On 31 March, 12 jurisdictions which are deemed by the OECD to have “no or only nominal tax” (including Bermuda, the BVI, the Cayman Islands, Guernsey and Jersey) exchanged tax information under the OECD’s Forum on Harmful Tax Practices (FHTP) global standard.
This standard sits alongside economic substance (in relation to which see our recent note providing an update) and the new annual exchange covers information on the identity, activities and ownership of entities established in such jurisdictions that are either non-compliant with the economic substance requirements, or engage in intellectual property or other “high-risk” activities.
The exchanges will be between the tax administrations in the various jurisdictions allowing them access to greater information. It is designed to ensure that businesses that operate out of such tax jurisdictions must carry out their core business functions there, and the countries where the parent entities and beneficial owners are tax resident get access to a greater level of information.
In addition, the FHTP has commenced annual monitoring of the compliance of the 12 jurisdictions with its own FHTP standard.
Another step forward in the exchange of information between jurisdictions and global transparency – the question is how far will this go?
"Today’s first exchanges of information on the previously unknown operations of entities in low tax jurisdictions, are good news for tax administrations around the world, as they will now have regular access to information on the activities and income of entities in low tax jurisdictions that are held or controlled by their taxpayers," said Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration"