January 5-11, 2019
NEWS
TURKS AND CAICOS WEEKLY NEWS
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TCI added to Dutch tax haven blacklist THE DUTCH government has added the Turks and Caicos Islands and 15 other countries to a tax haven black list. The jurisdictions listed have no corporation tax or a corporation tax rate of less than nine percent, a press release from the Government of the Netherlands stated. The 16 countries added to the list are in addition to five countries already black listed by the European Union American Samoa, the US Virgin Islands, Guam, Samoa, and Trinidad and Tobago. UK Caribbean overseas territories Anguilla, the British Virgin Islands and the Cayman Islands were among those added. Others include the Bahamas, Bermuda, Bahrain, Belize, Guernsey, Isle of Man, Jersey, Kuwait, Qatar, Saudi Arabia, Vanuatu and the United Arab Emirates. The list was published on December 28 in the Netherland’s Government Gazette. “By drawing up its own stringent blacklist, the Netherlands is once again showing that it is serious in its fight against tax avoidance,” said State Secretary for Finance Menno Snel. “And that’s just one of the steps we’re taking.” The list will be used in relation to three measures to combat tax avoidance. The first is the additional measure on controlled foreign companies announced on the Dutch budget day, which
came into effect on January 1. With this measure the government aims to prevent companies avoiding tax by moving mobile assets to low-tax jurisdictions. The list will also be used to implement a conditional withholding tax on interest and royalties from January 1, 2021. This means that companies registered in the jurisdictions on the Dutch list will pay 20.5 percent tax from 2021 on interest and royalties received from the Netherlands. This will prevent funds being channelled to tax havens through the Netherlands. Thirdly, the Tax and Customs Administration will no longer issue rulings on transactions with companies headquartered in jurisdictions on the list. The Dutch list will be updated each year, while the EU list will be updated in the first quarter of 2019. The Dutch list was subject to a consultation from September 25 to October 22. The consultation resulted in 16 responses, none of which led to the list being amended. Just last summer, the TCI Government was celebrating when it was not placed on the European Union’s tax haven black list, despite being on the anti-corruption watchdog’s grey list in 2017. Premier Sharlene Cartwright Robinson in a statement
on June 7, credited the territory’s tax transparency, fair taxation and anti-base erosion, and profit shifting measures for preventing the black listing. The EU process to set up a tax haven black list was triggered by publication of the Panama Papers documents that showed how wealthy individuals and multinational corporations use offshore schemes to reduce their tax bills. The TCI was one of eight jurisdictions placed on a grey list, partly as a result of the 2017 storms. Caribbean islands hit by hurricanes last year were given more time to comply with EU tax transparency standards when the black list was established in December 2017. The premier along with several senior government officials with private sector partnership engaged the EU Code of Conduct Group in February 2018 in Brussels to start the dialogue and conversation of matters of mutual interest. The premier said the TCI Government was able to demonstrate to the group significant legal and operational reforms implemented in the area of tax transparency and reporting. The Chair of the Code of Conduct Group communicated with the premier by email on June 7 that the TCI would not be included in the 2018 List of Non-Cooperative Jurisdictions.
NIB, NHIB and credit card fees will be deducted from service charge BY DELANA ISLES ONE of the proposed new changes to the Hotel and Restaurant (Service Charge) Ordinance 2018, will see NIB and NHIB statutory payments being deducted from service charge to be paid to hospitality workers. This means that the statutory deductions that are required to be made by the employer from employee’s earnings, will now be taken from the service charge. Due to the passage of the Service Charge Ordinance in September, proprietors of hotels, restaurants and villas who apply the service charge fee are now mandated by law to apply a set 10 percent to their customers and guests’ bills. The ordinance stipulated that 100 percent of those monies collected were to have been paid to employees. However, this stipulation caused a quite lot of discontent among proprietors, with some threatening
to pull benefits from employees, layoff and downsize of staff if they can no longer retain 40 percent of the service charge applied, as obtained in the past. Another change to the ordinance seeks to clarify that the service charge will be applied to the total charges paid or payable by a customer or guest, which will then be distributed between staff. The amendment bill also defines a number of key terms to better assist in compliance with the ordinance, and provides proprietors with the ability to have a distribution scheme prescribed or approved by the minister responsible for employment services. It further defines the purpose of the facility fee and removes the cap on the rate of facility fee to allow proprietors or employers to choose to charge a facility fee appropriate for their property. The ordinance in its current form
provides that proprietors can charge up to five percent in facility fee; the amendment bill removes this five percent and leaves the percentage open ended. The amended bill also clearly states that a proprietor can cover the costs associated with administering the service charge through the facility fee. It also goes on to clearly lay out the difference between service charge and tips, a point which has caused some confusion over the past several months. The draft amendment bill reads: “A tip (also called gratuity) is not service charge which is payable under this ordinance; a tip is a payment made by a guest or customer to an employee or employees which can be in the form of cash or credit or debit card; and payment of service charge is mandatory under this ordinance, and
is automatically added to customer’s bill, whereas payment of tip is optional.” The final amendment to the ordinance, sees another deduction being applied to the employees’ previously promised 100 percent service charge. The bill states that the proportion of the banking fees from credit card transactions, that are associated with the collection of service charges only, will also be taken out of the service charge. CONSULTATION As a result of these proposed amendments to the Service Charge Ordinance, members of the public have been invited to participate in providing feedback until January 11. The amendments come on the heels of additional representations the Government engaged in with proprietors who will be affected by the change in the new Ordinance,
as well as further dialogue with stakeholders. The draft bill, the Government said, seeks to improve the functioning of the ordinance by clarifying certain matters. “Your comments are necessary to finalise these proposed amendments which are intended to ensure the viability of the industry for employers and employees.” The proposed amendments to the Hotel and Restaurant (Service Charge) Ordinance 2018 can be found on the Government’s website www.gov.tc Comments can be sent to the following email address: servicechargeconsultation@gov. tc or can be provided in hard copy by being dropped off addressed to the Commissioner of Labour with the caption ‘Feedback on Service Charge’ at the Department of Employment Services, Sammy Been Plaza, Airport Road, Providenciales.