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.
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