EU blacklists Cayman Islands as tax haven

The Cayman Islands has been put on an EU blacklist of tax havens, the first UK overseas territory to be named and shamed for failing to crack down on tax abuse

The economic and financial affairs council (ECONFIN) has issued a revised list of non-cooperative jurisdictions for tax purposes and has added four jurisdictions to the existing list of eight countries:  Cayman Islands, Palau, Panama and Seychelles.

The EU said these jurisdictions did not implement the tax reforms to which they had committed by the agreed deadline.

They join American Samoa, Fiji, Guam, Oman, Samoa, Trinidad and Tobago, US Virgin Islands and Vanuatu on the blacklist.

The Cayman Islands government described the EU’s decision as ‘deeply disappointing’ and said it has already contacted EU officials to begin the process of being removed from the EU list of non-cooperative jurisdictions as soon as possible, claiming this is understood to be October this year.

Cayman Islands Premier Alden McLaughlin said that since 2018, Cayman has adopted more than 15 legislative changes in line with the EU’s criteria.

In April 2019 the EU confirmed that Cayman had satisfied its economic substance requirements, with the exception of economic substance for funds, also known as collective investment vehicles (CIVs).

On 31 January 2020, Cayman passed The Private Funds Law and The Mutual Funds (Amendment) Law, both of which address the EU’s concerns for CIVs. The laws came into force on 7 February 2020.

However, Premier McLaughlin said the EU listing appeared to stem from Cayman’s legislation not being in force by 4 February, which was the cut-off date for revision of the listing. 

‘While Cayman consulted with a number of stakeholders on our legislation, including our financial services industry, the principal components of our new and revised laws were shaped by the EU’s criteria, he said.

This includes Cayman’s commitment to a six-month transition period for registering funds that are now required to do so, in accordance with the new Private Funds and amended Mutual Funds laws.

The EU also judged that 16 jurisdictions which were under assessment have implemented all the necessary reforms to comply with EU tax good governance principles ahead of the deadline and have therefore been removed from the list. 

They are Antigua and Barbuda, Armenia, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cabo Verde, Cook Islands, Curaçao, Marshall Islands, Montenegro, Nauru, Niue, Saint Kitts and Nevis, and Vietnam.

David Burt,Premier of Bermuda, said: ‘The recognition of Bermuda as cooperative is welcome validation of the global blue chip status to which we operate, described by some as the Bermuda standard. 

‘The ECOFIN decision completes a journey for our island, placing us in pole position to maintain our global competitiveness as a service and finance centre, including in fintech, for our world-class client base and other stakeholders.’

The EU list of non-cooperative tax jurisdictions is based on am assessment exercise with about 70 third country jurisdictions. Since this began, 49 countries have implemented the necessary tax reforms to comply with the EU's criteria.

Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes 

EU list of non-cooperative jurisdictions 

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