In its meeting on 5 December, the EU economic and financial affairs council (ECOFIN) endorsed the six-monthly report of the Code of Conduct Group on business taxation, which includes guidance on national legislative tax measures towards non-cooperative jurisdictions. EU member states have been applying administrative measures since 2017.
The new guidance invites all member states to apply legislative tax measures against listed jurisdictions as of 1 January 2021. Every member state should apply at least one of the specific legislative measures listed below:
non-deductibility of costs, including interest, royalties and other concessions on intellectual property assets, and service fees;
controlled foreign company (CFC) rules in accordance with the anti-tax avoidance directive (ATAD);
withholding tax measures, to be applied at a higher rate on payments such as interest, royalties, service fees or remuneration, when these payments are treated as received in listed jurisdictions; or
limitation of participation exemption on profit distribution, which should be more stringent than rules they already apply based on the parent-subsidiary directive.
Member states should ensure that at least one of the defensive measures described is applied from 1 January 2021 at the latest. In case of listing or delisting, member states should ensure that defensive measures are applied accordingly, as soon as possible, depending on the nature and content of each measure and the rules on enactment of laws in the member state.
Denmark presented a document proposing an extension of the criteria for the EU blacklist of 'non-cooperative' jurisdictions, allowing EU member states to be listed. The current criteria provide only for listing of third countries. The Danish document seeks a discussion on whether the EU internally has sufficient safeguards against tax avoidance and evasion.
In its meeting on 5 December, the EU economic and financial affairs council (ECOFIN) endorsed the six-monthly report of the Code of Conduct Group on business taxation, which includes guidance on national legislative tax measures towards non-cooperative jurisdictions. EU member states have been applying administrative measures since 2017.
The new guidance invites all member states to apply legislative tax measures against listed jurisdictions as of 1 January 2021. Every member state should apply at least one of the specific legislative measures listed below:
non-deductibility of costs, including interest, royalties and other concessions on intellectual property assets, and service fees;
controlled foreign company (CFC) rules in accordance with the anti-tax avoidance directive (ATAD);
withholding tax measures, to be applied at a higher rate on payments such as interest, royalties, service fees or remuneration, when these payments are treated as received in listed jurisdictions; or
limitation of participation exemption on profit distribution, which should be more stringent than rules they already apply based on the parent-subsidiary directive.
Member states should ensure that at least one of the defensive measures described is applied from 1 January 2021 at the latest. In case of listing or delisting, member states should ensure that defensive measures are applied accordingly, as soon as possible, depending on the nature and content of each measure and the rules on enactment of laws in the member state.
Denmark presented a document proposing an extension of the criteria for the EU blacklist of 'non-cooperative' jurisdictions, allowing EU member states to be listed. The current criteria provide only for listing of third countries. The Danish document seeks a discussion on whether the EU internally has sufficient safeguards against tax avoidance and evasion.
