The European Union’s Economic and Financial Affairs Council (ECOFIN) has removed The Cayman Islands from the European Union’s (EU) blacklist of non-cooperative jurisdictions for tax purposes.

The Cayman Islands was removed from the EU list after it adopted new reforms to its framework on Collective Investment Funds in September 2020. ECOFIN had placed Cayman Islands on its EU list in February because the Caribbean territory had failed to implement legislative amendments (relating to the regulation and oversight of collective investment fund vehicles) before the agreed deadline.

The legislative amendments were due to be in force prior to the EU’s Code of Conduct Group meeting on February 4 but the Cayman Islands enacted The Private Funds Law, 2020 and the Mutual Funds (Amendment) Law, 2020 only three days later on February 7. The meeting reviewed each jurisdiction’s commitment to reform their tax policies and recommendations were made to place jurisdictions on the EU list for non-cooperative jurisdictions for tax purposes.

However, at its latest meeting last week, ECOFIN recognised that The Cayman Islands’ legislative amendments were consistent with the EU’s requirements and thus removed the territory from the EU list.

Two more Caribbean additions to the blacklist

In the meantime, ECOFIN has added Anguilla and Barbados to the EU list of non-cooperative jurisdictions for tax purposes. The Cayman Islands and Oman were removed from the list, after passing the necessary reforms to improve their tax policy frameworks. The EU list of non-cooperative jurisdictions for tax purposes is part of the EU’s external strategy for taxation and aims to contribute to ongoing efforts to promote tax good governance worldwide.

It lists non-EU jurisdictions that either have not engaged in a constructive dialogue with the EU on tax governance or have failed to deliver on their commitments to implement reforms to comply with a set of objective tax good governance criteria concerning tax transparency, fair taxation and implementation of international standards against tax base erosion and profit shifting.

Anguilla and Barbados were included in the EU list following peer review reports published by the Global Forum on Transparency and Exchange of Information for Tax Purposes, which downgraded the ratings of Anguilla and Barbados, respectively, to “non-compliant” and “partially compliant” with the international standard on transparency and exchange of information on request (EOIR).

Oman was considered as compliant with all its commitments after it ratified the OECD Convention on Mutual Administrative Assistance in Tax Matters, enacted legislation to enable automatic exchange of information and took all the necessary steps to activate its exchange-of-information relationships with all the EU member states.

Non-compliant jurisdictions

Following this update of the blacklist, 12 jurisdictions remain on the list of non-cooperative jurisdictions. They are American Samoa, Anguilla, Barbados, Fiji, Guam, Palau, Panama, Samoa, Seychelles, Trinidad and Tobago, the US Virgin Islands and Vanuatu.

As regards Annex II – state of play of pending commitments – due to the ongoing COVID-19 global pandemic, ECOFIN decided to extend several deadlines for these commitments. The Council also decided last week to remove Mongolia and Bosnia and Herzegovina from Annex II after those countries deposited the instruments of ratification of the OECD Convention on Mutual Administrative Assistance in Tax Matters, as amended.

Blacklisting dates back to December 2017

The EU list of non-cooperative jurisdictions for tax purposes was established in December 2017. It has been revised several times. The most recent substantial revision took place in February 2020. From 2020 on, it is to be updated twice a year.

The list is included in Annex I of the Council conclusions on the EU list of non-cooperative jurisdictions for tax purposes. Those Council conclusions also contain a state-of-play document (Annex II) identifying non-EU jurisdictions which do not yet comply with all international tax standards but have provided sufficient undertakings to reform their tax policies.

The jurisdictions are assessed on the basis of a set of criteria laid down by the Council in 2016, concerning tax transparency, fair taxation and implementation of international standards against tax base erosion and profit shifting. The Council’s decisions are prepared by the Council’s Code of Conduct Group which is also responsible for monitoring tax measures in the EU member states.