The Ministry of Financial Services met with members of Cayman’s financial services industry associations to discuss several commitments made to the European Union Code of Conduct Group for Business Taxation (EU COCG) as part of its evaluation of jurisdictions for tax purposes.
During last year’s EU COCG screening process, Cayman avoided being included on a blacklist of non-compliant countries in tax matters. Cayman was assessed as a transparent jurisdiction but placed on a graylist of cooperative jurisdiction for tax purposes that had committed to addressing certain shortcomings by the end of 2018. According to the EU Council, Cayman has fallen foul of a fair tax criterion aimed at tax regimes that facilitate offshore structures which attract profits without real economic activity.
The assurances given by the Cayman Islands relate to concerns expressed by the EU COCG in relation to ring-fencing of exempted companies.
Government has committed to revising Cayman’s exempted companies regime, which will allow these entities to operate in the local economy, provided that local participation requirements are met.
In addition, Cayman and the EU also are discussing enhanced accounting and regulatory reporting obligations; and the definition of economic substance for relevant businesses.
“This meeting is part of the government’s plan of engagement, which encompasses dialogue with international bodies and discussions with our local stakeholders, to achieve the best outcome for the jurisdiction,” Minister Rivers said. “Our communication with the EU on Cayman’s tax regime is ongoing, with our latest meeting with the EU Commission taking place on March 6.”
The government provided details of the commitments made to address the EU’s concerns relating to economic substance by December 2018. These commitments were initially discussed with industry in November last year.
On Tuesday, the EU Council removed Bahrain, the Marshall Islands and Saint Lucia from the tax blacklist and added the Bahamas, Saint Kitts and Nevis and the U.S. Virgin Islands. In addition six other countries – American Samoa, Guam, Namibia, Palau, Samoa and Trinidad and Tobago – remain on the blacklist. Eight of the original 17 blacklisted jurisdictions were delisted on Jan. 23.
At the same time, the EU Council decided to add Anguilla, Antigua and Barbuda, the British Virgin Islands and Dominica to its graylist of jurisdictions that have made sufficient commitments to address deficiencies identified by the EU.