Executive summary

On 8 October 2024, the Council of the European Union (the Council) held an Economic and Financial Affairs Council (ECOFIN) meeting in which Finance Ministers approved the Council Conclusions on the EU list of noncooperative jurisdictions for tax purposes, set out in Annex I (EU List). The Council decided to remove Antigua and Barbuda from the EU List.

Antigua and Barbuda has now been included in the state-of-play overview set out in Annex II, which reflects the jurisdictions that are monitored on their cooperation with the EU with respect to commitments made by these cooperative jurisdictions to implement tax good-governance principles (state-of-play overview). Antigua and Barbuda will remain on this overview while the outcome of supplementary review of Antigua and Barbuda by the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) is pending. With respect to the state-of-play overview, the Council removed Armenia and Malaysia. The Council also gave Vietnam more time to comply with its commitment on Country-by-Country Reporting (CbCR).

The Council will continue to review and update the EU List biannually, with the next update due in February 2025.

Detailed discussion

Background

The EU started working on the list of noncooperative jurisdictions for tax purposes in 2016. On 5 December 2017, the Council published the first EU List and the state-of-play overview. The EU List is set out in Annex I and includes jurisdictions that fail to meet the EU's criteria by the required deadline. The state-of-play overview, set out in Annex II, includes jurisdictions that have made sufficient commitments to reform their tax policies but remain subject to close monitoring while executing their commitments. Once a jurisdiction has executed all of its commitments, it is removed from the state-of-play overview.

The initial EU List included 17 jurisdictions that were deemed to have failed to meet relevant criteria established by the European Commission (the Commission).¹ Since the initial release of the EU List, there have been multiple changes to its composition based on recommendations made by the Code of Conduct Group for Business Taxation (COCG). These changes may occur if, for example, the COCG identifies new jurisdictions or regimes or reassesses jurisdictions already on the EU List. The removal of a jurisdictions from the EU List or from the state-of-play overview is considered justified if an expert assessment establishes that the jurisdiction now meets all the conditions posed by the COCG.

The Commission also instituted the first countermeasures against listed noncooperative tax jurisdictions by adopting a Communication in March 2018 that set new requirements targeting tax avoidance in EU legislation governing, in particular, financing and investment operations.² The requirements aim to ensure that EU external development and investment funds cannot be channeled or transited through entities in jurisdictions included in the EU List without being confronted with countermeasures.

Moreover, in 2019, the Council released additional guidance on defensive measures toward noncooperative jurisdictions. Concurrently, it also released guidance on assessing jurisdictions with notional interest deduction regimes and the treatment of partnerships under criterion 2.2 (existence of tax regimes that facilitate offshore structures that attract profits without real economic activity).³ In accordance with the guidance on defensive measures mentioned above, EU Member States are required, as of 1 January 2021, to use the EU List in applying at least one of four specific legislative measures:

1. Nondeductibility of costs incurred in a listed jurisdiction
2. Controlled foreign company rules
3. Withholding tax measures
4. Limitation of the participation exemption on shareholder dividends

Many Member States have already adopted or drafted legislation for these defensive measures.

In October 2023, the COCG published its multiannual work package (2023 — 2028), which mentions that the group could explore how to facilitate the proper functioning of the Pillar Two rules by making use of the EU listing process. The COCG will also continue to discuss the new beneficial ownership criterion (criterion 1.4) and the extension of the geographical scope of its EU List screening process, which now encompasses approximately 95 non-EU jurisdictions.

Revised EU List

On 8 October 2024, the EU Ministers met in Luxembourg for an ECOFIN meeting, during which the Ministers adopted the conclusions on the revisions of the EU List.

As noted, the Council adopted a revised EU List by removing Antigua and Barbuda. According to the Council press release, the reasons for removing this jurisdiction from the EU List are the following:

• As previously reported, Antigua and Barbuda was added to the EU List through the update adopted during the ECOFIN meeting of 17 October 2023, after a negative assessment from the Global Forum with regard to exchange of information on request.
• Following changes to the applicable rules in Antigua and Barbuda, the Global Forum has granted it a supplementary review, which will be undertaken in the near future.
• While the outcome of this review is pending, EU Finance Ministers decided to move Antigua and Barbuda to the relevant section of Annex II included in the state-of-play overview.

The revised EU List now includes 11 jurisdictions: American Samoa, Anguilla, Fiji, Guam, Palau, Panama, Russia, Samoa, Trinidad and Tobago, the US Virgin Islands, and Vanuatu.

The Council also endorsed the state-of-play overview with respect to commitments taken by cooperative jurisdictions. The EU Ministers made the following modifications to the state-of-play overview:

• The Council removed Armenia and Malaysia after they fulfilled their commitments by amending a harmful tax regime.
• Vietnam committed to implement the CbCR minimum standard and to activate CbCR exchange relationships with all EU Member States. Based on this reassurance, Vietnam was granted until 31 December 2024 to sign the Multilateral Competent Authority Agreement on CbCR and until 31 January 2025 to take the necessary steps to activate CbCR exchange relationships with all EU Member States. The commitment taken by Vietnam to implement tax good-governance principles will be reassessed in the next update, planned in February 2025.

As a result, the revised state-of-play overview now comprises nine jurisdictions: Antigua and Barbuda, Belize, British Virgin Islands, Costa Rica, Curaçao, Eswatini, Seychelles, Turkiye, and Vietnam.

Next steps

The Council will periodically review and update the EU List, taking into consideration the evolving deadlines for jurisdictions to deliver on their commitments and the evolution of the listing criteria that the EU uses to establish the EU List. Until 2019, the EU List was regularly updated without a fixed schedule to reflect the reforms undertaken by third countries. However, beginning in 2020, Member States agreed that the EU List will be updated no more than twice a year to ensure (i) a more stable listing process, (ii) business certainty and (iii) that Member States can effectively apply defensive measures against listed jurisdictions. Accordingly, the next revision to the EU List is expected in February 2025.

Implications

With its listing process, the EU continues to exert pressure on third states to enhance transparency and remove harmful elements from their tax systems. Businesses with activities in jurisdictions listed as noncooperative are advised to understand the implications of a jurisdiction's being included in the EU List, including:

• Reporting obligations arising from the mandatory disclosure rules (MDR) contained in Directive 2011/16/EU as amended by Council Directive (EU) 2018/822 (MDR Directive or DAC6) require, in part, the disclosure of cross-border arrangements that involve cross-border deductible payments when the recipient of the payment is tax-resident in a jurisdiction included on the EU List of noncooperative jurisdictions for tax purposes.
• EU Member States may consider applying one or more defensive measures, including tax and non-tax measures, to prevent the erosion of their tax bases. These may include measures such as nondeductibility of costs, enhanced controlled-foreign-company rules or withholding tax measures, among others.

The lists will also have implications for public CbCR, under which information should be disclosed on a country-by-country basis and thus be disaggregated for all EU Member States⁴ and all jurisdictions included in the EU List (on the first of March of the financial year for which the report should be drawn up) and the state-of-play overview (on the first of March of the financial year for which the report should be drawn up for two years consecutively).⁵ Further, companies cannot delay the publication of commercially sensitive information for up to five years by making use of the safeguard clause included in the public CbCR rules if the information relates to jurisdictions included in the EU List or in the state-of-play overview.

As the work of the EU COCG is a dynamic process, companies should continue to closely monitor developments, including other Member States' introduction of defensive measures toward noncooperative jurisdictions.

Annex: Jurisdiction status as of 8 October 2024