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The European Union tax haven blacklist, officially the EU list of non-cooperative tax jurisdictions, is a tool of the European Union (EU) that lists tax havens. It is used by the Member States to tackle external risks of tax abuse and unfair tax competition. It was adopted for the first time in 2017 as a response to tax avoidance in the EU, screening 92 countries.[1] It is managed by the Code of Conduct Group for Business Taxation and monitored by the European Commission (EC).[2] The most recent revision was released on 6 October 2020. The list is updated twice a year.[3]
Jurisdictions that do not comply with all three of these EC criteria are flagged as tax havens by the EU:[2]
Transparency
Fair Tax Competition
BEPS implementation (the OECD's Base Erosion and Profit Shifting minimum standards)
History
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The original list in 2017 contained additional countries. Of these, 25 countries have been cleared and removed from the list by March 2019: Andorra, Bahrain, Faroe Islands, Greenland, Grenada, Guernsey, Hong Kong, Isle of Man, Jamaica, Jersey, Korea, Liechtenstein, Macao SAR, Malaysia, Montserrat, New Caledonia, Panama, Peru, Qatar, San Marino, Saint Vincent and the Grenadines, Taiwan, Tunisia, Turks and Caicos, and Uruguay. An additional 34 countries that have committed to compliance by the end of 2019, and form a "grey list": Albania, Anguilla, Antigua and Barbuda, Armenia, Australia, Bahamas, Bosnia and Herzegovina, Botswana, British Virgin Islands, Cabo Verde, Costa Rica, Curaçao, Cayman Islands, Cook Islands, Eswatini, Jordan, Maldives, Mauritius, Morocco, Mongolia, Montenegro, Namibia, North Macedonia, Nauru, Niue, Palau, Saint Kitts and Nevis, Saint Lucia, Serbia, Seychelles, Switzerland, Thailand, Turkey, and Vietnam.[2]
A number of countries have not yet been screened: In 2019 Russia, Mexico and Argentina are scheduled to be screened. Other countries are planned to be brought into the scope from 2020 onwards.[2]
On 27 March 2019, the European Parliament voted by 505 in favour to 63 against of accepting a new report that likened Luxembourg, Malta, Ireland and the Netherlands, and Cyprus to "display[ing] traits of a tax haven and facilitate aggressive tax planning".[4][5] However, despite this vote, the EU Commission is not obliged to include these EU jurisdictions on the blacklist.[6]
Following this latest revision in October 2023, the EU blacklist includes the following sixteen jurisdictions: American Samoa, Anguilla, Antigua and Barbuda, Bahamas, Belize, Fiji, Guam, Palau, Panama, Russia, Samoa, Seychelles, Trinidad and Tobago, Turks and Caicos Islands, US Virgin Islands, Vanuatu. [8] In the February 2023 update, British Virgin Islands, Costa Rica, Marshall Islands and Russia were added and North Macedonia, Barbados, Jamaica and Uruguay were removed.[9] In the 2021 update, Dominica was added to the blacklist and Barbados was moved to the grey list, pending a supplementary review by the Global Forum. [10][3]
American Samoa does not apply any automatic exchange of financial information, has not signed and ratified, including through the jurisdiction they are dependent on, the OECD Multilateral Convention on Mutual Administrative Assistance as amended, did not commit to apply the BEPS minimum standards and did not commit to addressing these issues.
This is due to the Global Forum on Transparency and Exchange of Information for Tax Purposes (the international standards for the exchange of information on request) downgrading the ratings of this jurisdiction to “non-compliant”
Fiji is not a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes ("Global Forum"), has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance as amended, has harmful preferential tax regimes, has not become a member of the Inclusive Framework on BEPS or implemented OECD anti-BEPS minimum standard, and has not resolved these issues yet.
Guam does not apply any automatic exchange of financial information, has not signed and ratified, including through the jurisdiction they are dependent on, the OECD Multilateral Convention on Mutual Administrative Assistance as amended, did not commit to apply the BEPS minimum standards and did not commit to addressing these issues.
Palau does not apply any automatic exchange of financial information, has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance as amended, and has not resolved these issues yet.
Panama does not have a rating of at least “Largely Compliant” by the Global Forum on Transparency and Exchange of Information for Tax Purposes for Exchange of Information on Request and has not resolved this issue yet.
Code of conduct group screened Russia’s new legislation adopted in 2022 against the good tax governance criteria of the code and found that Russia had not fulfilled its commitment to address the harmful aspects of a special regime for international holding companies (criterion 2.1). In addition, dialogue with Russia on matters related to taxation came to a standstill following the Russian aggression against Ukraine.
US Virgin Islands does not apply any automatic exchange of financial information, has not signed and ratified, including through the jurisdiction they are dependent on, the OECD Multilateral Convention on Mutual Administrative Assistance as amended, has harmful preferential tax regimes, did not commit to apply the BEPS minimum standards and did not commit to addressing these issues.
Vanuatu does not have a rating of at least “Largely Compliant” by the Global Forum on Transparency and Exchange of Information for Tax Purposes for Exchange of Information on Request, facilitates offshore structures and arrangements aimed at attracting profits without real economic substance and has not resolved these issues yet.
Sanctions
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On 16 December 2019, the EU Code of Conduct Group (Business Taxation) (CCG), under the Economic and Financial Affairs Council, published a new guidance[11] on sanctions to be applied by EU Member States against blacklisted 'non-cooperative' jurisdictions by the end of 2020. These sanctions were immediately backed[12] by the Finnish Presidency of the Council of the European Union called such sanctions as "defensive-measures" that are recommended to EU Member States to take against blacklisted jurisdictions.[13]
denying deduction of costs and payments that otherwise would be deductible, when these costs and payments are treated as directed to entities or persons in blacklisted jurisdictions;
including in the taxpayer company's tax base the income of an entity resident or a permanent establishment situated in a blacklisted jurisdiction, in accordance with the Anti-Tax Avoidance Directive rules for controlled foreign companies;
applying a withholding tax at a higher rate on payments such as interest, royalties, service fee or remuneration, when these payments are treated as received in blacklisted jurisdictions; and
for those Member States with rules that permit excluding or deducting dividends or other profits received from foreign subsidiaries, denying or limiting these 'participation exemptions' if the dividends or other profits are treated as received from a blacklisted jurisdiction.
Member States are requested to apply at least one of these measures from 1 January 2021 at the latest. Furthermore, Member States are entitled to apply their own additional measures or to maintain their own lists of non-cooperative jurisdictions at the national level.
By the end of 2021, an overview of sanctions applied by Member States will take place, and as of 2022, the CCG will assess the need for further coordination of defensive measures.
Corporate haven, corporate tax haven, or multinational tax haven is used to describe a jurisdiction that multinational corporations find attractive for establishing subsidiaries or incorporation of regional or main company headquarters, mostly due to favourable tax regimes, and/or favourable secrecy laws, and/or favourable regulatory regimes.
The term "offshore company" or "offshore corporation" is used in at least two distinct and different ways. An offshore company may be a reference to:
International taxation is the study or determination of tax on a person or business subject to the tax laws of different countries, or the international aspects of an individual country's tax laws as the case may be. Governments usually limit the scope of their income taxation in some manner territorially or provide for offsets to taxation relating to extraterritorial income. The manner of limitation generally takes the form of a territorial, residence-based, or exclusionary system. Some governments have attempted to mitigate the differing limitations of each of these three broad systems by enacting a hybrid system with characteristics of two or more.
The European Union withholding tax is the common name for a withholding tax which is deducted from interest earned by European Union residents on their investments made in another member state, by the state in which the investment is held. The European Union itself has no taxation powers, so the name is strictly a misnomer. The aim of the tax is to ensure that citizens of one member state do not evade taxation by depositing funds outside the jurisdiction of residence and so distort the single market. The tax is withheld at source and passed on to the EU Country of residence. All but three member states disclose the recipient of the interest concerned. Most EU states already apply a withholding tax to savings and investment income earned by their nationals on deposits and investments in their own states. The Directive seeks to bring inter-state income into the same arrangement, under the Single Market policy.
The Financial Action Task Force blacklist, is a blacklist maintained by the Financial Action Task Force.
Taxation in the British Virgin Islands is relatively simple by comparative standards; photocopies of all of the tax laws of the British Virgin Islands (BVI) would together amount to about 200 pages of paper.
A tax haven is a term, often used pejoratively, to describe a place with very low tax rates for non-domiciled investors, even if the official rates may be higher.
Tax information exchange agreements (TIEA) provide for the exchange of information on request relating to a specific criminal or civil tax investigation or civil tax matters under investigation.
An offshore financial centre (OFC) is defined as a "country or jurisdiction that provides financial services to nonresidents on a scale that is incommensurate with the size and the financing of its domestic economy."
The Global Forum on Transparency and Exchange of Information for Tax Purposes was founded in 2000 and restructured in September 2009. It consists of OECD member countries as well as other jurisdictions that have agreed to implement tax related transparency and information exchange. The forum works under the auspices of the OECD and G20. Its mission is to "implement the international standard through two phases of peer review process". It addresses tax evasion, tax havens, offshore financial centres, tax information exchange agreements, double taxation and money laundering.
The British Overseas Territories maintain their own entry requirements different from the visa policy of the United Kingdom. As a general rule, British citizens do not have automatic right of abode in these territories.
The Common Reporting Standard (CRS) is an information standard for the Automatic Exchange Of Information (AEOI) regarding financial accounts on a global level, between tax authorities, which the Organisation for Economic Co-operation and Development (OECD) developed in 2014.
Base erosion and profit shifting (BEPS) refers to corporate tax planning strategies used by multinationals to "shift" profits from higher-tax jurisdictions to lower-tax jurisdictions or no-tax locations where there is little or no economic activity, thus "eroding" the "tax-base" of the higher-tax jurisdictions using deductible payments such as interest or royalties. For the government, the tax base is a company's income or profit. Tax is levied as a percentage on this income/profit. When that income / profit is transferred to a tax haven, the tax base is eroded and the company does not pay taxes to the country that is generating the income. As a result, tax revenues are reduced and the country is disadvantaged. The Organisation for Economic Co-operation and Development (OECD) define BEPS strategies as "exploiting gaps and mismatches in tax rules". While some of the tactics are illegal, the majority are not. Because businesses that operate across borders can utilize BEPS to obtain a competitive edge over domestic businesses, it affects the righteousness and integrity of tax systems. Furthermore, it lessens deliberate compliance, when taxpayers notice multinationals legally avoiding corporate income taxes. Because developing nations rely more heavily on corporate income tax, they are disproportionately affected by BEPS.
Conduit OFC and sink OFC is an empirical quantitative method of classifying corporate tax havens, offshore financial centres (OFCs) and tax havens.
Ireland has been labelled as a tax haven or corporate tax haven in multiple financial reports, an allegation which the state has rejected in response. Ireland is on all academic "tax haven lists", including the § Leaders in tax haven research, and tax NGOs. Ireland does not meet the 1998 OECD definition of a tax haven, but no OECD member, including Switzerland, ever met this definition; only Trinidad & Tobago met it in 2017. Similarly, no EU–28 country is amongst the 64 listed in the 2017 EU tax haven blacklist and greylist. In September 2016, Brazil became the first G20 country to "blacklist" Ireland as a tax haven.
James R. Hines Jr. is an American economist and a founder of academic research into corporate-focused tax havens, and the effect of U.S. corporate tax policy on the behaviors of U.S. multinationals. His papers were some of the first to analyse profit shifting, and to establish quantitative features of tax havens. Hines showed that being a tax haven could be a prosperous strategy for a jurisdiction, and controversially, that tax havens can promote economic growth. Hines showed that use of tax havens by U.S. multinationals had maximized long-term U.S. exchequer tax receipts, at the expense of other jurisdictions. Hines is the most cited author on the research of tax havens, and his work on tax havens was relied upon by the CEA when drafting the Tax Cuts and Jobs Act of 2017.
Dhammika Dharmapala is an economist who is the Paul H. and Theo Leffman Professor of Law at the University of Chicago Law School. He is known for his research into corporate tax avoidance, corporate use of tax havens, and the corporate use of base erosion and profit shifting ("BEPS") techniques.
Under Ministerial Order n. 150/2004 of 13 February, issued by the Portuguese Ministry of Finance and consequently updated, Portugal defines an official blacklist of countries and jurisdictions considered for legal and tax purposes as tax havens.
Jersey is a Crown Dependency with fiscal sovereignty and therefore sets its own tax rates. The island has a 'simple and stable' tax system, which does not change much over time. This is reflected in States policies, which call for a 'low, broad, simple and fair' system. Jersey does not have inheritance, wealth, corporate or capital gains tax.
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