2023-10-17-KPMG_s_EU_Tax_Centre-Euro_Tax_Flash_from_KPMG_s_EU_Tax_Centre_6页_444kb

KPMG EU Tax Flash Summary: October 2023 Update of the EU List of Non-Cooperative Jurisdictions

Core Content

The EU list of non-cooperative jurisdictions (Annex I) and the grey list (Annex II) were updated by the ECOFIN Council on October 17, 2023. These lists are part of the EU's broader effort to combat tax avoidance and harmful tax practices, based on criteria such as tax transparency, fair taxation, and OECD anti-BEPS measures.

Main Updates

Annex I (Non-Cooperative Jurisdictions)

• Added to Annex I:
  • Antigua and Barbuda (criterion 1.2)
  • Belize (criterion 1.2)
  • Seychelles (criterion 1.2)
• Removed from Annex I:
  • Marshall Islands (criterion 2.2)
  • British Virgin Islands (criterion 1.2)
  • Costa Rica (criterion 2.1)
• Current list of 16 jurisdictions:
  • American Samoa, Anguilla, Antigua and Barbuda, the Bahamas, Belize, Fiji, Guam, Palau, Panama, the Russian Federation, Samoa, the Seychelles, Trinidad and Tobago, Turks and Caicos Islands, the US Virgin Islands, and Vanuatu.

Annex II (Grey List)

• Removed from Annex II:
  • Jordan (section 2.1)
  • Qatar (section 2.1)
  • Montserrat (section 3.2)
  • Thailand (section 3.2)
  • Israel (section 3.2)
• Added to Annex II:
  • Costa Rica (section 1.1)
• Current list of 14 jurisdictions:
  • Albania, Armenia, Aruba, Botswana, the British Virgin Islands, Costa Rica, Curaçao, Dominica, Eswatini, Hong Kong (SAR), China, Israel, Malaysia, Türkiye, and Vietnam.

Key Criteria Used for Assessment

1. Automatic Exchange of Information (AEOI) and Exchange of Information on Request (EOIR):

   • Jurisdictions are assessed based on the Global Forum peer review results.
   • Countries like Anguilla, Antigua and Barbuda, and Belize were downgraded to "partially compliant" and moved accordingly.

2. Preferential Tax Regimes:

   • Focus on foreign source income exemption regimes (FSIE) and harmful tax regimes.
   • Costa Rica and Panama were reviewed for compliance with FSIE reforms.

3. Economic Substance Requirements:

   • Monitoring of collective investment funds (CIVs), partnerships, trusts, and other legal arrangements.
   • Marshall Islands improved enforcement and was removed from Annex I.

4. Country-by-Country Reporting (CbCR):

   • Assessment of CbCR minimum standards based on OECD Inclusive Framework peer reviews.
   • Belize, Panama, and Seychelles had their CbCR entries removed due to fulfilled commitments.

Next Steps

• The updated lists will take effect from the publication date in the Official Journal of the European Union.
• The next update is expected in February 2024.

Impact on Taxpayers

1. Defensive Measures:

   • EU Member States may apply measures such as non-deductibility of costs, CFC rules, increased WHT, and participation exemption limitations against jurisdictions on the list.
   • Taxpayers should be aware of the variations in local lists, defensive measures, and application timelines across Member States.

2. DAC6 Mandatory Disclosure Rules:

   • Jurisdictions on Annex I may trigger reporting obligations for cross-border payments, regardless of whether the transaction is aimed at generating a tax benefit.
   • The triggering date for such reporting is still under discussion among EU Member States.

3. EU Public CbCR Obligations:

   • Starting from June 22, 2024, companies resident in Annex I jurisdictions must publicly disclose country-by-country information.
   • Jurisdictions on Annex II for at least two years also require separate disclosure.

4. Non-Tax Impacts:

   • The list affects securitisation special purpose entities (SSPEs) under EU Regulation 2021/557, which restricts establishment in non-cooperative jurisdictions.

Future Developments

• The Code of Conduct Group (CoCG) plans to:
  • Introduce criterion 1.4 on exchange of beneficial ownership information (already approved in 2016 but delayed due to the pandemic).
  • Consider the impact of Pillar Two on listing criteria and potentially align the process with the Pillar Two peer-review framework.
  • Develop a prioritization list to expand the geographical scope of the EU list beyond the current 95 jurisdictions.

Conclusion

The October 2023 update reflects the EU's continued commitment to tax transparency and good governance, with significant changes in both Annex I and Annex II. Taxpayers and professionals must closely monitor these changes and their implications, particularly in relation to defensive measures, DAC6 reporting, and CbCR obligations. KPMG advises consulting local tax advisors for specific guidance.