g International Initiatives Impacting the Bahamian Financial Services Sector Presented at the Bahamas Financial Services Board Financial Services Bootcamp September 10th 2019 Stephen Coakley Wells Director, Regulatory and International Affairs Office Of the Financial Secretary Ministry of Finance
Topics EU/OECD Initiatives FATF Update The Road Ahead 2
The New Model Of International Tax Governance • Global Standards • OECD/G20 • Multilateral • EU Agreements • UN • International Coordination Bringing the World to the table 3
OECD/G20 Global Forum on Transparency and Exchange of Information for Tax Purposes 4
Base Erosion Profit Shifting (BEPS) 1 4 Minimum 11 Best Multilateral standards practices Convention 4 BEPS minimum standards Harmful tax practices (preferential regimes / exchange of tax rulings) – Action 5 Treaty shopping – Action 6 Country-by-Country (CbC) reporting – Action 13 Mutual agreement procedures – Action 14 5
TAX TRANSPARENCY Multilateral Convention on Mutual Administrative Exchange of tax information Common Reporting Standard Assistance in Tax Matters The Multilateral Convention on Mutual Automatic exchange of Administrative Assistance Under the Common information is the in Tax Matters allows all Reporting Standard (CRS systematic and periodic relevant jurisdictions to jurisidctions obtain transmission of tax exchange information in information from their information by countries to tax matters in line with the financial institutions and the residence country most up to date automatically exchange that concerning various international standards. information with other categories of income, such Currently, there are over jurisdictions on an annual as dividends, interest, gross 115 jurisdictions basis. proceeds, royalties, participating in the salaries, pensions, etc. Convention. 6
EUROPEAN UNION EU Listing Criteria Tax Transparency Fair Taxation BEPS Minimum Standards Exchange of 7 Information 7 7
The Bahamas Compliance - OECD BEPS Exchange of information on request (EOIR) Existence of any harmful not harmful (no or only tax practices (Action 5) nominal tax jurisdiction) Global Forum Member yes Fully Equipped review scheduled EOIR rating round 1 largely compliant Monitoring Mechanism EOIR rating round 2 largely compliant Preventing treaty abuse review scheduled (Action 6) CbC – Domestic law legal framework in place Automatic exchange of information (AEOI) (Action 13) CbC – Information Commitment to AEOI exchange network not activated 2017/2018 (CRS) (Action 13) Inclusive Framework on CRS MCAA signed yes yes BEPS member Mutual Administrative Effective dispute in force review pending Assistance Convention resolution (Action 14) 8
The Bahamas Compliance - EU • Legislative measures introduced in December 2018 to address EU’s Criterion 2.2. • The Bahamas not included on Annex I of EU List of Non Cooperative Jurisdictions for Tax Purposes. • The Bahamas remains on Annex II, the ‘Grey List’, and will be monitored for implementation of substance requirements for CIVs. • Ongoing monitoring of the implementation and the effectiveness of The Bahamas’ measures. 9
Substance Reporting CESRA Reporting Reporting for CESRA is to be done through an online portal, which is currently being developed. We anticipate portal being active in Q4 for reporting in 2020. Forms A-D are being amalgamated into a single "smart" form which will generate the pertinent questions for included entities, holding companies and non included entities, in response to answers given by the user. Reporting Timelines There is no need to report for substance for the 2018 fiscal year. Entities should report for the 2019 fiscal year, within 9 months of the 2019 year end. 10
FATF Update TECHNICAL COMPLIANCE WITH FAFT 40 RECOMMENDATIONS. • The Bahamas was found to be deficient in 22 of the FATF recommendations and sought to address the deficiencies upon release of the official CFATF Mutual Evaluation report in July 2017. • A total review of the AML/CFT/CFP regime was carried out and several laws were enacted or strengthened to bring the country into compliance with FATF 40 recommendations released in 2012. • CFATF in November 2018 favorably re-rated The Bahamas compliance with 13 of the 22 FATF recommendations identified with deficiencies. • The Bahamas currently is largely compliant or compliant with 30 FATF Recommendations. 11
FATF Update IMPLEMENTATION OF LEGAL, REGULATORY AND ENFORCEMENT FRAMEWORK. • The Bahamas was found deficient in the implementation of an effective AML/CFT/CFP framework in its 2015 MER. • FTRA , 2018, POCA 2018, ATA, 2018 and the enhancements to the ATA Regulations, and the IOEAMA, 1993 now address all technical AML/CFT/CFP deficiencies. Enforcement strengthened through administrative fines applicable • for breaches of FTRA 2018, enhanced Compliance Commission powers, and risk management requirements and building the capacity of the FIU. • Entities not complying with the statutory requirements of the Companies Act are also being monitored and penalized. Over 11,000 companies were struck off the register in August, 2019 with another 20,000 pending to be struck off. 12
The Road Ahead A. Ongoing Discussions with EU/OECD • a. Substance requirements for CIVs • b. Mandatory Disclosures • c. Enhanced Transparency • d. Taxation of the Digital Economy Framework • e. Action 14 Review – OECD • f. Fully Equipped Monitoring Mechanism Review – OECD C. CESRA Guidelines Amendments B. CESRA Amendments • a. Definition of outsourcing to • a. s. 4 & s. 5. Definition of Relevant clarify double counting Activities & CIGA • b. Intellectual Property definition • c. Holding property definition • d. Requirement to register and obtain TIN 13
Twi THANK YOU!
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