The European Union has removed the Caribbean island of Dominica from its list of uncooperative jurisdictions in tax matters.
Dominica changed its tax rules to comply with EU requirements meant to reduce the risks of tax evasion, the EU said in a statement.
The Code of Conduct Group, which assessed the compliance of countries with EU tax criteria, had already de-listed Aruba, Barbados and Bermuda on 17 May.
Dominica implemented its commitments and addressed EU concerns regarding the automatic exchange of financial information after it ratified the OECD Multilateral Convention on Mutual Administrative Assistance. As a result, Dominica will exchange tax information under the common reporting standard with all EU member states from December 2019.
The EU says its list is contributing to on-going 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.
Only 11 jurisdictions remain on the tax blacklist. They are American Samoa, Belize, Fiji, Guam, Marshall Islands, Oman, Samoa, Trinidad and Tobago, the United Arab Emirates, the US Virgin Islands and Vanuatu.
Technical guidance for funds
The Cayman Islands has addressed EU concerns by introducing new legislation requiring certain companies to demonstrate that they have sufficient economic activity on island in terms of management, staff and expenditure to justify the amount of profits they make in Cayman.
However, Cayman committed to comply with further economic substance requirements for collective investment vehicles that the EU might require before the end of this year.
In March, the EU Council said further work will be needed to define acceptable economic substance requirements for collective investment vehicles asking the Code of Conduct Group to provide technical guidance.
According to this technical guidance, released in May, the Code of Conduct Group will scrutinise the legislation for funds in the Bahamas, Bermuda, the British Virgin Islands and Cayman against four pillars. They include the authorisation and registration of funds; supervision and enforcement; valuation, accounting and auditing of funds; and depositary rules.
“In line with the principles of the EU listing process, the requirements in relation to funds legislation for third country jurisdictions do not go beyond the standards applicable in member states,” the technical guidance said.
The assessment of the legislative framework would have to take into account specific factual and legal circumstances in each jurisdiction, the Code of Conduct Group said.