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On February 14, 2023, the Council of the European Union made changes to the list of countries that do not cooperate with the EU on tax matters.
This is called the “EU blacklist”.
Four new countries were added to the list:
With these additions, the EU blacklist list now has 16 countries on it. The other countries are as follows:
The Council gave reasons for adding these countries.
For example, the Marshall Islands was added because they have a tax system that encourages businesses to move profits offshore without any real economic activity.
Costa Rica was added because they do not provide enough information about tax matters, and they have tax policies that are considered harmful. Russia was added for the same reason.
The Bahamas was previously removed from the EU blacklist in 2018 but was added back in 2022 and remains on the list.
The new list will be officially published in the Official Journal of the EU, and the next revision will take place in October 2023.
If you have any queries relating to the EU Blacklist or tax matters more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.
In 2020, the EU’s Anti-Tax Avoidance Directive II (“ATAD II“) came into force.
This led to EU Member States being required to implement into domestic law a suite of so-called “anti-hybrid” laws.
The aim of the anti-hybrid rules is, unsurprisingly, to eliminate the potential to exploit ‘hybrid features’ in a structure.
For example, the rules might address a hybrid instrument that is treated as debt in one jurisdiction but equity in another jurisdiction. Alternatively, they might target a hybrid entity which is treated as tax transparent in one jurisdiction and tax opaque in another jurisdiction.
One such anti-hybrid rule is the “reverse hybrid” rule.
This was introduced in a number of countries including Luxembourg.
The purpose of the “reverse hybrid” rule is to counteract “double non-taxation outcomes”.
Such an outcome might arise where an entity, e.g. a Luxembourg fund partnership, is treated as tax transparent in Luxembourg but tax opaque in the jurisdiction of one of its investors.
Why might this lead to ‘double non-taxation?’
Running with the example above, the Luxembourg fund partnership is not taxed in Luxembourg because it transparent for tax purposes. In other words, the entity does not pay tax, only the partners in the partnership.
However, that same income is also untaxed in that investor’s jurisdiction as a result of that jurisdiction deeming the income to have been paid by an opaque entity.
The rule may be triggered if:
This is subject to certain aggregation or “acting together” rules.
Where it is engaged, our fund partnership would be treated as a corporate for tax purposes in Luxembourg. As such, it becomes subject to Luxembourg corporate income tax.
Luxembourg amended its “reverse hybrid” on 23 December 2022.
This was to clarify certain conditions that must be satisfied in order for it to be engaged.
The conditions can be summarised as follows:
The reason for the amendment was that they overreached and counteracted certain mismatches that were not caused by hybridity – but rather as a result of an investor’s tax exempt status.
The amendment has retrospective effect from 1 January 2022.
If you have any queries relating to Luxembourg’s Reverse Hybrid Rule Amendments or tax matters in the Luxembourg more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.
Last month, the Swiss Federal Council took the decision to suspend co-operation under the Automatic Exchange of Information (AEoI) between itself and Russia.
Obligations under AEoI stem from the Common Reporting Standard (CRS). However, similar data sharing obligations arise under other tax-related information exchange including:
These are also suspended.
In respect of the CRS based obligations, this means that where a Swiss Reporting Financial Institution (FI) has submitted information for 2021 to the Swiss Federal Tax Administration (FTA) on its Russian resident clients then the FTA will not provide the Russian authorities with the data.
It is worth pointing out that all obligations of a Swiss Reporting FI remain in place following the move. It is simply that the FTA will not pass this information over the Swiss authorities as would normally be the case.
If you have any queries about this article, or Swisstax matters in general, then please do get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article