PwC’s Overview of Defensive Measures in the tax area in EU Member States
17/11/20
Update: an updated version of this publication is available in our PwC Tax News article: Update: PwC Overview of defensive tax measures in EU Member States
The EU Member States committed, as of 1 January 2021, to use the EU list of non-cooperative jurisdictions (the EU list) in the application of at least one of four specific legislative measures:
- non-deductibility of costs incurred in a listed jurisdiction;
- controlled foreign company (CFC) rules, to limit artificial deferral of tax to offshore, low-taxed entities;
- withholding tax measures, to tackle improper exemptions or refunds, and
- limitation of the participation exemption on shareholder dividends.
These are the so-called “defensive measures'' in the tax area.
In view of the deadline of 1 January 2021, PwC has prepared a publication of the defensive measures applicable or proposed in each EU Member State. The results of this publication are based on the input that was provided by the members of PwC’s EU Direct Tax Group (“EUDTG”) from 25 countries (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Spain, Sweden and the UK).
The publication can be found here.
EU list of non-cooperative jurisdictions
On 5 December 2017, the Council of the European Union (the Council) adopted the first EU list of non-cooperative jurisdictions (the EU list). The EU list consists of non-EU countries that encourage abusive tax practices, which erode EU Member States’ corporate tax revenues. According to the Council, the EU list “is a tool to tackle: a) tax fraud or evasion, b) tax avoidance and c) money laundering.” Since December 2019, the EU list has been revised several times with the most substantial amendments taken place in March 2019 and February 2020. From 2020, the list is updated twice a year.
As of 6 October 2020, the EU list is composed of the following jurisdictions:
American Samoa, Anguilla, Barbados, Fiji, Guam, Palau, Panama, Samoa, Seychelles, Trinidad and Tobago, the US Virgin Islands and Vanuatu.
What does it mean for you?
A transaction related to a country included in the EU list may have consequences in more than one EU Member State through the application of a defensive measure. Therefore, you should be able to monitor the defensive measures applicable or proposed in each EU Member State. With the help of PwC’s broad European network, we are able to assist you in this.
Main conclusions and interesting observations
The majority of the EU Member States has not introduced a defensive measure. This is, however, expected to change as the deadline of 1 January 2021 approaches.
9 EU Member States apply or have proposed a defensive measure. This is the case in Croatia, Finland, France, Germany, Ireland, Luxembourg, the Netherlands, Slovakia and Sweden. In relation to Germany, we observe that under the German Act to Counter Tax Evasion (the Act), it is essentially possible for the Federal Ministry of Finance (FMOF) to publish a list of countries that do not exchange information at all. As of now, the list is still empty but can be added with such states via a circular of the FMOF.
Certain EU Member States apply the EU list, in parallel with a domestic list, for the purposes of the application of a defensive measure. This is the case, for instance, in the Netherlands and France.
There are some EU Member States that apply a defensive measure that uses a domestic list of non-cooperative jurisdictions/jurisdictions with a preferential tax regime. This is the case, for instance, in Belgium, Greece, Poland, Portugal and Spain. This domestic list may include certain jurisdictions that are already included in the EU list. For the purposes of the publication, these measures were not considered “defensive” since their application was not linked with the EU list.
Please take a look at the publication for more interesting observations!
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