Background

Rather than expressly defining a "tax haven" in law, Spain started, back in 1991, with a designated "black list" of 48 tax havens. The list was controversial as certain no-tax or low tax jurisdictions were not included in the list while some other jurisdictions whose on-shore regimes lead to similar levels of taxation as in Spain were considered tax havens.

In 2003, Spanish tax legislation was amended in order to pave the way for the removal from Spain's black list of tax havens of two groups of countries and territories; those which have signed an income double tax treaty with Spain that includes an exchange of information clause; and those that have signed an exchange of tax information agreement with Spain.

Agreements with Spain

In the light of the above, Spain has entered into income tax treaties and exchange of tax information agreements with the following countries and territories that are no longer considered tax havens from a Spanish tax standpoint:-

  • Income tax treaties:
    • United Arab Emirates (in force as of January 2007)
    • Malta (in force as of September 2006)
    • Trinidad and Tobago (in force as of December 2009)
    • Jamaica (in force as of May 2009)
    • The protocol of the income tax treaty with Luxembourg has been amended to include an effective information exchange clause regarding certain corporations (applicable as of 1 January 2011)
  • Tax exchange information agreements:
    • Netherlands Antilles (in force as of November 2009)
      • Aruba (in force as of November 2009)

Therefore, as of October 2010, Spain's tax haven list now includes the following territories:

  • Asia Pacific: Bahrain, Brunei, Hong-Kong, Macao, Singapore, Northern Mariana Islands, Solomon Islands, Vanuatu Islands, and Fiji Islands.
  • Europe and Middle East: Cyprus (see below), Gibraltar, Principality of Liechtenstein, Principality of Monaco, Isle of Man, Channel Islands, Republic of San Marino, Lebanese Republic, Jordan and Republic of Liberia.
  • Africa: Oman, Republic of Seychelles, Mauritius and the Republic of Nauru.
  • America and Caribbean: Dominican Republic, Republic of Panamá, Anguilla, Antigua y Barbuda, Bahamas, Barbados, Bermuda, Cayman Islands, Cook Islands, Dominican Republic, British Virgin Islands, US Virgin Islands, Saint Vincent and Grenadines, Saint Lucia, Montserrat, Falkland Islands, Grenada and Turks and Caicos Islands.

Even though numerous territories continue to be considered tax havens from a Spanish tax standpoint, several jurisdictions are in the course of signing either an income tax treaty or an exchange of tax information agreement with Spain, as follows:

  • San Marino, Andorra, Bahamas, Barbados and Panamá.

Several other territories have initiated contact with the Spanish tax authorities in order to be excluded from the tax haven list. Those are:

  • Gibraltar, Channel Islands, Hong Kong, Jordan, Singapore, Oman, Bahrain, Cayman Islands, Bermuda and Isle of Man.

Other developments

In addition to the above, it is worth noting the special circumstances surrounding Cyprus. Cyprus was included in the tax haven list of 1991. However, Cyprus became a full Member State of the European Union in 2004. Consequently, EU Directives were to be transposed into Cyprus national law, including the EU Directive on exchange of tax information for certain purposes (insurance tax and VAT). This led to Cyprus having an uncertain status from a Spanish tax standpoint.

In its first approach to this issue, the Spanish tax authorities issued a binding ruling in 2006 in which it was clearly stated that Cyprus was not to be removed from Spain's tax havens list since it had not entered into any tax agreement, either into an income tax treaty or into an exchange of tax information agreement with Spain.

In a second approach, however, the Spanish tax authorities issued another binding ruling in 2009 in line with new wording of Spanish tax legislation adopted in 2008 to comply with EU principles, allowing companies tax resident in Cyprus (or in other EU/EEA jurisdictions) to benefit from Spain's participation exemption regime, provided the taxpayer could demonstrate that there are valid economic and business reasons for operating through a Cypriot company.

Finally, it is important to highlight that although Spain is an OECD member country, it does not exhaustively follow the OECD criteria on tax havens. While the OECD validates countries which demonstrate a commitment to international tax standards in the absence of substantially implemented criteria, Spain still seeks for such countries to be proactive and take formal steps in the form of agreements with Spain, not commitments. To illustrate, territories "whitened" by the OECD in its latest report of 19 October 2010 ("The global forum on transparency and exchange of information for tax purposes" in Annex III) are still considered tax havens by the Spanish tax authorities.