ECOFIN adopts revised list of non-cooperative jurisdictions for tax purposes; Pillar Two Directive not on the agenda

  • On 4 October 2022, the European Union (EU) Finance Ministers adopted a revised list of non-cooperative jurisdictions for tax purposes (EU list).

  • Anguilla, the Bahamas, and Turks and Caicos Islands were added to Annex I (the so-called “black” list). Armenia and Eswatini were added to Annex II (the so-called “gray” list), while Bermuda and Tunisia were removed.

  • The next revision to the EU List is expected in February 2023.

  • The Pillar Two Directive was not on the agenda.

Executive summary

On 4 October 2022, the Council of the European Union (the Council) held an Economic and Financial Affairs Council (ECOFIN) meeting where Finance Ministers approved the Council Conclusions (pdf) on the revised EU List. Regarding Annex I, the Council decided to add three jurisdictions (Anguilla, the Bahamas, and the Turks and Caicos Islands). With respect to Annex II and the state of play of pending commitments, the Council removed Bermuda and Tunisia and added Armenia and Eswatini. The Council will continue to review and update the EU List biannually, with the next update due in February 2023.

In this ECOFIN meeting, although there was some expectation that there would be a discussion on the Pillar Two Directive, this item was finally not included in the meeting’s agenda. However, Finance Ministers may have discussed the status of the Pillar Two directive during today's (4 October) non-public session on the preparations for the G20 meeting of finance ministers and central bank governors of 12–13 October 2022.

Detailed discussion


The EU started working on the list of non-cooperative jurisdictions for tax purposes in 2016. On 5 December 2017, the Council published the first EU list of non-cooperative jurisdictions for tax purposes, comprised of two annexes. Annex I includes jurisdictions that fail to meet the EU’s criteria by the required deadline, and Annex II includes jurisdictions that have made sufficient commitments to reform their tax policies but remain subject to close monitoring while executing their commitments. Once a jurisdiction has executed all of its commitments, it is removed from Annex II.

The initial list of Annex I included 17 jurisdictions that were deemed to have failed to meet relevant criteria established by the European Commission (the Commission).Since the release of the EU List, there have been multiple changes to its composition based on recommendations made by the Code of Conduct Group for Business Taxation (COCG). Such changes may occur if, for example, new jurisdictions or regimes are identified and analyzed by the EU COCG or jurisdictions already on the EU List are re-assessed. A de-listing for both Annex I and Annex II is considered justified in light of an expert assessment if it is established that the jurisdiction now meets all the conditions posed by the COCG.

The Commission also adopted the first countermeasures against listed non-cooperative tax jurisdictions by the adoption of a Communication in March 2018 that set new requirements against tax avoidance in EU legislation governing, in particular, financing and investment operations.The requirements aim to ensure that EU external development and investment funds cannot be channeled or transited through entities in jurisdictions listed in Annex I without being confronted with countermeasures.

Moreover, in 2019, the Council released additional guidance on defensive measures toward non-cooperative jurisdictions. On the same date, it also released guidance on assessing jurisdictions with notional interest deduction regimes and the treatment of partnerships under criterion 2.2 (existence of tax regimes that facilitate offshore structures that attract profits without real economic activity).In accordance with the guidance on defensive measures mentioned above, EU Member States are committed, as of 1 January 2021, to use Annex I in the application of at least one of four specific legislative measures:

  • Non-deductibility of costs incurred in a listed jurisdiction
  • Controlled foreign company rules
  • Withholding tax measures
  • Limitation of the participation exemption on shareholder dividends

Many Member States have already adopted or drafted legislation for such defensive measures.

Revised EU List

On 4 October 2022, the EU Finance Ministers met in Luxembourg for an ECOFIN meeting, during which the Ministers adopted the conclusions on the revisions of the EU List.

The Council adopted a revised Annex I of the EU List by adding Anguilla, the Bahamas, and the Turks and Caicos Islands. According to the Council press release on the revised EU List, the reason for the inclusion on the list is that there are concerns that these three jurisdictions, which all have a zero or nominal only rate of corporate income tax, are attracting profits without real economic activity (criterion 2.2 of the EU List). In particular, they failed to adequately address a number of recommendations of the OECD4 Forum on Harmful Tax Practices (FHTP) in connection to the enforcement of economic substance requirements, something to which they committed earlier this year. The revised Annex I of the EU List now includes 12 jurisdictions: American Samoa, Anguilla, the Bahamas, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, the Turks and Caicos Islands, the US Virgin Islands and Vanuatu.

The Council also amended the list of jurisdictions included on Annex II of the EU List which covers jurisdictions that have made sufficient commitments to reform their tax policies, but which remain subject to close monitoring while they are executing on these commitments. Accordingly, the Council decided to remove Bermuda and Tunisia from Annex II as they have fulfilled all their commitments. Armenia and Eswatini were added to the Annex II as they have received recommendations to amend their preferential tax regimes by the end of 2023.

While Costa Rica fulfilled its commitments regarding the amendment of its Special Economic Zones regime, it failed to remove its foreign-source income exemption (FSIE) regime. Thus, it was not removed from Annex II and was given a deadline to work on this outstanding commitment by 31 December 2022. Moreover, Turkey remained on Annex II and was not included on Annex I despite failing to make the EU’s requested changes and repeatedly missing deadlines to start exchanging tax information with all EU Member States.

As a result, the revised Annex II now comprises 22 jurisdictions: Armenia, Barbados, Belize, Botswana, British Virgin Islands, Costa Rica, Dominica, Eswatini, Hong Kong, Israel, Jamaica, Jordan, Malaysia, Montserrat, North Macedonia, Qatar, Russia, Seychelles, Thailand, Turkey, Uruguay, and Vietnam.

Next steps

The Council will continue to periodically review and update the EU List, taking into consideration the evolving deadlines for jurisdictions to deliver on their commitments and the evolution of the listing criteria that the EU uses to establish the EU List. Until 2019, the EU List was regularly updated without a fixed schedule to reflect the reforms undertaken by third countries. However, from 2020, Member States have agreed that the EU List will be updated no more than twice a year to ensure a more stable listing process, business certainty and so that the Member States can effectively apply defensive measures against listed jurisdictions. Accordingly, the next revision to the EU List is expected in February 2023.

In November 2020, the Council approved conclusions on fair and effective taxation, with which the Council expressed its support for a process that would lead to a revision of the Code of Conduct mandate.5 In December 2021, the Slovenian Presidency published a draft for a revised mandate for the Code of Conduct. The revised mandate was endorsed during the ECOFIN meeting on 7 December 2021; however, Hungary and Estonia blocked the agreement as they disagreed with the revision. In its latest work program on 22 September 2022, the COCG indicated that it would work on the revision of its mandate to advance the reform and at a technical level to evaluate possible impacts of Pillar Two, including on the EU listing criteria.


With its listing process, the EU continues to exercise pressure on third states to enhance transparency and remove harmful elements from their tax systems. It is expected that the jurisdictions that have made commitments in relation to their foreign-exempt income regimes will also take account of the broader negotiations on global minimum taxation triggered by the BEPS6 2.0 project.

Businesses with activities in jurisdictions listed as non-cooperative are advised to understand the implications of a jurisdiction being included in Annex I, including:

  • Reporting obligations that arise from the mandatory disclosure rules (MDR) contained in Directive 2011/16/EU as amended by Council Directive (EU) 2018/822 (MDR Directive or DAC6), which, inter alia, require the disclosure of cross-border arrangements that involve cross-border deductible payments when the recipient of the payment is tax resident in a jurisdiction included on the EU List of non-cooperative jurisdictions for tax purposes.
  • EU Member States may consider applying one or more defensive measures, including taxation measures and measures outside the field of taxation, to prevent the erosion of their tax bases. These may include measures such as non-deductibility of costs, enhanced controlled foreign company rules or withholding tax measures, among others.

The lists will also have implications for the public Country-by-Country Reporting, as, under these rules, information should be disclosed on a country-by-country basis and thus be disaggregated for all 27 EU Member States and all jurisdictions included in Annex I (on the first of March of the financial year for which the report should be drawn up) and Annex II (on the first of March of the financial year for which the report should be drawn up for two years consecutively ) of the EU List7. Also, companies cannot delay the publication of commercially sensitive information for up to five years if the information relates to jurisdictions listed in Annex I and Annex II of the EU List.

As the work on the EU List is a dynamic process, companies should continue closely monitoring developments, including the introduction of defensive measures toward non-cooperative jurisdictions by the other Member States.


For additional information with respect to this Alert, please contact the following:

EY Société d’Avocats, Paris
  • Jean-Pierre Lieb
Ernst & Young Belastingadviseurs LLP, Rotterdam
  • Marlies de Ruiter
  • Maikel Evers
  • Andromachi Anastasiou
Ernst & Young Belastingadviseurs LLP, Amsterdam
  • David Corredor Velasquez
  • Konstantina Tsilimigka

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.