on legislative defensive measures in the tax area by July 2021 at the latest.