On the 20th of February 2024, the Council of the European Union undertook a significant update to the EU List of non-cooperative jurisdictions for tax purposes (EU List). This development is paramount for businesses and tax professionals to be aware of.
Key Change:
Removals from the EU List:
- Bahamas
- Belize
- Seychelles
- Turks and Caicos Islands
With these modifications, the updated EU list comprises the following 12 jurisdictions:
- American Samoa
- Anguilla
- Antigua and Barbuda
- Fiji
- Guam
- Palau
- Panama
- Russia
- Samoa
- Trinidad and Tobago
- US Virgin Islands
- Vanuatu
Implications for Taxpayers:
Beyond mere compliance concerns, the inclusion of these jurisdictions prompts several implications:
- Enhanced Due Diligence: The inclusion of these jurisdictions necessitates enhanced due diligence.
- Reporting under DAC6: The EU Directive on Cross-Border Tax Arrangements DAC6 could see potential reporting implications for cross-border arrangements involving these jurisdictions.
- Withholding Tax: As of 31 December 2022, Cyprus has introduced withholding tax on payments such as dividends, interest, and royalties directed to entities in jurisdictions featured in the EU List.
A subsequent bi-annual review of this list is scheduled for October 2024.
DAC6 Reporting Details:
The below hallmarks could be affected due to the recent inclusions:
- C.1.b.(ii): Reportable arrangements here include deductible cross-border payments between associated enterprises, mainly when the beneficiary is a tax resident in a jurisdiction recognized as non-cooperative by the Council of the European Union.
- D.1: Potential reportability arises if a jurisdiction present in the EU list is utilized, especially if its use could compromise the reporting for agreements pertaining to the automatic exchange of information.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.