Updates on EU Blacklist and Cyprus Tax Legislation

Written by Demetris Nicolaides
20 October, 2023

The European Union (EU) maintains a list of non-cooperative jurisdictions for tax purposes, also known as the EU blacklist. This list is part of the EU’s efforts to combat tax evasion and avoidance, and includes countries that have not complied with good tax governance criteria.

On 17 October 2023, the EU made the following changes to its blacklist:

  • Antigua and Barbuda Belize and Seychelles were added to the blacklist.
  • The British Virgin Islands and Costa Rica were moved from the blacklist to the grey list.
  • Marshall Islands was completely removed from the blacklist.

With these updates, the EU Blacklist consists of the following 16 jurisdictions:

  • American Samoa
  • Antigua and Barbuda
  • Anguilla
  • Bahamas
  • Belize
  • Fiji
  • Guam
  • Palau
  • Panama
  • Russia
  • Samoa
  • Seychelles
  • Trinidad and Tobago
  • Turks and Caicos Islands
  • US Virgin Islands
  • Vanuatu

Cyprus Withholding Tax Legislation

As part of Cyprus’s efforts to prevent tax abuse and align with EU guidelines for defensive tax measures, a new legislation was introduced on 21 December 2021 imposing a withholding tax on certain payments made by Cyprus resident companies to companies which are:

  • residents in EU blacklist jurisdictions, or
  • incorporated/registered in a jurisdiction included in the EU Blacklist and are not tax resident in any other jurisdiction that is not included in the EU Blacklist.

This applies under the following conditions:

  • The recipient company, either alone or with its associated companies, holds more than 50% of the capital, voting rights, or is entitled to receive more than 50% of the profits of the Cyprus-based company23.
  • The associated companies should also be resident or incorporated in an EU blacklisted jurisdiction and are not tax resident in any other jurisdiction that is not included in the EU Blacklist4.

It’s important for businesses operating in Cyprus or dealing with entities in blacklisted jurisdictions to be aware of these changes and consider their potential impact. As always, for specific advice on these matters, it’s recommended to consult with a tax professional.

Feel free to talk with our team and understand how the above developments may affect your business.

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