This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.

Freshfields Transactions

| 2 minutes read

The revised EU list: how does it impact Italian deals?

On 18 February 2020, the Economic and Financial Affairs Council (ECOFIN) added four jurisdictions to the EU list of non-co-operative jurisdictions for tax purposes (‘the EU list’).

One of these jurisdictions was the Cayman Islands, a move that is seen as a warning to the UK in the context of post-Brexit talks and has raised concerns among investors.

This blog sets out some background on the EU list and how the changes might impact the Italian market.

What is the EU list? 

Adopted in 2017, the EU list aims to help EU member states deal more robustly with jurisdictions that encourage tax abuse and contribute to unfair tax competition.

The EU list has two parts:

  1. A ‘grey’ list of countries that have promised to improve their tax practices. It includes inter alia Australia, Bosnia, Morocco, Thailand and Turkey.
  2. A ‘black’ list of countries that either do not co-operate with the EU or have failed to comply with their commitments to the EU to reform their tax rules. It includes the four recently added jurisdictions – the Cayman Islands, Palau, Panama and Seychelles.

The listing criteria

The EU listing criteria are:

  • transparency, ie compliance with international standards on the automatic exchange of information;
  • fair tax competition, ie an absence of harmful tax rules; and
  • BEPS implementation, ie a commitment to the implementation of the OECD’s base erosion profit shifting minimum standards.

Consequences for blacklisted countries

Blacklisted countries may face restrictive measures at both European and domestic level:

  • The EU list is linked to EU funding programmes such as the Financial Regulation and European Fund for Sustainable Development, European Fund for Strategic Investment and external lending mandate. Funds arising from these instruments cannot be channelled through entities in countries on the EU list.
  • Some EU tax legislation also refers to the EU list.
  • EU member states could apply sanctions at a national level against the listed jurisdictions. These include measures such as increased monitoring and audits, withholding taxes, special documentation requirements and anti-abuse provisions. 

The impact on Italian deals

Italy has a so-called ‘white list’ consisting of countries that allow the adequate exchange of information with Italy. It is referred to in several Italian tax rules that give favourable tax treatment to non-Italian investors resident of or established in such countries, such as:

  • the exemptions on interest on 239 bonds;
  • interest on notes issued by Italian securitisation vehicles;
  • interest on medium long-term loans granted to Italian enterprises
  • profits distributed by Italian real estate funds
  • profits distributed by Italian investment funds; and 
  • capital gains on non-qualified Italian shareholdings and other financial instruments.

A country in the EU list is not automatically excluded from Italy’s white list. This means that, for the time being, investors established in the Cayman Islands can continue benefitting from Italian domestic withholding tax exemptions available to non-Italian white-list investors.

In fact, the EU list should be of more relevance under the Italian rules implementing the amendments to the EU directive on cross-border tax arrangements (known as DAC6). 

The current draft amending regulation provides that, under certain circumstances, intermediaries (eg banks, lawyers, consultants, etc.) may have to notify the tax authorities in case of deductible payments to intra-group entities based in countries on the EU list.


taxation, europe