On 14 February 2023, the Council of the EU decided to add British Virgin Islands, Costa Rica, Marshall Islands and Russia to the EU list of non-cooperative jurisdictions for tax purposes (the “EU List”).
From a Cyprus perspective adding British Virgin Islands, Costa Rica, Marshall Islands and Russia to the EU list may trigger withholding tax on dividend/interest/royalty payments paid by a Cypriot tax resident company to a company which is a resident of British Virgin Islands/ Costa Rica/Marshall Islands or Russia, or to a company incorporated or registered in those jurisdictions and not considered to be tax resident in another jurisdiction which is not included on the EU List.
Cyprus has also recently transposed the European Union (EU) Directive (2018/822) on the mandatory disclosure and exchange of information on reportable cross-border tax arrangements in Cyprus (the “DAC6 Law”). According to this latest development, transactions that involve deductible cross-border payments between associated enterprises where the recipient is resident in a county that is on the EU List may be reportable under the DAC6 Law.
If you are carrying out transactions with entities located in jurisdictions on the EU List, it is advisable to assess the impact of the revised list on your operations.