The EU has yesterday removed the Cayman Islands from its list of non-cooperative jurisdictions for tax purposes (the EU blacklist).

Cayman was put on the EU blacklist in February this year (please see here and here) and its removal from the list yesterday will be a relief to many who have entities, arrangements and/or investments involving the Cayman Islands and who have been waiting for the outcome of todays review meeting.

Other changes to the EUs blacklist announced yesterday include Anguilla and Barbados having been added to the blacklist.

The EU blacklist is next due for review and possible change in February 2021.

The removal of the Cayman Islands from the EU blacklist will be welcomed by private fund sponsors who often structure their investment funds using Cayman Islands entities, passive investors who invest in such funds or who otherwise make investments through Cayman Island vehicles and by active businesses for whom the Cayman Islands features in their corporate structures.

Since February a minority of taxpayers, for example those under contractual obligations to avoid EU blacklist jurisdictions, have undertaken restructurings or redomiciliations for existing Cayman structures, or have opted for alternative holding jurisdictions over the Cayman Islands for new structures. Most private fund sponsors, investors and businesses with existing structures involving the Cayman Islands have however opted to take more of a wait and see, optimistic approach particularly given hopes that the Cayman Islands would take the necessary steps to be de-listed following the October 6, 2020 scheduled review meeting.

Key considerations in relation to yesterdays announcement include the following:

Yesterdays development will be a relief for the Cayman Islands and for those who invest in or through Cayman entities or structures. However it remains to be seen whether there are any residual effects, for example whether private fund sponsors and investors now take a more searching look at structuring new investments through Cayman going forward given its historic EU blacklist association. Alternatively, the successful steps taken by the Cayman Islands to improve its tax policy framework resulting in its being removed from the EU blacklist may be perceived by many as reinforcing the choice of the Cayman Islands for their structures and arrangements. In all cases this should be carefully weighed up taking into account all relevant factors and with input from tax and other advisors.

The text of yesterdays EU announcement is at: https://www.consilium.europa.eu/en/press/press-releases/2020/10/06/eu-list-of-non-cooperative-jurisdictions-for-tax-purposes-anguilla-and-barbados-added-cayman-islands-and-oman-removed/

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Cayman Islands Removed from the EU Blacklist | Weil, Gotshal & Manges LLP - JD Supra