On 18 Feb 2020, EU has revised its list of non-cooperative jurisdictions for tax purpose (the so-called ‘blacklist’) by way of including new four territories to the list, namely Cayman Islands, Palau, Panama and Seychelles.
The EU Code of Conduct Group first approached Seychelles in Feb 2019 to request a replacement of its current preferential tax regime no later than 31 December 2019. In exchange, Seychelles would not be included in the EU ‘blacklist’ for tax purpose.
As part of its effort, Seychelles introduced territorial tax regime by implementing several legislative changes in its International Business Companies (IBC) Act, 2016 in December 2019. However, these changes have not constituted enough tax reforms to meet the EU’s requirements.
Therefore, Seychelles has announced its commitment to develop Economic Substance legislation to address EU concerns and align with international standards at the earliest time.
About The EU list of non-cooperative jurisdiction for tax purpose
The list is an ongoing effort of EU to improve tax governance on the global scale. It includes jurisdictions that fail to meet their tax reform commitments to comply with the EU’s criteria on time.
The EU first adopted the ‘blacklist' in 5 December 2017 and has updated regularly since then. From 2020, there will be no more than two revisions a year. The next update will take place in October 2020. As of 27 February 2020, it comprises of 12 jurisdictions:
- American Samoa
- Cayman Islands
- Trinidad and Tobago
- US Virgin Islands
Territories that fall within the list will face difficulty in accessing EU funding, be subject to more transaction monitoring in addition to ‘legislative measures’ by the EU’s member states i.e. non-deductibility of costs, controlled foreign company (CFC) rules, withholding tax measures and limitation of the participation exemption on profit distribution, which is expected to take effect since 1 January 2021.