Annex II: The EU’s Grey List of Tax Jurisdictions

The EU grey list of tax jurisdictions, formally known as Annex II, names countries and territories that fall short of the EU’s tax governance standards but have committed in writing to fix the gaps by set deadlines. As of the Council’s 17 February 2026 revision, nine jurisdictions sit on it. Grey listing carries no automatic financial penalties, but it is a public warning: deliver on the promised reforms, or face escalation to the blacklist (Annex I), where member states apply real tax and funding sanctions.¹

Who Is Currently on the Grey List

The nine jurisdictions on Annex II as of February 2026 are:¹

Belize
British Virgin Islands
Brunei Darussalam
Eswatini
Greenland
Jordan
Montenegro
Morocco
Türkiye

The roster changes with every revision. Armenia, Costa Rica, Curaçao, Malaysia, and Seychelles were all cleared during prior updates after completing their commitments. Vietnam moved the other way in February 2026, escalated from the grey list to the blacklist for failing to fully meet what it had promised.²

Brunei Darussalam is one of the more recent additions, placed on Annex II in February 2025 after the EU flagged a harmful foreign-source income exemption regime, with an end-of-2025 deadline to amend or repeal it. Türkiye has been on the list far longer, still working through technical issues tied to automatic exchange of tax information.

Why a Jurisdiction Ends Up on Annex II

The EU’s Code of Conduct Group screens jurisdictions against three criteria. Failing any of them is enough to face listing. What separates the grey list from the blacklist is a formal commitment to reform: a jurisdiction that pledges, at senior political level, to fix the identified problems by an agreed date goes to Annex II. A jurisdiction that will not cooperate, or that has cooperated and then failed to deliver, goes to Annex I.

The first criterion is tax transparency. A jurisdiction must implement the OECD standard for exchange of information on request, participate in the automatic exchange of financial account information under the Common Reporting Standard, and join the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.³

The second is fair taxation. The EU looks at whether a jurisdiction runs preferential regimes for non-residents or lets companies book profits locally without any real economic activity behind them.

The third is compliance with the OECD’s Base Erosion and Profit Shifting framework, specifically the four BEPS minimum standards. Country-by-country reporting is central here: large multinational groups must file annual breakdowns of revenue, profit, taxes paid, and employees for every country where they operate.⁴ Under the EU’s public reporting directive, this obligation applies to groups with consolidated revenue above €750 million in each of the two preceding years.

What a Grey-Listed Jurisdiction Has to Do

Staying on Annex II rather than dropping to the blacklist has a price: a signed commitment letter setting out exactly which laws will change and when. Deadlines are firm.

The most common reform involves dismantling preferential regimes. A jurisdiction offering foreign companies a zero or near-zero effective rate while taxing domestic businesses at the normal rate must either repeal the regime or restrict its benefits to entities with genuine economic presence.

Economic substance rules do a lot of that work. Jurisdictions pass legislation requiring companies in mobile sectors — banking, insurance, fund management, finance and leasing, headquarters, shipping, intellectual property holding, distribution and service centres, and holding entities — to carry out defined core income-generating activities locally, with qualified staff, physical premises, and adequate operating expenditure.

Transparency commitments fill out the package. A jurisdiction that has not yet adopted the Common Reporting Standard has to do so, plugging into the annual automatic exchange of financial account data. The OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes, with 173 members, oversees how these standards are implemented worldwide.⁵

Grey List Versus Blacklist: What Actually Changes

This is where the practical stakes sit. Grey-listed jurisdictions attract reputational scrutiny, but EU member states apply no mandatory defensive tax measures against them. The blacklist is different.

Annex I as of February 2026 contains ten jurisdictions: American Samoa, Anguilla, Guam, Palau, Panama, Russia, the Turks and Caicos Islands, the US Virgin Islands, Vanuatu, and Vietnam. Since January 2021, member states have agreed to apply at least one of four legislative measures against blacklisted jurisdictions:¹

Non-deductibility of costs paid to entities in a blacklisted jurisdiction.
Controlled foreign company rules that tax profits of low-taxed offshore subsidiaries as if earned by the EU parent.
Higher withholding tax rates on payments flowing to blacklisted jurisdictions.
Loss of the participation exemption for dividends received from entities in blacklisted jurisdictions.

Alongside the tax measures, EU funding instruments block money from being routed through entities in blacklisted countries, including the European Fund for Sustainable Development, the European Fund for Strategic Investments, and the External Lending Mandate.¹ Individual member states can and do go further than the agreed minimum under their own domestic anti-abuse legislation. None of these measures apply to Annex II jurisdictions.

How and When the List Changes

The Council decided in March 2019 to revise the lists twice a year. The most recent revision was in February 2026, and the next is scheduled for October 2026.¹

Between revisions, the Code of Conduct Group does the technical review, checking the actual legislative text a jurisdiction has adopted against what its commitment letter promised, and looking for evidence the new rules are being enforced. Its recommendations go to ECOFIN, where the 27 EU finance ministers formally approve changes to both annexes.¹

A jurisdiction that clears every commitment comes off Annex II and joins the fully cooperative countries, though it remains under periodic review and can be relisted for backsliding. Costa Rica and Curaçao took that route in February 2025 after amending harmful tax regimes. Missing a deadline sends a jurisdiction the other way: the February 2026 revision moved both the Turks and Caicos Islands and Vietnam to the blacklist for falling short.²

The Global Minimum Tax Runs Alongside

The OECD’s Pillar Two framework, which sets a 15% global minimum effective rate for large multinationals, now operates in parallel with the EU list. By 2025, 22 of the 27 EU member states had implemented Pillar Two’s core rules; the remaining five are using a permitted six-year deferral. Even if a jurisdiction offers a 0% rate, the multinational’s home country can collect a top-up tax to reach the 15% floor.

Pillar Two does not replace the listing process. The grey list and blacklist judge a jurisdiction’s legal framework and cooperation; Pillar Two addresses the tax outcome for specific companies. A jurisdiction can satisfy the EU’s three criteria and still see incentives partly neutralized by the minimum tax, while another can have a statutory rate above 15% and still land on Annex II for weak transparency or substance rules. For businesses, both systems apply at once: routing profits through a grey-listed jurisdiction carries reputational risk and possible future blacklist exposure, while Pillar Two independently caps the savings available from low-rate locations regardless of listing status.

1
Council of the European Union. EU List of Non-Cooperative Jurisdictions for Tax Purposes
2
Council of the European Union. Timeline – EU List of Non-Cooperative Jurisdictions
3
OECD. Convention on Mutual Administrative Assistance in Tax Matters
4
OECD. Country-by-Country Reporting for Tax Purposes
5
OECD. Global Forum on Transparency and Exchange of Information for Tax Purposes