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EU Announces Sanctions For 'Blacklisted' Countries

by Ulrika Lomas,, Brussels

22 March 2018

The European Commission is to take steps to ensure that EU external development and investment funds cannot be channelled or transited through entities in countries included on the EU's "blacklist" of non-cooperative tax jurisdictions.

The Commission has published guidelines which set out the applicable legislation on how EU funds should be treated when it comes to tax avoidance and non-cooperative jurisdictions. The guidelines are intended to ensure that the rules are interpreted and applied consistently.

The guidelines provide information on how the EU's implementing partners should assess funding projects that involve entities in jurisdictions listed by the EU as non-cooperative for tax purposes. The assessment process includes a series of checks designed to pinpoint a risk of tax avoidance.

For example, the Commission said that before funding is channelled through an entity, it should be established that there are sound business reasons for the particular structuring of a project, which must not take advantage of the technicalities of a tax system or of mismatches between two or more tax systems for the purpose of reducing a tax bill.

An exemption is made for direct financing, where a project is physically implemented in a listed non-cooperative tax jurisdiction and is not linked to money laundering, terrorism financing, tax fraud, or tax evasion. This exemption is intended to safeguard the EU's development policy.

Tax Commissioner Pierre Moscovici said: "The EU's blacklist of tax havens is a living document and more countries will be added if they don't live up to the commitments they have made to improve their tax systems."

"The Commission will not allow EU funds to contribute to global tax avoidance. These EU level countermeasures should act as a wake-up call for those jurisdictions as they show the EU is serious about tackling tax avoidance on a global scale."

The Commission called on international financial institutions and other bodies involved in the management of the EU budget to review their internal policies on non-cooperative jurisdictions.

The following countries are on the blacklist: American Samoa, the Bahamas, Guam, Namibia, Palau, Samoa, Saint Kitts and Nevis, Trinidad and Tobago, and the US Virgin Islands.

The "grey list" comprises: Anguilla, Antigua and Barbuda, Bahrain, Barbados the British Virgin Islands, Dominica, Grenada, Macao, the Marshall Islands, Panama, Saint Lucia, South Korea, Tunisia, and the United Arab Emirates. Jurisdictions on the grey list are subject to close monitoring, having made reform commitments.

TAGS: United Arab Emirates | compliance | tax | investment | business | European Commission | tax compliance | Bahamas | Saint Lucia | tax avoidance | investment funds | budget | corporation tax | Bahrain | Grenada | Marshall Islands | Samoa | Trinidad and Tobago | Virgin Islands | legislation | American Samoa | Anguilla | Antigua and Barbuda | Dominica | Korea, South | Namibia | Palau | Saint Kitts and Nevis | Tunisia | tax reform | European Union (EU) | Barbados | British Virgin Islands | Guam | Panama | Europe | Tax | Tax Evasion | BEPS

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