By the virtue of the European Council’s decision on 14 February 2023, the EU list of non – cooperative jurisdictions for tax purposes has been revised and updated by including the following countries: Russia, Costa Rica, British Virgin Islands and Marshall Islands as the “black listed” jurisdictions. This means that the countries failed to comply with the international standards of good tax governance, such as tax transparency, fair taxation and etc.
Therefore, from now the defensive measures will be introduced by EU Member States to combat with any potential cooperation with such countries, especially for the purposes of incorporating an international business company there (an offshore entity). The measures may include but are not limited to withholding taxes, controlled foreign company rules, limitation of the participation exemption and non-deductibility of costs related to entities in the listed countries.
More specifically, by the virtue of Cyprus Tax Law, Cyprus applies WHT on certain payments to companies in the black listed jurisdictions as follows:
- WHT of 17% applies on payments of dividends by non-quoted companies
- WHT of 10% on payments of royalties and similar type payments
Additionally, the compliance from the side of the banks and/or any other money institutions will become more strict and less favorable for the above jurisdictions.
The next revision of the list is scheduled for October 2023.