D.C.: Tax haven jurisdictions listed

District of Columbia: Tax haven jurisdictions listed

A provision in the D.C. budget support legislation expands the definition of “tax haven” for purposes of the water’s-edge combined group rules, and lists 39 jurisdictions as “tax havens.”

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Background

The District of Columbia Fiscal Year 2016 Budget Support Act of 2015 was signed by the mayor on August 11, 2015. The Act is now transmitted to Congress for a mandatory 30-day review period before becoming law.

Only days when Congress is in session are counted in determining the 30-day period. Thus, the exact date when the legislation would become law is difficult to predict.

“Tax haven” re-defined

One provision—the Combined Reporting Clarification Amendment Act of 2015—makes changes to the District’s combined reporting provisions that were effective for tax years after December 31, 2010.

Under D.C. law, the water’s-edge combined group includes the entire income and apportionment factors of any member doing business in a “tax haven.”

Originally, the District defined “tax haven” as a jurisdiction that, for the tax year in question, had no effective tax, or a nominal tax on the relevant income and:

  • Had laws and practices that prevented the exchange of tax information with other governments
  • Lacked transparency
  • Facilitated establishment of foreign entities without a local presence or impact on local economy
  • Excluded local residents from taking advantage of the tax regime’s benefits, or
  • Had created a tax regime that was favorable for tax avoidance

The statute, however, did not identify specific tax haven jurisdictions.

The statute, however, did not identify specific tax haven jurisdictions.

Countries identified

Under the new 2015 Budget Support Act, the definition of “tax haven” is expanded to include a list of 39 countries that are considered tax havens (i.e., for D.C. purposes of determining the combined group). The 39 listed tax haven jurisdictions are:

Andorra Dominica Montserrat
Anguilla Gibraltar Nauru
Antigua and Barbuda      Grenada The former Netherlands Antilles
Aruba Guernsey-Sark-Alderney      Niue
Bahamas Isle of Man Samoa
Bahrain Jersey San Marino
Barbados Liberia Seychelles
Belize Liechtenstein St. Kitts and Nevis
Bermuda Luxembourg St. Lucia
British Virgin Islands Malta St. Vincent and the Grenadines
Cayman Islands The Marshall Islands Turks and Caicos Islands
Cook Islands Mauritius U.S. Virgin Islands
Cyprus Monaco Vanuatu

Accordingly, all income and apportionment factors of entities operating in these jurisdictions are to be included in the D.C. water’s-edge combined group.

The D.C. Council is to review the tax haven list biennially or as needed, and the D.C. Chief Financial Officer is to submit revisions to the Council for consideration as the CFO considers necessary.

The Act does not specifically address when the changes are effective and labels the law change as a “clarification.”

 

For more information, contact a tax professional with KPMG’s State and Local Tax practice:

Leighanne Scott | +1 (703) 286-8251 | leighannescott@kpmg.com

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