International Taxation - UE list of non-cooperative tax jurisdictions

UPDATE OF THE EU LIST OF NON-COOPERATIVE TAX JURISDICTIONS

On March 12, the European Union's finance ministers updated the list of non-cooperative tax jurisdictions known as the "black list".

The list now includes fifteen jurisdictions:

• 5 jurisdictions that have been on the list since its inception: American Samoa, Guam, Samoa, Trinidad and Tobago and the American Virgin Islands.

• 3 jurisdictions that have moved from the black list to the grey list but have not fulfilled their commitments are again placed on the black list: Barbados, the United Arab Emirates and the Marshall Islands.    

• 7 other jurisdictions previously on the grey list and now blacklisted for the same reasons: Aruba, Belize, Bermuda, Fiji, Oman, Vanuatu and Dominica.

This list, first drawn up in December 2017, is based on an assessment of one indicator: the absence of corporate tax; and three criteria: fiscal transparency, good governance and real economic activity.

Member States may therefore take measures regarding transactions between their tax residents and these non-cooperative countries, such as:

• administrative measures: increased transactions’ monitoring and more audits for taxpayers benefiting from such schemes or using structures via these countries.

• legislative measures: non-deductibility of costs, controlled foreign companies’ rules or increased withholding taxes.

At this stage, France has not yet updated its own list of non-cooperative States and territories (ETNCs) referred to in Article 238-0 A of the French Tax Code. However, since the adoption of the law against fraud on October 24th 2018, the French list must now systematically take into account the countries included in the EU's black list.

Vigilance is therefore required as the French ETNC list must be updated at least once a year by ministerial decree, the last one dating from April 2016. Especially since the consequences are particularly restrictive. For instance, there is, among the measures relating to transactions with ETNCs, a 75% withholding tax applied on interest and dividend payments to these countries It is therefore necessary to anticipate the impact of these new rules on existing and future investment schemes, particularly those involving the United Arab Emirates.

The United Arab Emirates was keen to recall the existence of a detailed timetable of the measures currently being implemented to comply with the European Union’s requirements. Thus, a legislative process is apparently already under way to follow the same evolution as Tunisia, Panama or Bahrain, which were removed from the black list and then the grey list in fifteen months.

Bird & Bird's French tax team and the United Arab Emirates office are at your disposal to assist you in taking these new measures into account.