Tax haven blacklist to give EU citizens around the world a "rude shock"

According to UAE wealth managers, those in the EU looking to avoid personal or corporate tax will come under closer scrutiny

A move by the European Union to include 17 countries on a blacklist of global tax havens will be a “rude shock” to any EU citizens trying to conceal assets, wealth experts said on Thursday.

Gordon Robertson, owner of Investme Financial Services, said tax authorities in EU countries will clamp down on any citizens squirrelling away assets, such as property, without their knowledge.

“Individuals who have been using the UAE to hide assets are due for a rude shock next year,” he said. “The tax authorities in the country of residence will be asking some very uncomfortable is the main culprit, as it is easy to hide large amounts of money by turning it into bricks and mortar. Cryptocurrency is also a potential global system in which one can hide assets."

The list, revealed by the EU on Tuesday after a year of tough negotiations, aims to prevent tax dodging by the wealthy. However, the UAE government said on Thursday it expects to be taken off the European Union's tax-haven blacklist after it implements final outstanding measures set by the EU.

"We have committed to a reform process which will be finalised by October 2018, and we are absolutely confident this will ensure the UAE is swiftly removed from the list," the Ministry of Finance said in a statement.

Jeremy Cape, a tax lawyer at Squire Patton Boggs, said countries added to the Council of the EU's blacklist, have according to the body, failed to meet certain criteria on tax transparency, fair taxation and the “implementation of the anti-BEPS minimum standards” - an agreement signed by some OECD member countries to tackle tax avoidance strategies that allow multinational companies to shift profits artificially to low or no-tax locations.

"In the case of the UAE specifically, the Council has concluded that it does not apply the BEPS minimum standards and has not given a commitment to do so by the end of 2018," Mr Cape said. "The UAE’s commitment to tax transparency and the automatic exchange of information in tax matters is also being monitored."

The Ministry of Finance said it has been working with the EU since early 2017 to satisfy transparency criteria, with the only outstanding issue being the implementation of the BEPS minimum standard.

"The “tax haven” label is imprecise (and highly politicised) but has clear and negative connotations," Mr Cape said. "It is seen as a mechanism to apply international pressure on countries to align their tax regimes with globally agreed standards."

"For example, countries listed on the blacklist will have funding from EU institutions limited. In addition, EU member states will be asked to reinforce their own monitoring of transactions involving blacklisted countries, raise the risk profile of taxpayers with activities in them.


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Jahangir Aka, the head of Middle East and North Africa for the investment manager Neuberger Berman, said he was surprised to see the UAE on the list as EU residents invested into the four jurisdictions with links to the UK - Bermuda, the Cayman Islands, Jersey and the Isle of Man, which have been placed on a so-called “grey list” -  should be more worried.

“Those four are notorious with being tax havens; the UAE is not notorious with being a tax haven," said Mr Aka.

While the blacklist is primarily targeted at multinational businesses, Sam Instone, the founder of the financial advisory firm AES International, said EU citizens that try to avoid personal or corporate tax may also have taxation measures or administrative blocks applied.

“EU citizens may also find it harder to transfer assets from the EU into the UAE, for example making bank transfers,” he said.

Keren Bobker, a partner at Holborn Assets, said UAE residents from the EU will generally be unaffected but they may have a “few more hoops to jump through when remitting funds out of the UAE”.

“The majority of expats have no tax liability on their earnings in their home countries but this may not be the case for all companies, especially if they have set up a base in the UAE to avoid paying tax elsewhere,” she added. “More questions will be asked when companies are moving money around as governments and global organisations will be seeking to verify the source of funds.”