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Czech Republic attempts to make approval of state aid measures conditional on the absence of links to non-cooperative jurisdictions

October 2020 – The fight against the so-called tax havens has been a major ongoing issue both at the European Union level and also for Member States. A list of non-cooperative tax jurisdictions has been maintained by the EU since 2017. The battle against tax havens is also directly impacting the way state financial support is provided in the European Union.

In July 2020, the European Commission issued Recommendation 2020/139 on making State financial support to undertakings in the European Union conditional on the absence of links to non-cooperative jurisdictions (the “Recommendation”). Pursuant to the Recommendation, EU Member States adopting measures to provide financial support to eligible undertakings in their jurisdiction will have to make eligibility for such financial support contingent upon a number of conditions. Specifically, the undertakings that receive the financial support must not:

  • be resident for tax purposes in, or incorporated under, the laws of jurisdictions that feature on the EU list of non-cooperative jurisdictions
  • be controlled, directly or indirectly, by shareholders in jurisdictions that feature on the EU list of non-cooperative jurisdictions, up to and including the beneficial owner
  • control, directly or indirectly, subsidiaries, or own permanent establishments in, jurisdictions that feature on the EU list of non-cooperative jurisdictions
  • share ownership with undertakings in jurisdictions that feature on the EU list of non-cooperative jurisdictions.

In order to ensure the absence of links to non-cooperative jurisdictions, each EU Member State will have to verify that both immediate shareholders and also the ultimate owner(s) and all other undertakings under the same ownership are not tax resident in, or incorporated under, the laws of such a jurisdiction. The owner(s) of the undertaking receiving financial support may be legal entities (e.g. corporations, partnerships, etc.), legal arrangements (e.g. trusts) or natural persons.

Although the Recommendation is not legally binding for EU Member States, the approach is in line with overall ongoing efforts to combat tax evasion. Indeed, Czech authorities have already started to request that applicants for certain forms of state aid demonstrate fulfilment of the conditions stipulated in the Recommendation. We anticipate that such verification procedures will become standard practice for Czech authorities prior to approving certain forms of state aid. As a result, any company applying for state aid (standard investment programmes and also programmes initiated in response to the current COVID-19 outbreak) should review its ownership structure and tax residence status in order to avoid applications potentially being subjected to additional scrutiny or even rejection. The non-cooperative tax jurisdictions list is updated regularly, and should be consulted before making any application for state aid.

For more information, please contact Tomáš Čihula, Partner, at

e-mail

, or Karla Rundtová, Partner, at .