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The European Council has reached an agreement on the criteria and the process for the establishment of an EU list of non-cooperative jurisdictions in taxation matters.
On November 8, the Council resolved that an EU list of non-cooperative jurisdictions "will be determined by the Council in 2017." The "screening" of third countries will be completed by the end of September 2017, to enable the Council to endorse the full list by the end of the year. Screening is intended to be a continuous and regular process, and will be carried out by the Code of Conduct Group (Business Taxation), supported by the General Secretariat of the Council.
To be considered compliant on tax transparency, a jurisdiction will need to meet certain criteria. It must have committed to and started the legislative process for implementing the Common Reporting Standard (CRS), with the first exchanges to take place in 2018 at the latest. It must also have arrangements in place to automatically exchange tax information with all EU member states, and possess at least a "Largely Compliant" rating from the Global Forum on the exchange of information on request.
Sovereign states must have either ratified, agreed to ratify, be in the process of ratifying, or committed to the entry into force of the OECD Multilateral Convention on Mutual Administrative Assistance (MCAA) in Tax Matters, or have in place by December 31, 2018 a network of exchange arrangements sufficiently broad to cover all EU member states. Non-sovereign jurisdictions must either participate in the MCAA or have a network of exchange arrangements in force, or have taken the necessary steps to bring these agreements into force within a reasonable timeframe.
A jurisdiction must also be considered compliant on "fair taxation." It should have no preferential measures that could be regarded as harmful, and should not "facilitate offshore structures or arrangements aimed at attracting profits which do not reflect real economic activity in the jurisdiction."
A jurisdiction must commit by the end of 2017 to the agreed OECD anti-BEPS minimum standards and their consistent implementation, and receive a positive assessment for their effective implementation.
The Council stipulated that by January 2017, letters should be sent to jurisdictions selected for screening, inviting them to engage in the process. By February 2017, the Code of Conduct Group (Business Taxation) should nominate, where relevant, EU member states and/or their experts, to work with the Commission on the screening process. By summer 2017, written contacts and, where necessary, bilateral discussions with jurisdictions should take place, with the outcome of these discussions to be reported to the Code of Conduct Group by September.
By the end of 2017, the Council should endorse the list of non-cooperative jurisdictions.
Council President Peter Kažimír said: "Today's agreement between all member states is an essential part of our joint EU strategy to combat global challenges such as tax base erosion and profit shifting. It proves that we are delivering on our drive to be a frontrunner in this field."
"This is a crucial first step in the process that will take place throughout 2017. A dialogue will start with those countries that fail to comply with the criteria we have established, and only those jurisdictions refusing to cooperate and fulfil the criteria in due time will be placed on the so-called blacklist. Our primary goal is to incentivize, not punish."
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