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February 15, 2023

Costa Rica is added to EU list of non-cooperative jurisdictions (Annex I) for the first time

  • On 14 February 2023, the Council of the European Union updated the European Union (EU) list of non-cooperative jurisdictions for tax purposes and added Costa Rica for the first time in relation to its foreign source income exemption regime.

  • As a result, EU Member States may include Costa Rica on their lists of non-cooperative jurisdictions for tax purposes under their domestic laws and may apply defensive measures.

On 14 February 2023, the Council of the European Union (the Council) updated the EU list of non-cooperative jurisdictions for tax purposes (the EU list) and added Costa Rica in the Annex I (so called “blacklist”) for the first time.


The list includes jurisdictions worldwide that either have not engaged in a constructive dialogue with the EU on tax governance or have failed to deliver on their commitments to implement the reforms necessary to comply with a set of objective “tax good governance” criteria related to tax transparency, fair taxation and the implementation of international standards to prevent tax base erosion and profit shifting.

Updated list

Costa Rica was included on the EU list of non-cooperative jurisdictions for tax purposes by the Council on 14 February 2023 after failing to its commitment to abolish or amend the harmful aspects of its foreign source income exemption regime (Criterion 2.1).

With the 14 February 2023 update, there are 16 jurisdictions on the list of non-cooperative jurisdictions (Annex I) which includes: American Samoa, Anguilla, Bahamas, British Virgin Islands, Costa Rica, Fiji, Guam, Marshall Islands, Palau, Panama, Russia, Samoa, Trinidad and Tobago, Turks and Caicos Islands, US Virgin Islands and Vanuatu.


As a result of the inclusion of Costa Rica on the EU list of non-cooperative jurisdictions, EU Member States may include Costa Rica on their lists of non-cooperative jurisdictions for tax purposes under their domestic laws and may apply defensive measures. Under the Code of Conduct Group’s “Guidance on defensive measures in the tax area towards non-cooperative jurisdictions” and Council conclusions previously issued as part of a list of non-cooperative jurisdictions, Member States should apply at least one of the following administrative measures in the tax area:

  1. Reinforced monitoring of certain transactions

  1. Increased audit risks for taxpayers benefiting from the regime at stake

  1. Increased audit risks for taxpayers using structures or arrangements involving these jurisdictions

Additionally, Member States also should use the EU list to apply at least one of the following legislative measures:

  1. Non-deductibility of costs: deny deductions for otherwise deductible costs and payments when those costs and payments are treated as directed to entities or persons in listed jurisdictions

  1. Controlled foreign corporation (CFC) rules: include in the tax base of the taxpayer the income of an entity resident or a permanent establishment situated in a listed jurisdiction, which may allow Member States to apply this measure in accordance with the Anti-Tax Avoidance Directive CFC rules

  1. Withholding tax measures: apply a withholding tax at a higher rate on payments such as interest, royalties, service fees or remuneration, when these payments are treated as received in listed jurisdictions

  1. Limitation of participation exemption on profit distribution: for Member States with rules that permit excluding or deducting dividends or other profits received from foreign subsidiaries or deny or limit such participation exemptions if the dividends or other profits are treated as received from a listed jurisdiction.

The Council updates the list two times a year and is expected to update the list in October 2023.


For additional information with respect to this Alert, please contact the following:

Ernst & Young, S.A., San José, Costa Rica

Ernst & Young LLP (United States), Latin American Business Center, New York

Ernst & Young LLP (United Kingdom), Latin American Business Center, London

Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific


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