Tag Archive: blacklist

1. Hong Kong Removed from EU Watchlist Following Tax Regime Amendments

   21 March 2024 4:47 am Leave a Comment

   Hong Kong Removed from EU Watchlist – Introduction

   Hong Kong has been officially removed from the European Union’s list of non-cooperative jurisdictions for tax purposes, commonly referred to as the EU Watchlist.

   This took place with effect from the 20 February 2024.

   The development comes after the Hong Kong government introduced the Foreign-Sourced Income Exemption (FSIE) regime in January 2023.

   This is aimed at addressing the EU’s concerns over tax cooperation and aligning with international tax standards.

   Background of the FSIE Regime

   The FSIE regime was established in response to Hong Kong’s inclusion on the EU Watchlist in 2021, marking a concerted effort by the local government to ensure the jurisdiction’s compliance with global tax norms.

   The regime applies to certain types of passive income, including dividends, interest, income derived from intellectual property (IP), and disposal gains related to equity interests.

   To benefit from the profits tax exemption under the FSIE regime, multinational enterprises (MNEs) operating in Hong Kong must meet specific economic substance, nexus, and participation requirements relevant to each income type.

   Refinements and Compliance with EU Standards

   Following the EU’s updated Guidance on Foreign-sourced Income Exemption Regimes in December 2022, which called for adequate substance requirements for all passive income types, the Hong Kong government expanded the FSIE regime.

   This expansion included broadening the scope of disposal gains to encompass gains from the disposal of all asset types received by MNE entities in Hong Kong.

   These adjustments, which took effect on 1 January 2024, played a crucial role in demonstrating Hong Kong’s commitment to adhering to international tax standards.

   EU’s Decision to Remove Hong Kong from the Watchlist

   The EU’s decision to remove Hong Kong from the Watchlist was based on a comprehensive review of the amendments made to the territory’s tax regime concerning foreign-sourced passive income.

   By fully aligning with the EU’s requirements and international tax standards, Hong Kong has successfully addressed the concerns that led to its initial inclusion on the Watchlist.

   Implications and Future Developments

   Hong Kong’s removal from the EU Watchlist is a positive development for the region, enhancing its reputation as a cooperative jurisdiction in tax matters and potentially improving its attractiveness as a business and investment destination.

   Stakeholders in Hong Kong and international businesses operating within the territory will benefit from the clarity and stability this resolution provides.

   Hong Kong Removed from EU Watchlist – Conclusion

   As Hong Kong continues to implement and refine the FSIE regime, further updates and guidance are expected to ensure that the territory remains in compliance with evolving international tax standards.

   This proactive approach underscores Hong Kong’s dedication to fostering a transparent and cooperative tax environment on the global stage.

   Final thoughts

   If you have any queries about this article on ‘Hong Kong Removed from EU Watchlist’, or tax matters in Hong Kong more generally, then please get in touch.

2. Yer name’s not down – UAE is off Dutch Tax Blacklist

   9 February 2024 7:43 am Leave a Comment

   UAE is off the Dutch Blacklist – Introduction

   The Netherlands’ recent update to its list of low-taxed and non-cooperative jurisdictions for 2024 has notably excluded the United Arab Emirates (UAE), marking a shift in tax policy.

   This change follows the UAE’s introduction of a federal Corporate Income Tax (CIT) regime, setting a standard tax rate of 9% for financial years beginning on or after 1 June 2023.

   The Blacklist

   Of course, this blacklist has nothing to do with Raymond Reddington.

   Instead, the Dutch tax blacklist is a list of jurisdictions that facilitate abusive tax structures through minimal or non-existent taxation rates, defined as less than 9%.

   The presence on this list subjected entities in blacklisted jurisdictions to stringent domestic anti-abuse measures in the Netherlands.

   These included conditional withholding taxes on cross-border payments and limitations on obtaining tax rulings for transactions involving blacklisted jurisdictions, alongside the application of Controlled Foreign Corporation (CFC) rules that impacted the taxable income of Dutch entities.

   Back from black

   The removal of the UAE from this blacklist alleviates several challenges for UAE-based businesses operating in the Netherlands.

   Previously, the anti-abuse measures introduced a layer of complexity and uncertainty for transactions between the two nations.

   Now, the reclassification signals a positive development, potentially enhancing economic connections and fostering a more favorable environment for cross-border investments and collaborations.

   The UAE’s proactive adjustment of its tax regime to introduce a CIT rate aligns with global tax standards and demonstrates a commitment to fostering a transparent and cooperative financial landscape.

   This adjustment has directly influenced its standing with the Netherlands, removing barriers that once complicated financial and corporate engagements.

   UAE is off the Dutch Blacklist – Conclusion

   For businesses within the UAE with Dutch interests, this development opens doors to new opportunities and simplifies operations, heralding a phase of strengthened economic ties between the UAE and the Netherlands.

   This move is anticipated to encourage a smoother flow of trade, investment, and financial services between the two countries, reinforcing their positions in the global market.

   Final thoughts

   If you have any queries about this article on the UAE being off the Dutch Blacklist, or UAE matters more generally, then please get in touch.