On the February 14th, 2023, the EU Council added Russia, the British Virgin Islands, Costa Rica and the Marshall Islands to the EU’s list of non-cooperative jurisdictions.
Therefore, presently and until the next revision scheduled for October 2023, the EU list of non-cooperative jurisdictions for tax purposes now includes 16 jurisdictions being: American Samoa, Anguilla, the Bahamas, the British Virgin Islands, Costa Rica, Fiji, Guam, the Marshall Islands, Palau, Panama, the Russian Federation, Samoa, Trinidad and Tobago, the Turks and Caicos Islands, the U.S. Virgin Islands, and Vanuatu.
As a result of this addition, there are tax consequences both at EU and Cyprus level.
From the EU tax perspective, transactions involving cross-border arrangements with deductible payments made to associated enterprises included in the EU list of non-cooperative jurisdictions automatically trigger hallmark C.1.b.(ii) of Cyprus DAC 6 Law 41(I) 2021,and any arrangement involving an entity from a non-cooperative jurisdiction undermining the level of exchange of information required (EOI) will automatically trigger hallmark D.1 of Cyprus DAC 6 Law 41(I) 2021. In both cases, this triggers the reporting obligation for intermediaries under Cyprus DAC 6 Law 41(I)/2021 which applies independently of whether or not the objective of the arrangement is to obtain a tax advantage, both hallmarks are not subject to the so called Main Benefit Test.
From the Cyprus tax perspective and subject to conditions, dividends, interest, and royalty payments made by Cyprus tax resident entities to entities based in a country included in the EU list of non-cooperative jurisdictions for tax purposes will suffer withholding tax in Cyprus.