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Cayman Islands Added to the EU Tax List of Non-Cooperative Jurisdictions
On 18 February 2020, the European Union (“EU”) added the Cayman Islands to the EU’s Annex I list of non-cooperative jurisdictions for tax purposes on the basis that it did not have appropriate economic substance measures in place relating to collective investment funds (“CIVs”).
The Cayman Islands legislation to comply with the EU’s requirements was already in place at the time of being added to the list but, its enactment occurred after the relevant deadline and so the addition of the Cayman Islands to the list is a timing issue.
In the last two years, the Cayman Islands has adopted 15 legislative changes to comply with EU criteria. In April 2019, the EU confirmed that the Cayman Islands had satisfied its economic substance requirements save for CIVs. In June 2019, The Cayman Islands’ economic substance legislation was evaluated and Cayman received the highest rating possible by the OECD. The Cayman Islands Government has confirmed that it remains fully committed to cooperating with the EU and will continue to constructively engage with them with a view to be delisted as soon as possible.
We do not anticipate that the addition of the Cayman Islands to the list will have any immediate impact on our clients or that there will be any targeted or direct sanctions against the Cayman Islands at this time.
The Cayman Islands’ inclusion on the list is expected to be temporary and the Cayman Islands Government has already begun the process for removal which is expected to occur in October 2020.