Bahamas and three other IFCs exit EU's non-cooperative tax list

The European Union’s Economic and Financial Affairs Council’s said on 20 February that it was completely removing the Bahamas from its List of Non-Cooperative Jurisdictions for Tax Purposes.

The decision, it said "was made in recognition of The Bahamas having implemented all the necessary measures to address the concerns identified by the OECD’s Forum on Harmful Tax Practices and the EU".

It demonstrated The Bahamas’ "commitment at the highest political level to ensuring that as jurisdiction we comply with international standards on information exchange, tackling harmful tax practices, dismantling artificial tax structures and prevention of financial crime which is critical to our value proposition as a well-regulated international financial center".

The Bahamas Financial Services Board (BFSB) and the Association of International Banks and Trust Companies in the Bahamas (AIBT), welcomed the decision and "the positive impact we anticipate that it will have on the financial services industry and on investor confidence generally.

"We commend the Government’s efforts that led to the Bahamas’ removal from Annex 1 of the European Union’s list of non-cooperative jurisdictions for tax purposes. We look forward to our continued partnership with the Government on these issues and remain available to assist the Government in all of its efforts to ensure the country remains a leading international financial centre."

The Council also removed three other jurisdictions, namely Belize, Seychelles and Turks and Caicos Islands from the list of non-cooperative jurisdictions for tax purposes.

With these updates, the EU non-cooperative tax list consists of the following 12 jurisdictions:
• American Samoa
• Anguilla
• Antigua and Barbuda
• Fiji
• Guam
• Palau
• Panama
• Russia
• Samoa
• Trinidad and Tobago
• US Virgin Islands
• Vanuatu

The EU Council said in its statement that it regretted that these 12 jurisdictions are not yet cooperative on tax matters and invites them to improve their legal framework in order to resolve the identified issues.

The dropping of the Bahamas and Turks and Caicos Islands, reflected the EU's view that ever since October 2022, deficiencies in the enforcement of economic substance requirements had been identified in both of these jurisdictions by the OECD Forum of Harmful Tax Practices (FHTP).

But in the FHTP’s most recent assessment, the recommendations to both jurisdictions to remedy these deficiencies were converted from “hard” to “soft” recommendations, which allowed the Code of Conduct Group to consider these jurisdictions compliant with the standard for jurisdictions with no or only a nominal corporate income tax.

In October 2023, Belize and Seychelles were included in the EU list of non-cooperative jurisdictions for tax purposes after a negative assessment from the OECD Global Forum with regard to exchange of information on request.

Following changes to the applicable rules in these jurisdictions, the Global Forum has granted them both a supplementary review, which will be undertaken in the near future. Pending the outcome of this review, Belize and Seychelles have been included in the relevant section of Annex II.

In addition to the list of non-cooperative tax jurisdictions, the Council approved the usual state of play document (Annex II) which reflects the ongoing EU cooperation with its international partners and the commitments of these countries to reform their legislation to adhere to agreed tax good governance standards. Its purpose is to recognise ongoing constructive work in the field of taxation, and to encourage the positive approach taken by cooperative jurisdictions to implement tax good governance principles.

Two jurisdictions, Albania and Hong Kong, fulfilled their commitments by amending a harmful tax regime, and will be removed from the state of play document.

Aruba and Israel also fulfilled all of their pending commitments (related to the automatic exchange of financial account information in the framework of the common reporting standard).

The Global Forum gave Botswana and Dominica positive ratings with regard to the exchange of information on request, resulting in the deletion of the reference to these jurisdictions in the relevant section