The European Union today updated its List of Non-cooperative Jurisdictions for Tax Purposes. While Cayman finalised its legislation earlier this year to regulate private investment funds and updated the Mutual Funds Law to complete the regulatory framework covering other collective investment vehicles, the EU determined that it failed to implement measures relating to economic substance in the area of collective investment vehicles within the agreed timetable (December 2019), and therefore “did not deliver on the commitment on time”, and thus was placed on the blacklist. Crucially, this is a technical issue, and this does not reflect any concerns regarding the steps Cayman has taken to address the EU’s other concerns around fair taxation or transparency. The Cayman Islands has taken decisive action over the past years to adhere to the global harmonisation of laws in the areas of transparency and international tax standards. Its efforts have been recognised by leading global organisations, including the OECD, and the Cayman Islands Government has committed to work with the EU to be removed from the list at the next ECOFIN meeting later this year. It is anticipated that this determination will be temporary.
It is important to note that this EU decision does not mean that any direct penalties will be imposed by EU member states on Cayman or Cayman structures and is limited in scope to EU Member States and not any other jurisdiction.
The Cayman Islands government press release can be found here.
The EU accepted that the BVI had implemented the necessary reforms to comply with EU tax good governance principles ahead of the agreed deadline and was moved to the whitelist and removed from Annex II (or the so called grey list).