According to recent information from Reuters, the EU has agreed to remove UAE, Switzerland and the Marshall Islands from the tax haven blacklist in October 2019, which signified another step forward on the journey to global transparency on assets. In the following month, Hong Kong has taken actions and has shut down a large number of offshore accounts. Large-scale tax avoidance has becoming more and more restricted and riskier as the Common Reporting Standards (CRS) are being widely implemented and the trend on global information transparency is growing.
The EU tax haven list can be viewed in two lines, the blacklist and the grey list. The blacklist was initiated in 2017 and 25 countries has been removed from that list so far. The grey list consists of another 34 countries or regions. They are on grey list because they have agreed at the end of 2019 to commit to improve tax compliance in upcoming years. If their commitments are fulfilled soon, they will be removed from the grey list; Otherwise they will be replaced into the blacklist.
The EU issues these two lists based on three main criteria:
- Fair Tax Competition
- BEPS Implementation
The remaining tax havens which have not committed to improving tax compliance or information exchange mechanism are American Samoa, Guam, Fiji, Samoa, Trinidad and Tobago, US Virgin Islands, Vanuatu and Oman.
Global assets transparency is a result of automatic exchange of financial information based on CSR, which might bring more tax burdens or even fines, if failure to report timely, onto taxpayers possessing various assets in different countries or regions. Passive non-financial companies (aka shell companies) established in favourable tax jurisdictions for assets management or tax avoidance could face more information disclosure to the authorities, which lead to an inhibiting effect on tax avoidance behaviours. Family trusts, large insurances, trade businesses and so forth are all belonging to the information that are being made transparent to many authorities. Tax authorities certainly pay more attention to capital flows and acquisition. Capitals from unknown sources or irregular cash flows are also being exposed, especially regarding those capital activities in relation to tax avoidance.
If you have questions on assets management or cross-border tax issues, please feel free to contact us, we are your GCA team who is always willing to help on your business journey.
Global Connect Admin B.V. | Xuan Hao