As of February 14, 2023 the EU Council has added the British Virgin Islands, Costa Rica, Marshall Islands and Russia to the EU list of countries that do not cooperate for tax purposes.
In total the EU list now includes 16 jurisdictions as follows:
- American Samoa
- Panama
- Samoa
- British Virgin Islands
- Anguilla
- Guam
- Trinidad and Tobago
- Costa Rica
- Bahamas
- Palau
- Turks and Caicos Islands
- Marshall Islands
- Fiji
- Panama
- Vanuatu
- Russia
The list is a component of the EU’s external taxation strategy and intends to support ongoing initiatives to advance global tax good governance and avoid aggressive tax planning.
Following the amending laws published on 21 December 2021 which are effective as of 31 December 2022, there has been an introduction of withholding taxes on payments to companies in jurisdictions included in the EU List of non-cooperative jurisdictions for tax purposes.
The provisions are applicable as follows:
Dividends:
Withholding taxes at the rate of 17% will apply on dividends paid by a Cyprus tax resident company to companies which are residents in jurisdictions included in the EU Blacklist, 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.
The following conditions apply:
- The company receiving the dividend holds directly, either alone or jointly with associated companies, over 50% of the capital, voting rights, or is entitled to receive more than 50% of the profits in the company paying the dividends.
- The associated companies should also be resident in an EU blacklisted jurisdiction or incorporated/ registered in an EU blacklisted jurisdiction and are not tax resident in any other jurisdiction that is not included in the EU Blacklist.
No taxes will be withheld in cases of dividend payments on shares listed on a recognized stock exchange.
Interest payments:
Taxes will be withheld at source at the rate of 30% on interest paid by a Cyprus tax resident company to companies which are:
- residents in jurisdictions included in the EU Blacklist, 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.
No taxes will be withheld in cases such as:
- interest payments on securities listed on a recognized stock exchange.
- Interest payments made by individuals.
Royalties:
Taxes will be withheld at the rate of 10% on royalties paid by a Cyprus tax resident company to companies which are:
- resident in jurisdictions included in the EU blacklist, 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.
The above does not apply in the case of royalty payments made by individuals.