The EU has excluded eight countries that have expressed willingness to join the international exchange of financial information from list of offshores. These include such popular offshore jurisdictions as Panama, Grenada and Barbados.
The European Council issued a conclusion on the jurisdictions included in the blacklist of the European Union, thise who agreed to bring their legislation in line with European standards. Those are — Barbados, Grenada, Mongolia, Panama, Macau, Tunisia, United Arab Emirates and South Korea.
The exception of Panama and the UAE from the black list of the EU will lead to a weakening of the control of the European banks in respect of transactions carried out by banks and companies of these countries. It’s important for the Russian beneficiaries of companies registered in the UAE and Panama. To withdraw capital directly into these offshores for Russians is currently impossible, as such transfers are traced by Tax authorities. Therefore, for the withdrawal of funds EU transit companies are used.
The EU published its first blacklist of offshore jurisdictions 5 December 2017. Then it included 17 countries — American Samoa, Bahrain, Barbados, Grenada, GUAM, Macau, Marshall Islands, Mongolia, Namibia, Palau, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia, South Korea, Panama and UAE.
The main criteria based on which the decision on inclusion of the country or territory in the black list, — was the presence of unjustified preferences in the tax laws and refusal to disclose financial and tax information in respect of residents of foreign countries.
Sanctions for cooperation with companies from the black list are not yet determined. Most likely the EU will introduce a special fee for any transfers in favor of companies from the European blacklist. So far, out of all EU countries such fees were introduced only by Latvia and only in respect of payments in the form of dividends, royalties and interest on loans.
What matters for Russians, is that the countries excluded from the black list agreed to join the international automatic exchange of financial information. The most popular among Russians are Panama and the UAE. Panama is a popular place for cheap offshore companies, and more recently for private foundations (similar to trusts). UAE, thanks to the wide development of free economic zones is the jurisdiction is used by serious companies for international trade. To date, the registers of companies in these jurisdictions are closed, information on Directors and shareholders are closed for public access. After the system of automatic exchange of information will start working, these benefits may be lost. But shareholders, directors and employees of those companies can obtain the UAE residence permit, thus becoming the country’s residents. This will allow them to avoid disclosure to the Russian tax authorities. Financial information in respect of its own residents (although foreign nationals) countires normally do not disclose.
However, it is not clear whether Panama and the UAE will disclose information about Russian beneficiaries anyway. The mentioned Convention provides that each country determines its list of countires that they will be willing to disclose information on residents’ bank accounts.
International exchange of information on tax and financial matters is made on the basis of the OECD Convention on mutual administrative assistance in tax matters. Interaction on the basis of the Convention involves the direct and rapid exchange of information on a regular basis between the tax authorities of the mamber States. Information is provided on request of the tax authority of a country party to the Convention and may relate to any information from abroad in respect of tax residents of this country, including Bank account transactions.
At the moment, 73 countries are to provide information to Russia’s federal Tax Service. The list of all countires can be found here. Information exchange with these countries is due to start in September 2018.