In June 2015 the European Union (“EU”) established a list of non-cooperative tax jurisdictions, seen as third country tax havens, with a view to securing a level playing field and code of conduct to mitigate tax avoidance and evasion.
In September 2016, the Commission issued its ‘scoreboard of indicators’ for the screening of third countries. At that time a total of 213 countries were pre-assessed, 92 were screened in the process of setting up lists, 20 of which were found to meet the required criteria and 72 were asked to address deficiencies. In December 2017, the council adopted conclusions on the EU list of non-cooperative jurisdictions for tax purposes.
In March 2019 the list was revised and updated and as of October 2019 there are now only 9 countries on the list as the Economic and Financial Affairs Council of the European Union (“ECOFIN”) removed the United Arab Emirates (“UAE”), Switzerland and Mauritius, among others, from the list of countries deemed to be acting as tax havens.
Notably, the UAE has been removed from Annex I of the list (the Black List), while Mauritius and Switzerland were removed from Annex II (the Grey List).
The reason for this change is that the UAE, Switzerland and Mauritius have each made the necessary amendments to improve their tax policy frameworks, implementing reforms that comply with the EU tax good governance principles and they have all achieved this ahead of the scheduled deadline. The UAE has adopted new rules on offshore structures and passed reforms improving their tax policy framework, implementing economic substance requirements for emirates domiciled companies.
Similarly, Mauritius made changes through adopting a new Finance Bill and rolled out additional regulations to amend the legislation applicable to its Freeport zone and Partial Exemption regimes.
The revisions of each of these countries were assessed in September 2019 by the EU Code of Conduct Group, where they were found to have met their obligations to address the deficiencies identified. Substance requirements have been introduced and Controlled Foreign Corporation (“CFC”) rules have been adopted to address the lack of anti-abuse regulations.
In addition to these three countries, the Marshall Islands, Albania, Costa Rica and Serbia were also removed from the list.
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