European Union Adopts Black List of 17 jurisdictions

By Legal, Tax

On 5 December 2017, European Union (EU) finance ministers adopted a list of “non-cooperative jurisdictions for tax purposes” also known as  ‘The Black List’. The list is part of the EU’s work to counter worldwide tax evasion and avoidance. According to the EU, it will help the EU to deal more robustly with external threats to Member States’ tax bases and to tackle third countries that consistently refuse to play fair on tax matters. The list should create a positive incentive for international jurisdictions to improve their tax systems where there are deficiencies in their transparency and fair tax standards. No EU member states fall into the list because it should be recognized as a tool to deal with external threats to Member States’ tax bases.

The list is based on three screening criteria’s: tax transparency, fair taxation (no harmful tax regimes) and implementation of BEPS minimum standards. The Black List consists of 17 countries which failed to meet agreed tax good governance standards. The following jurisdictions appear on the EU Black List: American Samoa, Bahrain, Barbados, Grenada, Guam, Korea, Macao the Marshal Islands, Mongolia, Namibia, Palau, Panama, Santa Lucia, Samoa Trinidad Tobago, Tunisia, and United Arab Emirates.

In addition to the Black List, the EU finance ministers also adopted a “Grey List”. The “Grey List” includes entities which have committed to addressing deficiencies in their tax systems and to meet the required criteria and following contacts with the EU by the year-end 2018 (or in the case of developing countries by the year-end 2019). As those jurisdictions are not blacklisted, they would not fall within any of the sanctions discussed below. The Grey List includes 47 countries, among others, EU candidates Turkey, Serbia and Montenegro, as well as Switzerland, Bosnia and Herzegovina, Macedonia, Morocco, Thailand, Vietnam and Hong Kong.


The jurisdictions on the final Black List may face sanctions (‘defensive measures’) imposed by the Member States in the form of (administrative) tax measures and by the EU in the form of non-tax measures.

The non-tax measures are linked to EU funding in the context of the European Fund for Sustainable Development (EFSD), the European Fund for Strategic Investment (EFSI) and the External Lending Mandate (ELM). Funds from these instruments cannot be channeled through entities in listed jurisdictions.

The European Commission recommends (not mandatory!) Member States to take tax sanctions against the EU Black Listed jurisdictions. The following defensive tax measures of legislative nature could be applied by the Member States: non-deductibility of costs, CFC rules, withholding taxes, limitation on participation exemption, switch-over rules, reversal of the burden of proof, special documentation requirements and mandatory disclosure by tax intermediaries of specific tax schemes with respect to cross-border arrangements. The European Commission does not provide any guidance on when the Member States should take the recommended sanctions.  If a Member State takes such measures, not only its domestic law but – depending on the measure – also bilateral tax treaties might have to be changed.

The Black List will be updated at least once a year. This update will be based on the continuous monitoring of Black Listed jurisdictions, as well as those that have made commitments to improve their tax systems (Grey Listed jurisdictions).


Proposal For UBO Register Adopted By Parliament

By Legal, Tax

On 20 May 2015, the European Parliament adopted the Fourth Money Laundering Directive. This directive obligates EU member states to adopt a UBO-register of corporate and legal entities. Such register should include at least the name, the month and year of birth, the nationality and the country of residence of the UBO, and additionally, the nature and extend of the beneficial interest held by the UBO. The register should be accessible to the respective tax authorities, obliged entities (for example banks, lawyers and notaries, as they have to perform KYC procedures) and the public if they have a “legitimate interest”.

Amendments To The Parent Subsidiary Directive Adopted

By Legal, Tax

The EU-Council of Economic and Finance Ministers have adopted the amendments to the Parent Subsidiary Directive, challenging hybrid financial instruments which have the characteristics of both debt and equity.

A payment on hybrid financial instruments could be eligible for tax deduction in the state of source, and at the same time, be tax exempt in the state of residence (double non-taxation). The adopted amendments provide for a mandatory limitation of the exemption in the state of residence, to the extent the (interest) payments are deductible in the state of source.

All EU member states are required to implement the amendments in their domestic legislation no later than 31 December 2015.

Dutch Guidance Notes On Intergovernmental Implementation Of FATCA

By Legal, Tax

In January, the Dutch Minister of Finance published guidance notes in relation with the intergovernmental agreement (“IGA”) concluded between the Netherlands and the United States.

The IGA facilitates the intergovernmental implementation of FATCA, aimed to combat tax evasion by U.S. persons holding assets through offshore entities and accounts.

The guidance notes provide for technical clarification of certain aspects of the concluded IGA.

OECD Publishes Various Discussion Drafts

By Legal, Tax

In between 16 and 19 December the OECD published the following public discussion drafts on specific issues under these action plans:

Action 4:              Limitations on interest deductions
Action 8-10:        Transfer pricing for risk re-characterization and special measures
Action 10:            Profit split method for transfer pricing in the context of global value chains
Action 10:            Transfer pricing for commodity transactions
Action 14:            Improving dispute resolutions

EU Court of Justice Ruled Dutch Fiscal Unity Regime In Contravention

By Legal, Tax

On the 12 June 2014, the European Court of Justice ruled that the Dutch fiscal unity regime (treating multiple group companies as one single taxpayer), contravenes to the EU principle of Freedom of Establishment. In essence the infringement was caused as the Dutch fiscal unity regime does not allow:

– A fiscal unity between Dutch sister companies, while being held (in)directly by a EU resident parent company;
– A fiscal unity between a Dutch parent company and a Dutch second-tier subsidiary, while the second-tier subsidiary is held through a EU resident (first-tier) subsidiary.

The European Court of Justice reached this decision while answering prejudicial questions raised by the Amsterdam High Court in three separate cases.