EU Expands List Of Non-Cooperative Tax Jurisdictions

By Global Tax Weekly

On February 18, the EU revealed that it has added the Cayman Islands, Palau, Panama, and the Seychelles to its list of non-cooperative tax jurisdictions, bringing the total tally to 12 from 8.

The European Council, which agreed the additions, stated that these jurisdictions had failed to implement the tax reforms to which they had committed by the agreed deadline; most commitments delivered upon by third-country jurisdictions involved a deadline of the end of 2019.

The Council also reported that it had amended its “grey list”, of jurisdictions cooperating with the EU to amend their tax systems. In light of their implementation of reforms in compliance with EU tax good governance principles within the required timeframe, the following jurisdictions have been removed from the grey list: Antigua and Barbuda, Armenia, the Bahamas, Barbados, Belize, Bermuda, the British Virgin Islands, Cabo Verde, the Cook Islands, Curacao, the Marshall Islands, Montenegro, Nauru, Saint Kitts and Nevis, and Vietnam.

The EU has granted 12 jurisdictions extensions to enable them to pass the necessary reforms and deliver on their commitments. The EU said that most of the deadline extensions concern developing countries without a financial center who have already made meaningful progress in the delivery of their commitments.

It subsequently emerged that the government of the Cayman Islands was not best pleased about this state of affairs, and is hoping that the territory will be removed from the EU’s blacklist of non-cooperative tax jurisdictions this year.

The Cayman Islands authorities argued that the EU’s decision is “deeply disappointing” and that it has “already contacted EU officials to begin the process of being removed from the EU list.” The Government is reported to be hopeful that this can be achieved as early as October.

Cayman Premier Alden McLaughlin went on to add that over the past two years, the Government has cooperated with the EU to deliver on its commitments to enhance tax good governance. Since 2018, Cayman has adopted more than 15 legislative changes in line with the EU’s criteria.

McLaughlin observed that the listing appears to stem from Cayman’s new rules on collective investment vehicles (CIVs) not being in force on February 3, 2020.

In April 2019, the EU confirmed that Cayman had satisfied its economic substance requirements, with the exception of economic substance rules for CIVs. On January 31, 2020, Cayman passed the Private Funds Law 2020 and the Mutual Funds (Amendment) Law 2020, which it says addresses the EU’s concerns. The Government said that the EU was notified that the legislation would be passed by January 31. The laws entered into force on February 7.

McLaughlin concluded by explaining that the Cayman Islands “remains fully committed to cooperating with the EU, and will continue to constructively engage with them with the view to be delisted as soon as possible.”

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