Thursday, 10 October, 2019
European Union finance ministers today agreed to white-list Switzerland as compliant with all required tax cooperation commitments.
The EU's listing system places jurisdictions into three classes: non-cooperative, fully cooperative, and a 'grey list' of jurisdictions that are not yet cooperative but which have given undertakings to become so. Switzerland was placed on the grey list when the system was launched in December 2017. This required it to make the necessary tax policy changes by December 2018. It immediately began a series of reforms which were adopted in October 2018 but could not enter into force until a referendum had been held. The EU thus granted Switzerland an additional year to comply with the rules.
Following referendum approval in May 2019, Switzerland informed the EU's Code of Conduct Group (Business Taxation) in August that the relevant legislation had come into force on 16 July; would take effect on 1 January 2020; and its federal tax regimes CH004 and CH005, to which the Code of Conduct Group (CCG) had objected, had been closed to new entrants as from 1 January 2019. The CCG thus agreed that Switzerland should be removed from the grey list.
The United Arab Emirates, which until now has been on the EU blacklist, has also been white-listed today, having kept its December 2018 promise to improve its economic substance legislation. Costa Rica, Mauritius, Serbia and Albania are also white-listed.
The EU is still not satisfied with the economic substance legislation enacted by the Bahamas, British Virgin Islands, Cayman Islands, Barbados and Bermuda, in particular regarding collective investment funds. They remain on the grey list but have been granted until the end of 2019 to adapt their legislation.
Special consideration was needed in the EU's examination of the US, which some authorities have suggested might qualify for blacklisting following the end of the EU's 'two out of three' exception for tax transparency criteria on 30 June 2019. Under this rule, countries that complied with any two of the EU's three tax transparency sub-criteria would be exempted from blacklisting. However, to qualify, the US should have had arrangements with all EU Member States allowing for both automatic exchange of information (AEOI) and effective exchange of information on request.
In the event, the EU finance ministers concluded that the US's network of exchange of information arrangements, including the US Foreign Account Tax Compliance Act arrangements, was sufficiently broad to cover all EU Member States, effectively allowing both exchange of information on request and AEOI 'in line with international standards and the respective needs of both sides'.
Nine jurisdictions remain on the blacklist: Belize, Trinidad and Tobago, American Samoa, the US Virgin Islands, Guam, Oman, Fiji, Samoa and Vanuatu.