Barbados is off the European Union (EU) grey list of non-cooperative states for tax purposes within the international business sector.
This means Barbados is completely cleared and is no longer being seen as a non-cooperative jurisdiction. The Council of the European Union gave Barbados the clearance in a news release on its website.
In the news release, the EU announced that “16 jurisdictions (Antigua and Barbuda, Armenia, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cabo Verde, Cook Islands, Curaçao, Marshall Islands, Montenegro, Nauru, Niue, Saint Kitts and Nevis, Vietnam) managed to implement all the necessary reforms to comply with EU tax good governance principles.”
The reforms, which were implemented ahead of the agreed deadline, resulted in these states being removed from the EU’s Grey List of non-cooperative jurisdiction.
In the meantime, The Cayman Islands, Palau, Panama and Seychelles have been added to the list of eight other countries already identified as non-cooperative tax jurisdictions. These territories did not implement tax reforms, to which they had committed by the agreed deadline.
Director of International Business in the Ministry of International Business and Industry, Kevin Hunte, pointed out that being “completely cleared” is good for Barbados’ reputation. “It sends the international signal that Barbados is serious about compliance, regulation and good tax governance principles that are fair to all. Barbados remains open for credible investors of substance, and Barbados will continue to make strides in all areas in order to facilitate business,” Hunte said.
Croatian Deputy Prime Minister and Minister of Finance, Zdravko Marić explained that 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.
According to Marić, “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 press release on the Council of the EU’s website stated that “the list of non-cooperative tax jurisdictions, which is part of the EU’s external strategy for taxation as defined by the Council, is intended to contribute to ongoing efforts to promote tax good governance worldwide”.
The EU Code of Conduct Group assessed the tax policies of jurisdictions with no, or only nominal tax against the criteria of ‘economic substance’ contained in the EU’s Criteria 2.2., which states that a jurisdiction should not facilitate offshore structures or arrangements aimed at attracting profits that do not reflect real economic activity in the jurisdiction.
As a result, a list of non-cooperative jurisdictions for tax purposes was published in January 2019, under which a number of countries with no, or only nominal tax was grey-listed based on their efforts of satisfying Criterion 2.2 by December 31, 2019.
In November 2018, the Organization for Economic Cooperation and Development (OECD) implemented a new global standard on Base Erosion and Profit Shifting (BEPS) – Action 5 on Countering Harmful Tax Practices More Effectively. It aimed to prevent business activities from being relocated to countries with no, or nominal tax.
Many countries then sought to address these concerns through improved legislation. Barbados enacted the Barbados Companies (Economic Substance) Act 2018-41, which introduced enhanced economic substance requirements for tax purposes from January 1, 2019.
However, Hunte explained that the Act was repealed and replaced in the last quarter of 2019 and that the guidelines were also published. He said this was done to ensure that both the Economic Substance Act and the guidelines were in line with international standards, “while still ensuring they were not too onerous or cumbersome for businesses in Barbados”.