Tax

On 17 October 2023, the EU published the conclusions of its bi-annual review of the list of non-cooperative jurisdictions for tax purposes (the “EU Blacklist”) and the state of play document (the “EU Grey List”, which monitors jurisdictions that do not yet comply with all international tax standards but have committed to implementing reforms). The EU Blacklist and EU Grey List were last revised in February 2023. In summary:

1. Added to the EU Blacklist: Antigua and Barbuda, Belize and Seychelles;
2. Removed from the EU Blacklist: Marshall Islands;
3. Removed from the EU Blacklist, but added to the EU Grey List: British Virgin Islands and Costa Rica;
4. Removed from the EU Grey List: Jordan, Qatar, Montserrat and Thailand.

The updated EU Blacklist and EU Grey List can be found here

Reasons for the changes

Antigua and Barbuda, Belize and Seychelles were all added to the EU Blacklist for a failure to properly enforce tax standards. Namely, the EU Council noted that these jurisdiction do not “have a rating of at least “Largely Compliant” by the Global Forum for exchange of information on request”.

Marshall Islands has been completely delisted following sufficient progress on its enforcement of economic substance requirements. British Virgin Islands has been removed from the EU Blacklist as it has amended its framework on exchange of information on request; it is now included on the EU Grey List pending reassessment under the OECD standard. Costa Rica has been removed following an amendment to its foreign source income exemption regime but added to the EU Grey List due to its commitment to address its non-compliant rating as regards the effectiveness of its framework for the automatic exchange of information. In each case, removal from the EU Blacklist demonstrates a commitment to cooperation, BVI and Costa Rica having been added to the EU Blacklist in February 2023.

Jordan and Qatar have been removed from the EU Grey List by fulfilling their commitments to amend a ‘harmful tax regime’, and Montserrat and Thailand have been removed from the EU Grey List by fulfilling all pending commitments relating to country-by-country reporting of taxes paid.

Key action for private fund sponsors

As we summarised in our previous blog post regarding the EU Blacklist, private fund sponsors should undertake a review of side letters to check for any provisions on the use of EU Blacklist or EU Grey List jurisdictions in investment structures. For any EU deals, private fund sponsors should confirm that there are no issues under the relevant domestic EU law with the use of entities or investors in jurisdictions on the EU Blacklist, as certain EU countries have introduced measures targeted at jurisdictions on the EU Blacklist. Developments with regard to the EU Grey List should also be monitored as these may impact the EU Blacklist when it is next reviewed and revised in February 2024.