Tuesday, December 29, 2020
DMS ALERT: EU LISTS CAYMAN

It has been announced that the Cayman Islands have been included by the finance ministers of the EU member states (“ECOFIN”) in the list of non-cooperative jurisdictions for tax purposes.

The Cayman Islands Government is working with EU Officials on the ongoing measures to address the concerns and has issued the following statement regarding this process, its commitment and the current legislative changes that are in place, which can be read here.

The Cayman Islands Government has contacted EU officials to begin the process of removing Cayman from the list. The current list will be reviewed for additions and removals twice annually commencing in October 2020.

It is expected that the listing will have limited direct impact on the funds industry, but individual EU member states may have a range of actions under their domestic laws. However, unless individual Member States provide otherwise:

  • EU investors can continue to stay invested in funds domiciled in the listed jurisdictions.
  • EU investors can increase their investment in funds domiciled in the listed jurisdictions.
  • Funds domiciled in the listed jurisdictions can be marketed to EU investors under the existing private placement regimes.

The EU member states have been working independently and in collaboration with the Organisation  for Economic Co-operation and Development (“OECD”)/G20 Inclusive Framework on Base Erosion and Profit Shifting (“BEPS”) to put an end to tax avoidance strategies that exploit gaps and mismatches in tax rules to avoid paying tax. The BEPS Inclusive Framework involves the work of over 135 countries, including the Cayman Islands.

The Cayman Islands as a jurisdiction has worked with the EU and the OECD for many years to implement measures to combat tax evasion and avoidance, including:

  1. the EU Savings Directive.
  2. the OECD Common Reporting Standards.
  3. Economic Substance legislation.
  4. Private Funds Law.
  5. The Mutual Funds (Amendment) Law.

The last two measures are intended to establish the widest possible regulatory coverage for funds in order to demonstrate that the transparency requirements have been adequately fulfilled. View DMS updates here

Since 2018, more than 15 legislative changes have been made in accordance with the EU’s criteria. 

The implementation and effectiveness of these measures is evaluated periodically and, for example, the Economic Substance legislation has received the highest possible rating by the OECD’s Forum on Harmful Tax Practices.

Since the EU began its listing process in December 2017, almost 30 countries have been listed as non-cooperative. The majority have been subsequently removed, once the required actions have been taken.

The Cayman Government has confirmed that it remains fully committed to cooperating with the EU and will continue to constructively engage with them with the view to be delisted as soon as possible.


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