OECD Assessment Of Low-Tax Jurisdictions Updated- UAE Is Close To Compliance

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The July 23rd 2019 report of the OECD Forum (Organisation for Economic Co-operation and Development) on Harmful Tax Practices (HTP) has concluded that 11 of the 12 countries on its list of low-tax jurisdictions are compliant with its standards for ‘substantial activity’ legislation. Their tax regimes are therefore not considered harmful anymore.

Since November 2018 all the relevant nations embarked on a rapid legislative programme to embody the OECD standard in their laws and practices by the end of 2018, which included the introduction of “Economic Substance” in certain jurisdictions

Some continued to make changes into 2019, to ensure they had satisfied the OECD, which requires that core income-generating activities must be conducted with qualified employees and operating expenditure located within the jurisdiction.

The 11 jurisdictions now regarded as wholly compliant are Anguilla, the Bahamas, Bahrain, Barbados, Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Isle of Man, Jersey and the Turks and Caicos Islands.

The 12th jurisdiction, the United Arab Emirates, has only one ‘technical point’ outstanding, and its law is now in the process of being amended, said the OECD.

From 2020, the Forum will start an annual monitoring process for the effectiveness of jurisdictions’ mechanisms, to ensure compliance with the standard in practice.

The OECD report also examined various ‘preferential tax regimes’ operated by some jurisdictions, and identified as potentially harmful to others. Most of these have now either been abolished, amended, are not actually operating, or are not really harmful. Only one such regime, the development zone system operated by Jordan, has been found actually harmful, while a further 21 regimes have been placed under OECD review.