By Claire Shefchik From BVI Beacon

The Virgin Islands is one of 16 countries and territories newly whitelisted by the European Union on Tuesday, with the reveal of the EU’s revised “white list” of “non-cooperative tax jurisdictions.”

“I welcome the European Union’s recognition that the BVI fully complies with its tax good governance principles,” Premier Andrew Fahie said in a statement re- leased the same day. “This is as a result of close cooperation and positive dialogue with the EU and demonstrates the BVI’s commitment to meeting and surpassing international standards.”

The whitelisting is thanks in part to economic substance legislation enacted at the end of 2018, which, at the time, allowed the VI to be placed on the EU’s “Annex II” of jurisdictions with “pending commitments.”

This referred to the deadline extensions they were granted to enable
them to pass the needed reforms to be deemed fully cooperative and avoid being placed on “Annex I,”also known as the blacklist.

The Cayman Islands, which had also been on Annex II alongside the VI, was blacklisted this week, along with Palau, Panama and the Seychelles because they “did not implement the tax reforms to which they had committed by the agreed deadline,”according to an EU statement.

Mr. Fahie added that he and his government “remain completely focused on ensuring the continued success of our international business and finance centre and its role in the global economy. We believe there will be significant opportunity for our territory and our people as we enhance our economic substance yet further.”

History

The VI was first greylisted, along with other jurisdictions, in 2017. At the last review of the list in March 2019,the EU concluded that the VI, the Bahamas and the Cayman Is- lands needed further technical guidance from the EU Code of Conduct Group on Business Taxation and had until the end of 2019 to adapt local legislation.

Although Cayman did pass new legislation at the end of January 2020, it appears this was too late, with the EU stating that the territory “does not have appropriate measures in place relating to economic substance in the area of collective investment vehicles.”
Thus, Cayman now joins eight other territories previously blacklisted: American Samoa, Fiji, Guam, Oman, Samoa, Trinidad and Tobago, the US Virgin Islands and Vanuatu.

The 16 newly whitelisted jurisdictions, besides the VI, are Antigua and Barbuda, Armenia, the Bahamas, Barbados, Belize, Bermuda, Cabo Verde, Cook Islands, Curaçao, Marshall Islands, Montenegro, Nauru, Niue, St. Kitts and Nevis and Vietnam.

“The work on the list of non-cooperative tax jurisdictions is based on a thorough process of assessment, monitoring and dialogue with about 70 third country jurisdictions,” Croatian Deputy Prime Minister Zdravko Marić said in the EU statement. “Since we started this exercise, 49 countries have implemented the necessary tax reforms to comply with the EU’s criteria. This is an undeniable success. But it is also work in progress and a dynamic process where our methodology and criteria are constantly reviewed.”

The VI’s new economic substance law places “substance” requirements on VI-incorporated companies and partnerships that are not “tax resident” in other jurisdictions.

Such companies are required to demonstrate that their “core income-generating activities” happen on the territory’s shores, and that there are “an adequate number of suitably qualified employees in relation to that activity who are physically present” in the VI, among other requirements.

The EU said it will continue to regularly review and update the list in the future, taking into consideration the evolving deadlines for jurisdictions to deliver on their commitments and the evolution of the listing criteria.

For more on this story go to: https://www.bvibeacon.com/virgin-islands-makes-eu-white-list/