EU reviewing Annex II: Potential inclusion of BVI and Bermuda

The European Union Competition Council is meeting on 24 February 2022 to review their list of countries that make up Annex II, also known as the Greylist. The EU groups countries into two lists depending on the level of cooperation and commitment to EU taxation standards. Annex I is a list of non-cooperative jurisdictions and Annex II comprises cooperative jurisdictions that have substantially met all international tax standards set out by the EU but have committed to further enhancements.

The EU Commission is reported to be putting forward a recommendation to the Council of the EU to add the BVI and Bermuda to Annex II, along with 10 other jurisdictions, based on commitments made to the OECD. They have been proposed under different criteria: BVI - Criterion 3.2 re country-by-country reporting under BEPS Action 13; Bermuda - Criterion 2.2 re zero or nominal corporate income tax.

The BVI has been assessed by the OECD since 2019 as having implemented its BEPS country-by-country reporting minimum standard with two recommendations for improvement and steps are being finalised to ensure successful implementation of both recommendations ahead of the 2023 deadline.

Inclusion on the list means that the EU monitors for progress towards addressing the recommendations by the required deadline. Once a jurisdiction meets all its commitments, it is removed from the annex. Indeed, the BVI and Bermuda were removed from Annex II in 2020 after their respective economic substance regimes were further extended to collective investments schemes.

It is important to note that this EU decision does not mean that any direct penalties or sanctions will be imposed by EU member states on BVI or Bermuda structures and is limited in scope to EU member states and not any other jurisdiction.

Both jurisdictions take their international obligations seriously and have already been finalising the necessary steps to ensure successful implementation of the OECD recommendations.

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