Weekly Tax News - Monday 13 February 2023

February 13, 2023

EU leaders discuss EU response to the US IRA

EU leaders discussed during a European summit on Thursday 9 February in Brussels the proposals that the European Commission made in its communication “Green Deal Industrial Plan for the Net-Zero Age” to respond to the US Inflation Reduction Act (IRA). In the conclusions adopted at the end of their meeting, EU leaders stressed the need to make state aid procedures “simpler, faster and more predictable, and allow for targeted, temporary and proportionate support to be deployed speedily,  including via tax credits, in those sectors that are strategic for the green transition and are adversely impacted by foreign subsidies or high energy prices”. In a press conference following the meeting, the President of the European Council, Charles Michel, reportedly underlined the consensus of the leaders around a “relaxation of State aid which must be targeted, limited in time and coupled with more flexibility with existing means, to support the EU’s industrial and economic base”.

EU to add Russia to its blacklist of tax havens

EU  Finance Ministers will reportedly add Russia to the EU blacklist of non-cooperative jurisdictions in tax matters when they meet in Brussels on 14 February at the Ecofin meeting. During a meeting of EU ambassadors on Wednesday 8 February, Italy and Hungary  reportedly  lifted their reservations against the listing of Russia. Russia landed on the grey list in February 2022 because of its international holding company regime, which was introduced in 2018 to shield companies from international sanctions. It made a commitment to the EU to modify the regime before the end of 2022 to avoid being put on the EU blacklist. In its assessment of Russia’s progress, the European Commission said that Russia has not properly implemented rules on the grandfathering of the international holding company regime and that its treatment of income from intellectual property is in question. The British Virgin Islands, Costa Rica and the Marshall Islands will also reportedly join the blacklist. Aruba, Belize, Curaçao and Qatar are expected to join the EU so-called “grey” list of jurisdictions that have made commitments on good tax governance while Barbados, Uruguay, Jamaica, North Macedonia and Bermuda would be completely removed from the grey list.

Member States discuss how to define shell companies

EU Member States are reportedly working on how to define an abusive shell entity and which entities can be considered low risk in the framework of the examination of the UNSHELL Directive proposal. The latest compromise text drafted by the Swedish Presidency of the Council of the EU reportedly sets out in a single article – instead of two in the initial proposal - indicators and a substance test that entities must pass in order to not be considered abusive shell entities. The Swedish Presidency reintroduced some of the substance requirements that were removed by the Czech Presidency, namely having premises in the Member State, an active bank account in the EU, and a majority of employees performing most of their tasks in the Member State of the entity. Many Member States would have reportedly welcomed this approach while asking for some clarification on some concepts. Another issue currently discussed is the number of entities that the same person can manage without raising suspicion of being a shell company. A compromise proposal on the tax consequences of being a shell entity is reportedly expected to be presented during a technical meeting on 21 February. Depending on the evolution of the technical talks, the UNSHELL Directive could be discussed at the ministerial level in May.

MEPs impatient with the AML blacklist update

The chairs of the ECON and LIBE committees of the European Parliament wrote on 3 February to Member States to urge them to update the EU list of third countries at risk in terms of money laundering. In January, Member States indeed agreed to extend by one month the deadline for objecting to the European Commission’s proposal to add to the AML blacklist the Democratic Republic of the Congo, Gibraltar, Mozambique, Tanzania, and the United Arab Emirates, and to remove Nicaragua, Pakistan, and Zimbabwe. The reluctance of some Member States to add the United Arab Emirates to the EU list has reportedly been one of the reason for the extension of the deadline. “The update of the EU list is urgent and long overdue, especially considering that several countries were added to the FATF list since March 2022. This situation puts the EU financial system at risk with regard to jurisdictions identified as having significant deficiencies in their AML/CFT framework”, the two chairs wrote in their letter. Member States have until 20 February to object to the Commission’s proposal but during a Parliament hearing on 1 February, a representative of the Swedish Presidency of the Council of the EU reportedly said that the Council is unlikely to object again.


This newsletter contains information about European tax policies and developments gathered from official documents, hearings, conferences and the press. It does not reflect the official position of ETAF nor should it be taken as a written statement on behalf of ETAF.  

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