New counter-measures will prevent EU funds unintentionally reaching blacklisted countries.
The European Commission (EC) recently published guidelines for International Financial Institutions, such as the European Investment Bank and various Development Financial Institutions, to prevent them from unintentionally channeling EU external development and investment funding through blacklisted countries. This guidance provides information on how these institutions should assess projects involving entities in blacklisted countries including, performing tax avoidance checks on all relevant entities involved in a project and identifying ultimate beneficial owners.
Under current EU legislation, EU funds cannot be invested in entities if they are incorporated in jurisdictions that do not commit to internationally accepted tax standards. To emphasize the link between EU funding and good tax governance, various EU legal acts now contain explicit references to the EU blacklist.
This will affect entities in the following nine jurisdictions currently included on the EU blacklist: American Samoa, the Bahamas, Guam, Namibia, Palau, Saint Kitts and Nevis, Samoa, Trinidad and Tobago, and the US Virgin Islands.
The EU's blacklist of non-cooperative tax jurisdictions was originally released in December 2017. The list currently includes nine countries identified as failing to meet agreed good tax-governance standards. The list looks at non-EU countries who trade economically with the EU and replaces the former patchwork of national lists.
EU taxpayers dealing with entities from countries on the blacklist may experience a greater likelihood of being audited and monitored by their local EU tax jurisdiction-including taxpayers who use structures or arrangements involving blacklisted jurisdictions. According to the EC, multinationals that have a presence in blacklisted jurisdictions may also face stricter reporting requirements, among other potential measures that specific EU Member States may take.
The EU Directive on Mandatory Disclosure Requirements also includes a specific reporting rule addressing cross-border payments between associated enterprises where the recipient is a resident in an EU blacklisted jurisdiction.
For more information, contact your KPMG adviser.
Information is current to April 03, 2018. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500