More work to be done as Bermuda back on "grey list”

While Bermuda was removed from the European Union’s so-called “blacklist”, it has now been placed on Annex II of the EU list of non-cooperative tax jurisdictions, also known as the “grey list”, reflecting commitments it must make with regard to economic substance.

Specifically, Bermuda is expected to further expand its legislative framework to include the EU’s economic substance requirements for collective investment funds (CIVs) - groups of pooled accounts held by a bank or trust.

"This is by no means the end of the work required to continue strengthening the framework in this area. Bermuda continues to be a leader in insurance and other financial services and so that comes with a responsibility to be ahead of the curve in terms of regulation and best practice," said Bermuda finance minister Curtis Dickinson.

Bermuda now has until the end of 2019 to cooperate with the EU on establishing an economic substance framework for CIVs that it finds acceptable, or else it could find itself on the blacklist once move.

The EU removed Bermuda from the blacklist on Friday May 17. It has been placed on there on March 12, 2019, for failing to meet good tax governance standards, along with Aruba, Barbados, Belize, Dominica, Fiji, the Marshall Islands, Oman, the United Arab Emirates, and Vanuatu.

Bermuda Premier David Burt had blamed the EU’s action on a “minor technical omission”. He said that one paragraph, which appeared to be a duplication in almost identical language in a draft, was “unintentionally omitted”. He said that despite the omission being discovered and immediately addressed, the reinsertion of the omitted line “appears not to have been good enough for the EU”.

Burt, along with Dickinson, had explained to European tax officials the reasons for which there was a technical omission in its Economic Substance Regulations submission - which has now been corrected to the satisfaction of European authorities.