The European Union on Friday removed Bermuda, Aruba and Barbados from its list of uncooperative jurisdictions in tax matters.
Barbados has made commitments at a high political level to remedy EU concerns regarding the replacement of its harmful preferential regimes by a measure of similar effect, while Aruba and Bermuda have now implemented their commitments, the EU Council said in a statement.
The EU says its list is contributing to ongoing efforts to prevent tax avoidance and promote good governance principles such as tax transparency, fair taxation or international standards against tax base erosion and profit shifting.
Twelve jurisdictions remain on the list of non-cooperative jurisdictions. They are American Samoa, Belize, Dominica, Fiji, Guam, Marshall Islands, Oman, Samoa, Trinidad and Tobago, United Arab Emirates, US Virgin Islands and Vanuatu.
The EU is targeting offshore financial centres for enabling structures that attract profits without having corresponding economic activity locally. To avoid a blacklisting, many jurisdictions committed to introduce new economic substance legislation that required companies engaged in relevant activities to prove that they have sufficient staff, office space, expenditures and management locally.
Bermuda adopted additional amendments to its Economic Substance Regulation on 4 March 2019, and thereby resolved an issue flagged by the EU related to the wording of core income-generating activities for intellectual property assets. This legislative change was adopted after the cut-off date agreed by the Code of Conduct Group and was not examined in time for the ECOFIN Council meeting on 12 March, EU documents show. At the meeting, the surprising decision was made blacklist the British Overseas Territory.
Bermuda will remain on a grey list of countries, together with the Cayman Islands, the British Virgin Islands and the Bahamas, until it resolves concerns related to the economic substance of collective investment funds.
In letters sent to the Code of Conduct Group in April, the minister for international business and industry of Barbados made a written commitment to amend or abolish a measure that replaced a harmful preferential tax regime but which was deemed by the EU to have a similarly harmful effect.
Aruba, in turn, adopted on 4 April 2019 a National Ordinance introducing substance requirements for its transparency regime, which came into force on 11 April.
The EU considers its tax list a dynamic process, with regular reviews and updates to the listed countries and the listing criteria.