Italy adds Cayman to tax ‘whitelist’

Italy has included the Cayman Islands on the list of jurisdictions it deems cooperative in tax matters.

The amended list reflects numerous bilateral and multilateral agreements signed by Italy during the past several years and includes 51 new countries, among them offshore centers such as Bermuda, the Cayman Islands, Hong Kong, Liechtenstein and Switzerland.

The Cayman Islands signed a tax information exchange agreement with Italy on Dec. 3, 2012, which came into force on Aug. 13, 2015. But the Italian government amended the tax cooperation whitelist by ministerial decree on Aug. 9 and published the list in the Official Gazette on Aug. 22.

Taxpayers resident in the whitelist countries who invest in the Italian market have access to a range of tax benefits, and some benefits are afforded to Italian taxpayers dealing with whitelisted countries.

Cayman Finance CEO Jude Scott welcomed Italy’s decision to include the Cayman Islands on its whitelist.

The inclusion will allow Cayman Islands funds to invest in Italian securities such as bonds and securitization instruments and receive interest payments gross of withholding tax.

Cayman funds may also benefit from full exemption from Italian tax on profits attributable to them where they own more than 5 percent of an Italian Real Estate Investment Fund, Cayman Finance noted.

Mr. Scott said Cayman’s financial services industry is encouraged by Italy’s recognition of the Cayman Islands for its good tax governance.

“The inclusion of the Cayman Islands on Italy’s whitelist echoes to the global financial services industry its recognition of our robust framework to combat corruption, money-laundering and tax evasion but as importantly, Cayman’s commitment to comply with international standards of transparency and exchange of information.

“It is encouraging to be recognized by many European countries and more recently Italy, on tax information exchange. We look forward to building a stronger partnership with Italy and other EU countries in an effort to combat financial crimes,” he added.

According to the decree, the Italian Ministry of Finance will be able to remove jurisdictions from the list that do not comply with their reporting obligations. The list is updated every six months.

Although about three-quarters of Cayman-domiciled funds are managed by fund managers in the United States, Mr. Scott said Cayman’s funds industry could play an increasingly important role in providing liquidity and credit to Italian businesses, to help offset the challenges faced by Italian banks as a result of the recent global credit crises.

“Cayman funds have played this role with other major economies,” he said.

As a global allocator of global capital and financing, Cayman provides a platform for international investment to be made into economies that need investments and for pension funds and other international institutional investors to invest into a diversified portfolio of securities.

“The Cayman Islands enables parties from around the world who are domiciled in countries that may have differing laws, regulations, tax structures and customs to benefit from doing business with each other using Cayman as an efficient and effective global financial hub.

“This inward investment from Cayman will ultimately help stimulate economic activity, create much needed jobs and generate taxable revenue in Italy,” Mr. Scott said.

He added that Italy’s decision was a positive step forward for Cayman’s financial services industry in Europe, especially after the European Securities and Markets Authority deferred its recommendation on whether the Cayman Islands should be granted a passport under the Alternative Investment Fund Managers Directive.

This passport would allow Cayman-domiciled funds to be marketed across the EU and enable Italian resident investors and pension funds to invest in Cayman-domiciled structures.

Once the pending legislation to make Cayman compliant with the EU funds regime is in place in late 2016 or early 2017, Mr. Scott said, there should be no further impediments to Cayman’s AIFMD passport application.