Inclusion of new countries in the EU tax havens list – practical implications
The list of non-cooperative jurisdictions for tax purposes (commonly referred to as “tax havens”), adopted by the Council of the European Union, has recently been extended to include 4 countries. The new countries added to the list include Russia. The other jurisdictions are: the British Virgin Islands, Costa Rica and the Marshall Islands.
The change may affect in particular the reporting of cross-border tax schemes.
According to the regulations, a tax scheme needs to be reported if a Polish company recognizes as tax costs payments made to a related party having its registered office or management in a country that applies harmful tax competition. Reporting will be necessary irrespective of the amount of payment and of whether the transaction with an entity from e.g. Russia involves a tax benefit.
The deadlines for cross-border tax scheme reporting have not been suspended and all companies need to observe the 30-day time limit for filing the report to the tax authorities.
Additionally, entities which make tax settlements in Russia will need to disclose this fact in their tax strategy required to be published.
The additional aspects related to extension of the EU tax heavens list include: (i) the CFC regulations (the possibility to recognize e.g. Russian subsidiaries as controlled foreign companies), (ii) provisions governing shifted profits (the possibility to tax certain deductible costs incurred for a related party established e.g. in Russia with a flat-rate tax).
The EU tax havens list applies alongside the Polish list of tax havens, published in the form of Regulation of the Minister of Finance. The Polish list has not been extended yet, although this can be expected to change soon. This will cause reduction of the thresholds for the obligation to document in case transfer pricing files are prepared.
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