On 16 July 2020, entered into force the Commission Recommendation (EU) 2020/1039 of 14 July 2020 on making State financial support to undertakings in the Union conditional on the absence of links to non-cooperative jurisdictions. 

In order to ensure that the financial support can flow to eligible entities, the Commission recommends Member States to establish reasonable requirements to demonstrate the absence of links to a jurisdiction that features on the EU list of non-cooperative jurisdictions. 

The Commission suggests hence that if the Member States adopt measures that provide financial support, they must make sure that those entities that receive the financial support in their jurisdiction should 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 the beneficial owner;

• control, directly or indirectly, subsidiaries or own permanent establishments in jurisdictions that feature on the EU list of non-cooperative jurisdictions; and

• share ownership with entities in jurisdictions that feature on the EU list of non-cooperative jurisdictions. 

Moreover, in order to verify that the upper requirements are followed, the Members States should ensure that not only the immediate shareholders but also the ultimate owner and all other entities under the same ownership are not tax resident in, or incorporated under the laws of non-cooperative jurisdictions. 

However, the Commission recommends that, if one of the following conditions is met, the Member States may disregard the existence of links of the EU registered entity to the listed non-cooperative jurisdictions: 

• when the level of the tax liability in the Member State granting the financial support over a given period of time (e.g. the last three years) is considered adequate when compared to the overall turnover of the entity receiving the support over the same period (though, the Commission does not exemplify or define what “adequate” term means in this situation);
  
• if the entity that is entitled to receive financial support makes legally binding commitments to remove its ties to EU listed non-cooperative jurisdictions within a short timeframe, subject to appropriate follow-up and sanctions in case of non-compliance. 

In the view of the Commission, the Member States should agree to reasonable requirements demonstrating the absence of links to a jurisdiction that features on the EU list of non-cooperative jurisdictions. 

As the Member States are requested to inform the Commission about the measures taken further to the present Recommendation, we look forward to the actions to be implemented by the Romanian authorities in this regard.