The European Union is planning to remove the British overseas territory of Bermuda, the Dutch Caribbean island of Aruba and Barbados from the bloc’s blacklist of tax havens at a meeting on May 17. The removals are due to the changing of their corporate law.
To be removed from the blacklist, the jurisdiction should have law that reflects the fair corporate tax. Under the EU’s fair corporate tax criteria, a company should have “economic substance” in the relevant territory, and must not be a letterbox firm that has been set up to take advantage of low or zero corporate tax rates. In this regard, the three countries already amended their corporate tax law based on the EU’s standard. Therefore they will be removed from the list.
According to the EU document, Bermuda changed its laws relating to economic substance in the area of collective investment funds by the end of 2019. Bermuda will be transferred to the EU gray list until the island nation carries through on its commitments.
Similar to Bermuda, Barbados and Aruba will also be moved from the blacklist to the gray list to ensure that similar “economic substance” requirements are adopted by the end of 2019.
The Caribbean island nation of Dominica also changed its laws but it still does not comply with EU “transparency” criteria that require the exchange of bank information of non-resident account holders, according to the document. As a result it will remain on the EU tax haven blacklist.
Due the removal of the three islands, the current blacklist will shrink to twelve jurisdictions. It will still include the United Arab Emirates, Oman and the three U.S. territories of American Samoa, Guam, and the U.S. Virgin Islands. Other jurisdictions on the list are Belize, Fiji, the Marshall Islands, Vanuatu, Dominica, Samoa and Trinidad and Tobago.
The impact of the blacklist is the reputational damage and stricter controls on transactions with the EU. Therefore the remaining jurisdictions are reported on effort to fulfill the EU’s requirement.
One of TPA’s technology partners Cygnet Infotech has developed a comprehensive VAT solution named R7VAT MTD, which is amongst others recently approved by HMRC for use by companies in the UK to automate and manage their VAT returns filing process but can also be used broadly within the EU.
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