Ecofin adopts revised list of non-cooperative jurisdictions for tax purposes

The EU list of non-cooperative jurisdictions for tax purposes has recently been updated. Find out how this can be relevant to your business…  

The EU list of non-cooperative jurisdictions for tax purposes is part of the EU’s work to fight tax evasion and avoidance. It is composed of countries which have failed to fulfil their commitments to comply with tax good governance criteria within a specific timeframe, and countries which have refused to do so.

On 14 February 2023, the Economic and Financial Affairs Council (ECOFIN) approved a revision to the EU list of non-cooperative jurisdictions for tax purposes, whereby, amongst others, 4 new jurisdictions were added to Annex I of the said EU list. The new additions are the British Virgin Islands, Costa Rica, Russia and the Marshall Islands.

There are now 16 jurisdictions in Annex I of the EU list:

  • American Samoa
  • Anguilla
  • Bahamas
  • British Virgin Islands
  • Costa Rica
  • Fiji
  • Guam
  • Marshall Islands
  • Palau
  • Panama
  • Russia
  • Samoa
  • Trinidad and Tobago
  • Turks and Caicos Islands
  • US Virgin Islands
  • Vanuatu

One of the practical effects of this revision, is that Maltese companies that hold an interest (that qualifies as a “participating holding”) in a body of persons that is resident in one of the said jurisdictions (including the jurisdictions which have recently been added to the said EU list) could possibly no longer be entitled to claim the Maltese participation exemption with respect to dividend income derived from such foreign (i.e. non-Maltese) body of persons. There is an exception to this rule if the Maltese company proves that the said body of persons has sufficient significant people functions in that jurisdiction in terms of the relevant provision.

The disapplication of the participation exemption should apply if the jurisdiction of residence of the said body of persons (i.e. the entity distributing the dividend) is included in the EU list of non-cooperative  jurisdictions for a minimum period of 3 months during the year immediately preceding the year of assessment.

The inclusion of these new jurisdictions in the EU list may also trigger Maltese DAC6 reporting obligations in terms of Hallmark C1(b)(ii) in the context of a cross-border arrangement involving deductible cross-border payments between two or more associated enterprises where the recipient of the said payment is resident for tax purposes in a jurisdiction that is included in the said EU list of non-cooperative jurisdictions.

Lastly, from a corporate income tax compliance perspective, Maltese companies having any nexus with any of the jurisdictions listed in the EU list of non-cooperative jurisdictions, should also have an obligation to disclose certain information in TRA110 of their Maltese income tax return.

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How can we help?

Our team can help you understand the implications that the said revision to the EU list of non-cooperative jurisdictions could possibly have on your business. Feel free to contact us for advice.

Contact us

Mirko Rapa

Mirko Rapa

Tax Partner, PwC Malta

Tel: +356 2564 6896

Eleanor Muscat

Eleanor Muscat

Senior Manager, Tax, PwC Malta

Tel: +356 7973 9020

Joanna Azzopardi

Joanna Azzopardi

Manager, Tax, PwC Malta

Tel: +356 2564 6536

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