EU revised a “black list” of jurisdictions for tax purposes on February 14, 2023

Yesterday on 14 February 2023, the European Union (EU) Finance Ministers have recently adopted a revised list of non-cooperative jurisdictions for tax purposes, highlighting the countries that fail to meet the tax-related criteria set by the European Union.

Four countries – Russia, the British Virgin Islands, Costa Rica, and the Marshall Islands– were added to Annex I, commonly referred to as the “black” list. This means that these countries have failed to address the concerns raised by the EU regarding tax transparency, fair taxation, and other related issues. They will now face increased scrutiny and potential sanctions by the EU member states.

The reason for their inclusion on the list is due to their failure to comply with the tax-related criteria set by the EU:

Absolutely obvious, that Russia on taxation-related matters came to a standstill following the Russian aggression against Ukraine. Russia also has not fulfilled its commitment to address the harmful aspects of a special regime for international holding companies.

The British Virgin Islands was found to be insufficiently in compliance with the Organisation for Economic Co-operation and Development standard on the exchange of information on request. This criterion requires countries to provide information on request in a timely manner to assist in the prevention of tax evasion and other financial crimes.

Costa Rica, on the other hand, has not fulfilled its commitment to abolish or amend the harmful aspects of its foreign source income exemption regime. This criterion is concerned with ensuring that countries do not offer harmful tax incentives that could encourage harmful tax practices.

For the Marshall Islands, there are concerns that this jurisdiction, which has a zero or nominal only rate of corporate income tax, is attracting profits without real economic activity. This criterion is intended to prevent countries from engaging in harmful tax practices that could erode the tax bases of other countries.

The revised Annex I of the EU List now includes 16 jurisdictions: American Samoa, Anguilla, the Bahamas, British Virgin Islands, Costa Rica, Fiji, Guam, Marshall Islands, Palau, Panama, Russia, Samoa, Trinidad and Tobago, the Turks and Caicos Islands, the US Virgin Islands, and Vanuatu.

Additionally, three new countries were added to Annex II, also known as the “gray” list. Albania, Aruba, and Curaçao will face increased monitoring by the EU in the coming months to ensure that they take the necessary steps to comply with the EU’s tax standards.

The EU remains committed to its efforts to combat tax evasion and ensure fair taxation, and the next revision to the EU List is expected in October 2023.

You can read the Council press release here.