Optimizers will have to evacuate from Cayman and Panama

Опубликовано: 24.02.2020

For what punished beginners

The reason why the four countries became involved in the EU black list was their failure to fulfill their obligations. Palau was “punished” for not introducing an automatic exchange of financial information and for signing the Convention on Mutual Administrative Assistance in Tax Matters(OECD Multilateral Convention on Mutual Administrative Assistance).

Seychelles suffered for “harmful” preferential tax treatment. Panama, in the opinion of the European Union, still does not fully comply with the principles outlined by the Global Forum on Transparency and Exchange of Information for Taxation and Information Exchange upon Request.

Caymans – have not worked enough to implement the requirements for controlling collective investment.

At the moment, in addition to the “newcomers” to the “black” list are American Samoa, Fiji, Guam, Oman, Samoa, Trinidad and Tobago, US Virgin Islands and Vanuatu. This list was first introduced in 2017, and the next revision of the list is scheduled for October 2020.

What barriers to cooperation will be established

EU countries have seriously taken on deoffshorization and the fight against aggressive tax planning (when companies use imperfections or inconsistencies in tax laws of different countries to reduce the tax burden).

Therefore, they are very meticulously monitoring the implementation of new standards of control over the completeness of tax payments and the exchange of tax information. Blacklisting is fraught with limited investment and business opportunities for jurisdictions that have fallen out of favor.

Firstly, the funds of the Sustainable Development Fund (EFSD) and the European Fund for Strategic Investments (EFSI) will not be able to go through organizations located in the states from the “black” list.

Secondly, servicing schemes involving counterparties from such jurisdictions is becoming much more expensive.

This is because for multinational corporations working with such jurisdictions, requirements for public reporting are increasing. In addition, EU member states may introduce additional tax measures. For example:

-forbid the inclusion in costs of expenses and payments directed to legal entities or individuals in jurisdictions included in the black list;

-introduce higher income tax rates on interest, royalties, service or remuneration fees and other payments received from blacklisted countries.

Schemes will have to be changed

As a rule, no one works directly with offshore companies. But they can be included in the optimization chain, which also includes companies with a European “residence permit”. Now, “newcomers” from the “black” list will have to be excluded from optimization schemes. And that’s why:

• any company from the EU countries will very carefully check all financial transactions involving individuals and legal entities, including financial institutions, from the “black” list countries. Europeans try not to work with companies from “fiscally unreliable” countries.

• Not all banks agree to work with blacklisted companies or residents. In any case, opening an account in a European bank for a resident of jurisdiction from the “black” list is problematic. Any transaction with a counterparty from such jurisdiction falls under tightened control. Banks can pause the transaction and hold funds until the essence of the transaction is clarified and the information about the counterparty is carefully checked. Some EU countries have introduced a tax on offshore operations.

• For companies registered in the countries on the list, additional measures of financial and investment control will be applied.

• Additional taxation of transactions with residents of these countries.

• Additional control by tax authorities and additional reporting on such transactions.

How painful is this for our business? The answer to this question can be found in the data of the State Statistics Service. For example, last year, imports of services from Panama showed an increase of 33% compared to the results of 2018.

Assessing the degree to which our companies use other offshore companies is more difficult. Since the State Statistics Service did not disclose the results of trading with them at the end of 2019, referring to the confidentiality of such information. But, say, according to the results of 2018, the export of services to the Cayman Islands increased by 87% compared to 2017.

The article was prepared by Vladimir Garkusha, Managing Partner of KAC Group

source: Минфин


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