Russia, BVI, Marshall Islands, and Costa Rica are now on EU non-cooperative jurisdictions list: new obligations under DAC6/MDR
24 April 2023
Tax Messenger
Tax Messenger
On 14 February 2023, the European Union (EU) Finance Ministers adopted a revised list of non-cooperative jurisdictions for tax purposes (EU list), adding four jurisdictions to the so-called "tax haven black" list (Annex 1)[1]: Russia, British Virgin Islands, Marshall Islands and Costa Rica and now the list includes 16 countries in total.
Implications
The EU list update may have significant impact on those companies which have relationships with EU countries from DAC6/MDR[2] requirements perspective e.g. in case Cyprus taxpayers conduct different type of arrangements (transactions or operations) with parties located in Russia or BVI.
DAC6/MDR effect may apply if the following conditions are met:
Subject to meeting the above conditions the arrangement may be classified as reportable in accordance with hallmark C1b (ii) criteria. The list of possible arrangements may now include such arrangements as payments for intra-group loan or payments for the provision of consulting services by a party which is tax resident in Russia, BVI or in any other country listed as non-cooperative jurisdiction.
The arrangements classified as reportable are due to be reported to the relevant EU jurisdiction’s tax office as per the relevant EU country reporting format rules e.g. in XML format. The arrangement must be filed within 30 days beginning the day after the arrangement is made available for implementation, is ready for implementation, or the first step in implementing the arrangement is made (whichever occurs first).
The EU list update may have significant impact on those companies which have relationships with EU countries from DAC6/MDR[2] requirements perspective e.g. in case Cyprus taxpayers conduct different type of arrangements (transactions or operations) with parties located in Russia or BVI.
DAC6/MDR effect may apply if the following conditions are met:
- The recipient of the payment is tax resident in a country placed in EU non-cooperative list
- The payer is a tax resident in EU jurisdiction
- Such payment is a deductible payment for tax purposes
Subject to meeting the above conditions the arrangement may be classified as reportable in accordance with hallmark C1b (ii) criteria. The list of possible arrangements may now include such arrangements as payments for intra-group loan or payments for the provision of consulting services by a party which is tax resident in Russia, BVI or in any other country listed as non-cooperative jurisdiction.
The arrangements classified as reportable are due to be reported to the relevant EU jurisdiction’s tax office as per the relevant EU country reporting format rules e.g. in XML format. The arrangement must be filed within 30 days beginning the day after the arrangement is made available for implementation, is ready for implementation, or the first step in implementing the arrangement is made (whichever occurs first).
How can B1 help?
B1 is happy to provide a wide suite of support as part of DAC6 rules compliance:
B1 is happy to provide a wide suite of support as part of DAC6 rules compliance:
- Conduct impact assessment and identify which arrangements can be classified as reportable for DAC6 purposes
- Assistance with DAC6 report generation
- Methodology support, e.g. as part of governance framework development allowing to define the roles and responsibilities
[1] The EU list of non-cooperative tax jurisdictions (Annex I) is composed of countries that either failed to deliver on their commitments to comply with tax good governance criteria within a specific timeline, or have not committed to do so at all. The EU non-cooperative country list currently is made up of 16 countries: American Samoa, Anguilla, the Bahamas, the British Virgin Islands, Costa Rica, Fiji, Guam, the Marshall Islands, Palau, Panama, the Russian Federation, Samoa, Trinidad and Tobago, the Turks and Caicos Islands, the U.S. Virgin Islands and Vanuatu. The next revision of the list is expected to occur in October 2023
[2] The Council of the European Union (EU) adopted Directive 2018/822 on 25 May 2018 (DAC6 or Mandatory Disclosure Regime, MDR) amending Directive 2011/16/EU with respect to mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements. The Directive provides for the exchange of taxpayer information between the tax administrations of EU Member States on certain cross-border transactions.
[2] The Council of the European Union (EU) adopted Directive 2018/822 on 25 May 2018 (DAC6 or Mandatory Disclosure Regime, MDR) amending Directive 2011/16/EU with respect to mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements. The Directive provides for the exchange of taxpayer information between the tax administrations of EU Member States on certain cross-border transactions.
Authors:
- Maria FrolovaPartnerTax and Legal Services
- Ruslan GasparyanSenior ManagerTax and Legal Services
- Elena GubarevaManagerTax and Legal Services
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