Background
The European Union established the blacklist in 2023 with the objective of promoting tax governance at a global level. The jurisdictions included on this list are those that do not comply with internationally agreed tax standards, have failed to meet their commitments in relation to tax good governance within the timeframe set by the EU, or have not implemented the necessary tax reforms.
In Detail
Following the most recent update, the list consists of 10 jurisdictions:
- American Samoa
- Anguilla
- Guam
- Palau
- Panama
- Russia
- Turks and Caicos Islands
- US Virgin Islands
- Vanuatu
- Viet Nam
Impact - Luxembourg tax aspects
The EU ‘Blacklist’ directly affects the application of several Luxembourg tax measures:
- Interest and royalty payments made to a related party in a blacklisted jurisdiction are, under certain conditions, non-deductible in Luxembourg (unless certain justifications are provided)
- One of the DAC 6 Hallmarks relates to cross-border payments to associated enterprises located in a blacklisted jurisdiction; a Hallmark not subject to the main benefit test (however not leading to a reportable case where the above-mentioned non-deduction rule is applicable)
- Increased scrutiny by the Luxembourg tax authorities where related parties are located in blacklisted jurisdictions and certain disclosure requirements for Luxembourg entities in their corporate tax returns
- Certain public CBCR disclosure requirements
Our observations
Taxpayers who are investing, making payments to or conducting business in any of the blacklisted jurisdictions should contact their tax advisors to analyze the possible impact.
The list is evolutive and is in principle updated twice a year. The next revision of the Blacklist is scheduled for October 2026. By that time, some of the jurisdictions might succeed in demonstrating sufficient cooperation to be delisted; others may be added. It is therefore important to closely follow the updates to the list.
We are ready to assist
Please do not hesitate to be in touch with your usual Grant Thornton contacts, or our dedicated subject matter experts.
For any questions, please feel free to be in touch with your usual Grant Thornton contacts, or our specialist team mentioned hereafter:
- Jean-Nicolas Bourtembourg - Partner, Head of Tax & Transfer Pricing
- Alain Verbeken - Partner, Tax - Financial Services
- Mélina Rondeux - Partner, International Tax
