Update: EU blacklist & tax havens

What is the EU blacklist?

The EU blacklist is a list of countries that don’t cooperate with the EU for tax purposes, i.e. they are regarded as tax havens. It is updated twice a year, applying international tax standards. Once a country has been identified as non-cooperative, contact is made to draw their attention to problems and outstanding commitments. Furthermore, the countries concerned are subject to both tax and non-tax defensive measures in the EU member states. In Germany, the tax defence measures are regulated in the Tax Haven Defence Act (Steueroasenabwehrgesetz – StAbwG).

What is the Tax Haven Defence Act (StAbwG)?

The intention behind the Tax Haven Defence Act (StAbwG) is to curb unfair tax competition among businesses. This new legislation makes economic relations with tax havens more difficult. The measures include increased tax obligations and documentation requirements for transactions with non-cooperative countries.

Updating the EU blacklist

On 8 October 2024, the Council of the European Union updated the EU list of non-cooperative jurisdictions for tax purposes (“tax havens”). After four countries were removed from the EU blacklist in February, the state of Antigua and Barbuda was also now removed. 

These removals are due to be incorporated into the Tax Haven Defence Regulation by the end of the year, which will take these countries out of the scope of the Tax Haven Defence Act (StAbwG).

No new countries have been added. The EU blacklist therefore now includes the following eleven jurisdictions:

1. American Samoa
2. Anguilla
3. Fiji
4. Guam 
5. Palau
6. Panama
7. Russia
8. Samoa
9. Trinidad and Tobago
10. American Virgin Islands and
11. Vanuatu.

Extended defence measures from 2025

The remaining jurisdictions on the EU blacklist continue to be subject to the Tax Haven Defence Act (StAbwG). The general defence measures, i.e. the stricter controlled foreign companies tax rules (Section 9 StAbwG) and the extended withholding taxation (Section 10 StAbwG), continue to apply to business relationships with partners based in these states.

The following additional restrictions will be imposed from 2025, depending on the length of time a country has been on the EU blacklist.

• Measures for the distribution of profits and the sale of shares (Section 11 StAbwG)
  From the third year after listing, the statutory tax exemptions for dividends and profits from the sale of shares in corporations based in a tax haven are blocked, subject to certain exceptions (e.g. Section 8b Corporate Income Tax Act [Körperschaftsteuergesetz – KStG]). Corporations from Anguilla will be affected for the first time starting from 2025.
  
  
• Ban on deducting business expenses and income-related expenses (Section 8 StAbwG)
  From the fourth year after listing, operating expenses and income-related expenses from business transactions with tax havens may no longer be deducted for tax purposes. This does not apply to expenses for which the corresponding income is subject to taxation in Germany. The ban on deducting business expenses will come into force for the first time in 2025 and will affect the following states:
  
  American Virgin Islands, American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, and Vanuatu.

Related to the ban on deducting expenses, the question arises as to how to proceed with expenses on globally deposited bearer bonds and similar debt instruments. In these cases, the taxpayers have no knowledge of the creditor’s identity. They therefore cannot be certain whether the beneficial owner is resident in a tax haven or whether the ban on deduction applies.

German legislature has considered the ban on deduction in these cases to be unfair and included an exception in the draft of the Annual Tax Act 2024. A corresponding exemption is also to apply to (re)insurance services. The Bundestag adopted the draft Annual Tax Act 2024 on 18 October 2024. It can therefore be expected that this welcome clarification will enter into force after the legislative process is concluded.

Practical note

We recommend you check as soon as possible whether you have any business relationships with companies in the listed countries and whether profit distributions or sales of shares are