(CNS): As the Cayman Islands waits on confirmation that it has escaped blacklisting by the wider European Union, following the passage of new legislation just before Christmas, it has found itself on a new blacklist. Cayman is one of 21 jurisdictions on a list of low-tax jurisdictions released over the weekend by the Government of the Netherlands. According to officials, the list has been created to “combat tax avoidance”. Several British Overseas Territories are on the list, as well as the UK’s Crown Dependencies and the existing five EU blacklisted countries.
Despite passing a new law paving the way for offshore companies to have an economic or substantive presence in the Cayman Islands and creating a new regime for much of the financial sector, the laws do not appear to have saved Cayman from the latest move by the Dutch. According to the Netherlands government website, the list will be used in relation to other measures.
“By drawing up its own stringent blacklist, the Netherlands is once again showing that it is serious in its fight against tax avoidance,” said State Secretary for Finance Menno Snel. “And that’s just one of the steps we’re taking.”
From 1 January 2021, the list will also be used to implement a conditional withholding tax on interest and royalties. This means that from 2021 on, companies registered in the jurisdictions on the Dutch list will pay 20.5% tax interest and royalties received from the Netherlands.
The Dutch officials said this would prevent funds being channelled to tax havens. The list was subject to a consultation from 25 September to 22 October, with 16 responses being submitted, but none led to the list being amended.
This latest list is bound to cause significant controversy and fuel allegations of hypocrisy, as the Netherlands has often been labeled as a tax haven in its own right as it has a relatively low business tax regime.
CNS has contacted the Cayman Islands Ministry of Financial Services for comment on the latest knock to Cayman’s offshore sector, and we are awaiting a response.