On the 2nd of October 2018, the Council of the EU revised the EU’s list of non-cooperative tax jurisdictions. During the revision, 3 jurisdictions, namely, Liechtenstein, Peru, and Palau, were removed from the so-called “EU blacklist of tax havens”.

Liechtenstein and Peru were de-listed because they were admitted as compliant with the commitments regarding international tax cooperation. Both jurisdictions successfully completed the necessary tax reforms and now adhere to the principles of good tax governance identified by the EU.

Palau was transferred from annex I to annex II of the list (the “grey list”) as a country that has provided sufficient commitments on a high political level to reform its tax policies. It means that Palau has not yet made the required reforms yet sufficiently addressed the EU concerns. If Palau implements its commitments and gets approved by the European Council working group responsible for the listing process, Palau may also be de-listed as entirely cooperative tax jurisdiction. If no such measures are taken, the jurisdiction may come back to the blacklist.

The jurisdictions that remain blacklisted are American Samoa, Guam, Namibia, Samoa, Trinidad and Tobago, and the US Virgin Islands.

What is the Blacklist of Tax Havens?

The EU’s list of non-cooperative tax jurisdictions was first published in 2017 with the aim to improve tax governance globally and ensure that the countries that maintain partnership relationships with the EU adhere to the same transparency and fair tax competition standards.

The selected indicators that are taken into account when assessing non-cooperative tax jurisdictions include the following three dimensions:

  • Strength of economic ties with the EU;
  • Financial activities (e.g., whether the country has a high level of financial services exports or a disconnection between their financial activity and the real economic state); and
  • Stability factors (e.g., whether the jurisdiction would be considered a safe place for tax dodgers).

The main risk indicators that trigger country’s inclusion in the blacklist are lack of international tax information exchange mechanisms, existence of preferential tax regimes, and 0% personal income or corporate tax rate.

4th revision in 2018

The original blacklist announced on the 5th of December 2017 contained 17 tax jurisdictions, including South Korea, UAE, Barbados, Panama, and Tunisia.

Although the list should be revised every year, the supervising code of conduct group of the European Council may suggest implementing changes more frequently if there are significant measures taken by the listed countries. The recent removal of Liechtenstein, Peru, and Palau was the 4th revision of the blacklist this year: in January, eight tax jurisdictions were removed from the list (Barbados, Grenada, the Republic of Korea, Macao SAR, Mongolia, Panama, Tunisia, and the United Arab Emirates); in March – 3 jurisdictions added (Bahamas, Saint Kitts and Nevis and the US Virgin Islands) and 3 removed (Bahrain, the Marshall Islands, and Saint Lucia); in May – 2 removed (Bahamas, Saint Kitts and Nevis).