The idea of so-called non-cooperative jurisdictions was first introduced in the French tax code from January 1 2010. The definition covers states and countries that are not EU member states whose exchange of information rules have been reviewed by the OECD, who do not have an tax agreement with France containing a mutual assistance clause to allow exchange of information and who, as of January 1 2010, do not have such an agreement with at least 12 states or territories.
Orlando Smith, the BVI premier, told local media on August 30 that the territory signed a tax information agreement with France in 2009. He said his officials would seek clarification from the French government.
"Under article 28-0A of the French tax code, regardless of the signature of a TIEA, the French government can add a country to the list if, in practice, the exchange of information did not work in a way that allowed the French tax authorities obtain useful information, " said Guillaume Glon, of PwC.
In contrast, Cesar Purisima, the Philippines Finance Secretary, was delighted about his country being taken off the list.
"This move is recognition of the Aquino's administration commitment and tangible progress in combating tax evasion and promoting fiscal honesty," he said.
Not automatic
The French tax authorities do not automatically disqualify transactions that use non-cooperative jurisdictions, but such deals must comply with more stringent transfer pricing documentation requirements and tougher rules for controlled foreign corporations located in these places than those deals that do not use them.
Additionally, a French entity must pay a 75% withholding tax on payments such as interest, dividends, royalties and capital gains to a company in a non-cooperative jurisdiction, the French participation exemption regime does not apply for dividends paid by a company in such places to a French parent and most expenses accrued or paid to a company in a non-cooperative jurisdiction cannot be deducted in France
The updated list takes effect on January 1 2014. The affected jurisdictions have until then to prepare for implementation or change their approach to information exchange to meet France's satisfaction.
"Taxpayers will have to review their structures and flows in order to evaluate the impact of this new list," said Glon. "On a case by case basis they will have to make a decision as to whether they change the way they do business with these jurisdictions."
Progress on an international standard of automatic exchange of information will be discussed by G20 heads of government at their summit in St Petersburg tomorrow and Friday.
