---
titulo: "Questions and Answers: List of Non-Cooperative Jurisdictions"
titulo_seo: "EU Tax Haven List Q&A (2018): Panama Included"
meta: "The European Commission's 2018 fact sheet on the first EU tax-haven blacklist, which named Panama: the criteria, the screening and the sanctions. Archive."
autor: "Diego Ospina Serna"
fecha: 2018-04-11
actualizado: 2018-04-11
materia: "Tax Law"
idioma: "en"
par: "preguntas-y-respuestas-lista-de-jurisdicciones-no-cooperadoras"
resumen: "HISTORICAL ARCHIVE (2018): translation of the questions-and-answers fact sheet (Memo 17/5122) with which the European Commission explained the methodology, criteria and sanctions of its first list of non-cooperative tax jurisdictions, on which Panama was included following the Paradise Papers scandal."
tags: ["Common Reporting Standard", "European Union", "CRS"]
orden: 20180411
---
> [!warning] Currency note
> This article translates the European Commission's Memo 17/5122 on the first list of non-cooperative jurisdictions (2017-2018). The list is updated periodically, and Panama's status on it has changed several times since then; see the [current list](https://taxation-customs.ec.europa.eu/tax-good-governance/eu-list-non-cooperative-jurisdictions-tax-purposes_en) for the present status. This article is preserved for its explanation of the methodology. See also our guide on [Panama and the EU's list of tax havens](/guias/panama-as-a-tax-haven-according-to-the-eu/).

Through Memo 17/5122, the European Commission published a questions-and-answers fact sheet on its first list of non-cooperative tax jurisdictions, published by agreement of the European Union's finance ministers in December 2017. *(The European Union's original note can be consulted in the references to this article.)*

**Why has the EU produced a list of non-cooperative tax jurisdictions?**

The new list is part of the EU's work to crack down on tax evasion and avoidance. The list will help the EU to address more robustly the external threats to Member States' tax bases and to tackle those third countries that consistently refuse to play fair on tax matters.

Until now, Member States have taken a patchwork approach to dealing with tax havens, which has had a limited impact. In its [External Strategy for Effective Taxation](http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52016DC0024), the Commission suggested that a common EU list could be a more effective way of tackling countries that encourage abusive tax practices. Member States [agreed](http://www.consilium.europa.eu/en/press/press-releases/2016/05/25/conclusions-tax-treaty-abuse/) that a single EU list would carry much more weight than a mix of national lists and would have a significant deterrent effect on problematic third countries.

The EU listing process also brings about change. It creates a positive incentive for international partners to improve their tax systems where there are weaknesses in their transparency and fair-tax standards. Throughout the EU listing process, many countries engaged with the Member States to address the shortcomings found in their tax systems.

Finally, the common EU list will also create a clearer and fairer environment for businesses and third countries. Divergent national approaches, with different "triggers" and listing criteria, send mixed messages to international partners about the EU's good-governance expectations. A single EU listing process, based on clear criteria and a process of open dialogue, is much easier for international partners to understand and engage with.

**Why were EU Member States not assessed for this list?**

The EU list is a tool for addressing the external threats to Member States' tax bases. It is also a means of promoting greater dialogue and cooperation with international partners on tax matters.

Member States' laws have been brought into line with these global standards over the past three years, through various legislative acts agreed at EU level. Thanks to these changes, the EU is now the leader when it comes to tax standards.

**How was the list compiled?**

In May 2016, the EU finance ministers [approved the new listing process](http://www.consilium.europa.eu/en/press/press-releases/2016/05/25/conclusions-tax-treaty-abuse/) of the External Strategy and subsequently [agreed common criteria](http://www.consilium.europa.eu/media/24230/08-ecofin-non-coop-juris-st14166en16.pdf) for assessing the selected countries. They asked the Code of Conduct Group — the body made up of Member State tax experts in the Council — to manage the process and present a first EU list by the end of 2017.

**The list was compiled through a three-step process:**

  1. **Pre-selection:** in September 2016, the Commission [pre-assessed 213 countries](http://europa.eu/rapid/press-release_IP-16-2996_en.htm) using more than 1,600 different indicators. These indicators help to classify countries according to their economic ties with the EU, financial activity, legal and institutional stability, and levels of good tax governance. This data was compiled into a Scoreboard and helped Member States decide which countries should be examined in greater detail. On the basis of the Scoreboard, Member States decided which countries to examine more thoroughly.
  2. **Screening:** formal contact was made with all the jurisdictions chosen for screening, to explain the process and invite them to engage with the EU. Member State experts assessed in depth the tax systems of the selected jurisdictions using the agreed criteria. There were many contacts with the jurisdictions during the screening stage, to seek clarifications, information and explanations from both sides.
  3. **Listing:** once the experts had finished the screening stage, they handed their findings to the Code of Conduct Group. On that basis, a letter was sent to each jurisdiction, confirming that they met the criteria or highlighting the shortcomings in their tax systems. Jurisdictions were asked to make high-level commitments to address the identified shortcomings within a set period of time. Those that did not do so were put forward for listing.

The Code of Conduct Group drew up the first EU list and submitted it to the EU finance ministers for endorsement at their monthly meeting. The Member States also took note of the commitments made by several jurisdictions and agreed on a general approach to sanctions for the listed countries.

Screening | Commission reviews third-country risk levels | 1/10/16
---|---|---
Screening | Members agree screening criteria | 1/11/16
Screening | Members assess third countries' tax systems | 1/12/17
Listing | Members list countries that did not commit | 5/12/17
Monitoring | Ongoing review, updated at least once a year | Annual

Overview of the Screening Process *(213 countries pre-assessed for the scoreboard)*
---
92 countries chosen for screening
20 Meet Requirements | 72 asked to address shortcomings
47 countries must make commitments to: – Improve transparency – Stop harmful tax practices – Introduce substance requirements – Implement OECD BEPS | 8 hurricane-hit countries have more time.
17 countries on the EU list

**What criteria were used in the EU listing process to assess the countries?**

The [EU listing criteria are aligned](http://www.consilium.europa.eu/media/24230/08-ecofin-non-coop-juris-st14166en16.pdf) with international standards and reflect the good-governance standards that Member States comply with themselves. These are:

  * **Transparency:** The country must comply with international standards on automatic exchange of information and exchange of information on request. It should also have ratified the OECD's multilateral convention or signed bilateral agreements with all Member States to facilitate this exchange of information. Until June 2019, the EU requires only two of the three transparency criteria. After that, countries will have to comply with all three transparency requirements to avoid being listed.
  * **Fair Tax Competition:** the country should not have harmful tax regimes that run counter to the principles of the EU Code of Conduct or the OECD Forum on Harmful Tax Practices. Those that choose to have no corporate tax or a zero rate must ensure that this does not encourage artificial offshore structures without any real economic activity.
  * **BEPS Implementation:** the country must have committed to implementing the minimum standards of the [OECD](http://www.oecd.org/ctp/beps/)'s [Base Erosion and Profit Shifting](http://www.oecd.org/ctp/beps/) (BEPS).

**Who was responsible for screening the selected jurisdictions?**

The process was led by the Member States. They proposed national tax experts to assess the tax systems of the selected third countries. These experts were grouped into panels, which examined the jurisdictions according to the agreed criteria. The expert groups received guidance from the Code of Conduct Group and technical support from the Commission.

**Did the screened countries have the opportunity to present their case?**

Yes. From the outset of the exercise, the Commission stressed that the EU listing process should be as fair, transparent and open as possible. At every subsequent stage, high priority was given to ensuring that the relevant countries understood the process and could respond. Many bilateral and multilateral meetings were held to this end, and there was extensive correspondence between the Member States and the affected jurisdictions.

The jurisdictions were sent a formal letter when they were selected for screening in January 2017. At the end of the screening process, they received another letter, confirming that they complied or asking them to make specific improvements to their tax systems. At each stage, jurisdictions were encouraged to engage with the EU, provide all relevant information and seek any clarifications they needed. Each country had the opportunity to present its position, address concerns and discuss how to deepen its cooperation with the EU on tax matters.

**Why did the Member States not list all the countries that did not meet the criteria?**

The EU list was always conceived as an option of last resort, when all other efforts to engage with a third country had failed. Jurisdictions that were prepared to cooperate were not listed, provided they gave a clear and concrete commitment to address the identified tax shortcomings.

For certain jurisdictions, specific factors must be taken into account. For example, 8 jurisdictions (Antigua and Barbuda, Anguilla, the Bahamas, the British Virgin Islands, Dominica, Saint Kitts and Nevis, the Turks and Caicos Islands, the U.S. Virgin Islands) severely hit by hurricanes in the summer of 2017 were given until early 2018 to respond to the EU's concerns. Special attention was also paid to the situation of developing countries. The least developed countries without financial centers were automatically excluded from the screening process, while other developing countries without financial centers were given more time to address their shortcomings.

**What positive changes can already be seen as a result of the EU listing process?**

A key benefit of the EU listing process is that it relaunched discussions on good tax governance and led countries to improve their tax systems, in line with international standards. Many jurisdictions cooperated closely with the EU during the listing process and made firm commitments to fix the problems identified in their tax systems. Many others improved their standards immediately, in response to the EU listing exercise.

**What is the breakdown of the commitments made by the jurisdictions to improve their tax standards?**

In total, 47 countries committed to improving their transparency standards. Once fulfilled, these commitments should improve the good tax-governance environment worldwide. The work must now continue by reviewing the situation throughout 2018.

**What kind of commitments did the countries make in response to the EU listing process?**

The Member States agreed not to list jurisdictions if they committed to addressing the shortcomings found during the screening process. These commitments had to be made at a high political level (for example, the Minister of Finance) and provide a clear national timetable for implementing the changes. The commitments related to the good-governance criteria used in the listing process.

**Why did the EU not exclude developing countries from the EU listing process?**

The specific situation of developing countries was fully taken into account throughout the EU listing process. The Commission excluded 48 least developed countries from the pre-assessment, in recognition of the particular constraints they face. In addition, developing countries without financial centers were given an additional year to comply with the expected standards, where shortcomings were found in their tax systems with respect to transparency and BEPS implementation.

The Commission is very sensitive to the challenges that developing countries face in the field of taxation. The External Strategy has a full section on supporting developing countries in the fight against tax abuse and in domestic revenue collection, which builds on the Commission's "Collect More, Spend Better" strategy. This fulfils the EU's commitments under the Addis Tax Initiative, such as greater support for low-income countries to improve their revenue-collection capacity. The Commission and the Member States have also begun to examine the possible effects of national and EU tax policies on developing countries, to avoid negative spillovers and ensure greater policy coherence.

**What sanctions will be applied to the listed countries?**

The EU list should have a real impact on the affected countries, thanks to the EU's new legislative measures.

First, following the Commission's proposals, the EU list is now linked to EU funding in the context of the European Fund for Sustainable Development (EFSD), the European Fund for Strategic Investments (EFSI) and the External Lending Mandate (ELM). Funds from these instruments cannot be channelled through entities in listed countries. Only direct investment in these countries (that is, on-the-ground project financing) will be permitted, in order to preserve development and sustainability objectives.

Second, the Commission has referred to the list in other relevant legislative proposals. For example, the proposal for [public country-by-country reporting](http://europa.eu/rapid/press-release_IP-16-1349_en.htm) includes stricter reporting requirements for multinationals with activities in the listed jurisdictions. Under the proposed [transparency requirements](http://europa.eu/rapid/press-release_IP-17-1663_en.htm) [for intermediaries](http://europa.eu/rapid/press-release_IP-17-1663_en.htm), a tax scheme routed through an EU-listed country will be automatically reported to the tax authorities. The Commission is also examining legislation in other policy areas, to see where further consequences can be introduced for listed countries.

In addition to the EU provisions, the Commission encouraged the Member States to agree on coordinated sanctions to apply at national level against the listed jurisdictions. The first steps have been taken in this direction. The Member States have agreed on a set of countermeasures that they can choose to apply against the listed countries. These include measures such as increased monitoring and audits, withholding taxes, special documentation requirements and anti-abuse provisions. The Commission will support the Member States' work to develop a more binding and definitive approach to sanctions for the EU list in 2018.

**Will the list be updated?**

Yes. The list will be updated at least once a year. This update will be based on continuous monitoring of the listed jurisdictions, as well as those that have committed to improving their tax systems. Depending on developments, the Member States may also decide to examine more countries in 2018. An interim report will be prepared in mid-2018 to assess the progress made.

From June 2019, stricter transparency criteria will come into force, requiring a reassessment of all jurisdictions to ensure they are in line. The EU listing criteria will also be updated in the future, to reflect the new elements agreed by the Member States, such as transparency on beneficial ownership, as well as possible developments at the international level.

**How can a country be removed from the list by the EU?**

A country will be removed from the list once it has addressed the matters of concern to the EU and has brought its tax system into line with the required good-governance criteria. The Code of Conduct Group will be responsible for updating the EU list and recommending to the Council that countries be removed.

This unprecedented exercise will raise the levels of good tax governance globally and will help prevent large-scale tax abuses, such as those exposed in recent scandals of the Paradise Papers type.

**Is the EU list in line with the international agenda for good tax governance?**

Yes, the EU list strongly supports the international good tax-governance agenda. The EU listing criteria reflect internationally agreed standards, and countries were encouraged to comply with these standards to avoid being listed. The EU also took into account the OECD's assessments of countries' transparency standards and tax regimes, as part of the screening process. The Commission and the Member States maintained close and regular contact with the OECD throughout the listing process, to ensure that EU and international work in this field remains complementary and mutually reinforcing.

**How does the EU list differ from the list published by the OECD in July?**

The OECD list focused on countries that did not comply with international transparency standards, as requested by the G20. The EU list is based on a broader set of good-governance criteria. In addition to transparency, it also covers fair taxation, compliance with the BEPS standards and the level of taxation, where this could encourage artificial structures and arrangements. As such, there was a broader scope for the EU listing process. This is in line with the wide spectrum of good tax-governance standards that the EU Member States themselves adhere to.

**How does the new EU list compare with the "pan-European list" published in 2015?**

The new EU list is a fully coordinated EU project. It was conceived, developed and managed at EU level. The criteria and the process were agreed by the EU finance ministers in the ECOFIN Council, and the Member States worked together to screen the selected countries and decide which ones to list. The final EU list was approved unanimously by the Member States in the Council.

The "pan-European" list was simply a compilation of the individual lists of the Member States. The Commission published this consolidated version of national lists in June 2015, as a first step toward a more coordinated EU approach. The "pan-European" list highlighted the diversity of Member States' lists and the confusion this created for businesses and international partners. Many countries welcomed the idea of a single EU listing process, which would be clearer and easier to work with than a patchwork of different lists.

**What is the difference between this list of non-cooperative tax jurisdictions and the EU's anti-money-laundering list?**

The anti-money-laundering (AML) list focuses on countries with poor anti-money-laundering and terrorist-financing regimes. The list reflects the approach of the Financial Action Task Force (FATF) to dealing with countries that have not implemented international anti-money-laundering standards. Banks must apply enhanced due-diligence controls to financial flows toward these listed countries.

The EU tax list focuses on the external risks posed by countries that refuse to respect good tax-governance standards. It has different objectives, different criteria, a different compilation process and different consequences from the AML list. Nonetheless, the two lists will complement each other to ensure double protection of the single market against external good-governance risks.

* * *

*Editorial note: the translation shared here is not literal; for editorial reasons, unnecessary elements were trimmed and the main ideas of the European Commission's original document were preserved.*

The [OECD](https://www.oecd.org/about) provides a forum in which governments work together to share experiences and seek solutions to common problems in matters of trade, investment, taxation and international standards.

The [FATF](https://www.fatf-gafi.org) is an intergovernmental body created in 1989 to set standards and promote the effective implementation of measures to combat money laundering, terrorist financing and other related threats to the international financial system.