Summary of defensive measures against non-cooperative jurisdictions for tax purposes

Following the publication in November 2019 by the EU Code of Conduct Group (CoCG) of guidance on defensive measures against jurisdictions deemed un-cooperative (in the tax area) by the EU, Member States committed to implementing and applying from January 1, 2021 at least one of the legislative defensive measures Suggested by the CoCG:

  • Non-deductibility of costs: Member States that opt for this measure should deny deduction of costs and payments that otherwise would be deductible for the taxpayer when these costs and payments are treated as directed to entities or persons in listed jurisdictions. The measure should include, for example, interest, royalties and other concessions on intellectual property (IP) assets and service fees;
  • Controlled Foreign Company (CFC) rules: Member States that opt for this measure should include in the tax base of the taxpayer the income of an entity resident or a permanent establishment situated in a listed jurisdiction. Member States could apply this measure in accordance with to the rules laid down in articles 7 and 8 of the Anti-Tax Avoidance Directive (EU) 2016/1164 (ATAD1);
  • Withholding tax measures: Member States that opt for this measure should apply withholding tax at a higher rate, for example, on payments such as interest, royalties, service fee or remuneration, when these payments are treated as received in listed jurisdictions. Alternatively or in addition to this measure Member States could consider applying specific targeted withholding tax on such payments;
  • Limitation of participation exemption on profit distribution: Member States, which have rules that permit excluding or deducting dividends or other profits earned from foreign subsidiaries, could deny or limit such participation exemptions if the dividends or other profits are treated as received from a listed jurisdiction. 

The Summary of defensive measures against non-cooperative jurisdictions for tax purposes report provides a high level overview of defensive tax and administrative measures adopted by a selection of EU / EEA jurisdictions, plus the UK, against countries included on the EU list of non-cooperative jurisdictions for tax purposes as well as on equivalent national lists, where applicable.

Please note that the information is generally valid as at January 2022, unless stated otherwise.  The data presented is of a general nature and subject to change.