Tax laws of 12 low-tax countries including BVI, Bermuda, Cayman don’t harm other countries, 131-country group concludes

An OECD-led 131-country coalition, known as the “Inclusive Framework on BEPS,” has approved an assessment which concludes that 12 low or zero-tax countries do not have “harmful” tax regimes, the OECD today announced.

The assessment, conducted by the OECD Forum on Harmful Tax Practices (FHTP), concludes that the tax laws the following countries were not harmful to other countries: Anguilla, the Bahamas, Bahrain, Barbados, Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey, Turks and Caicos Islands.

The report concludes the United Arab Emirates tax laws are not in line with thee standards. However, since the UAE has committed to change the law it is designated in the FHTP report has having a tax regime that is “in the process of being amended,” rather than “harmful.”

The countries must meet a substantial activities standard as determined by the FHTP to be considered not harmful. The standard requires that for certain highly mobile sectors of business activity other than IP, the core income generating activities must be conducted with qualified employees and operating expenditure in the jurisdiction. For IP, the standard requires that agreed-to “nexus” rules are complied with. The Inclusive Framework on BEPS agreed to assess whether no or low tax countries met the standards in 2018.

From 2020, the FHTP will start monitoring whether the tax laws adopted by these countries in practice comply with the standards.

The FHTP also determined that Jordan’s development zone tax regime is harmful. It also noted that Greece’s tax patent incentives and Kazakstan’s special economic zone and Astana international financial center laws are in the process of being amended.

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