16 March 2023
Updated EU list of Non-cooperative Jurisdictions for Tax Purposes – Russia, British Virgin Islands, Costa Rica and the Marshall Islands added to the list
On 14th February 2023, the EU Council revised the existing list of non-cooperative jurisdictions for tax purposes that was established in 2017.
Russia, the British Virgin Islands, Costa Rica and the Marshall Islands were added to the list, which now consists of 16 jurisdictions that are listed below:
- American Samoa
- British Virgin Islands
- Costa Rica
- Marshall Islands
- Trinidad and Tobago
- Turks and Caicos Islands
- US Virgin Islands
The list includes countries that either have not engaged in a constructive dialogue with the European Union on tax governance or haven’t followed through on their commitments to carry out the required reforms that aim to comply with a set of tax governance criteria, such as tax transparency, fair taxation and adaption of international standards designed to prevent tax base erosion and profit shifting.
The list will be updated again in October 2023.
Impact on businesses operating in Bulgaria
Taxpayers that are established in Bulgaria and perform transactions or operations with parties located in a jurisdiction that is part of the EU list of non-cooperative jurisdictions for tax purposes may be subject to the following implications:
- EU Mandatory Disclosure Rules (DAC6): Based on Hallmark C(1)(b)(ii) transposed in Art.143я, Para.4, point 7 of the Tax and Social Security Procedure Code, arrangements that involve deductible cross-border payments made between associated enterprises in the cases where the recipient is resident in a jurisdiction that is included in the EU list of non-cooperative jurisdictions for tax purposes, are reportable, irrespective of whether the main benefit test is met or not.
- Default payments and indemnity payments made by Bulgarian tax resident entities or by Bulgarian permanent establishments of non-Bulgarian entities in favor of entities located in jurisdictions that are part of the EU list of non-cooperative jurisdictions for tax purposes, are regarded to be Bulgarian-source income subject to a Bulgarian withholding tax (subject to conditions).