Harmful Tax Practices - 2018 Progress Report on Preferential Regimes

Chapter 2. Update on the status of regimes

14.  This part provides an update on the status of preferential tax regimes that have been reviewed by the FHTP. In all of the following tables, the meaning of the relevant terms is as follows:

Table 2.1. Meaning of results for preferential tax regimes

Result	Meaning
Harmful	The regime has harmful features and economic effects. The jurisdiction is expected to take measures in order to remove the harmful features of the regime.
Potentially harmful but not actually harmful	The regime is in scope, meets the low or no effective tax rate criterion and implicates one or more of the criteria, but an assessment of the economic effects shows that the regime is not having a harmful impact in practice. The regime is subject to a yearly monitoring process by the FHTP and where changes are identified, the FHTP can reconsider the conclusion.
Potentially harmful	The regime is in scope, meets the low or no effective tax rate criterion and features of the regime implicate one or more of the criteria. However, an assessment of the economic effects has not yet taken place to make a determination as to whether the regime is (actually) “harmful”.
Not harmful	The regime is in scope but does not have any features which implicate any of the criteria.
Not harmful (amended)	The regime is not harmful, taking into account amendments to ensure harmful features are removed.
Out of scope	The regime does not grant tax benefits to geographically mobile activities.
Out of scope (amended)	The regime is out of scope, taking in account amendments which means it no longer grants tax benefits to geographically mobile activities.
In the process of being amended / in the process of being eliminated	The jurisdiction has communicated to the FHTP the commitment of its government to abolish or amend the regime in light of the discussions by the FHTP about the features of the regime that are of concern, For regimes reviewed in 2017 and thereafter, this commitment involves a commitment to making the amendments within the timeline indicated above.
Abolished	A definite date for complete abolition of the regime has been announced, and the regime is transparent and has effective exchange of information. No new entrants are permitted into the regime. Any grandfathering for existing beneficiaries is consistent with the applicable framework and timelines.
Disadvantaged areas regime	The regime provides incidental benefits to IP income, which is acceptable under paragraph 150 of the 2015 BEPS Action 5 Report (OECD, 2015[1]).
Not operational	The jurisdiction did not operationalise the regime and no taxpayer is able to benefit from it. If the regime becomes operational in the future, the jurisdiction has committed to inform the FHTP and the regime will be reviewed.
Under review	The FHTP is continuing to consider the features of the regime and whether the criteria are implicated.

Regimes listed in the 2015 BEPS Action 5 report

15.  These tables present an update on the status of regimes listed in the 2015 BEPS Action 5 Report (OECD, 2015[1]).

Table 2.2. IP regimes

	Jurisdiction	Regime	Status	Comments
1.	Belgium	Deduction for innovation income	Not harmful (amended)	Substance requirements (nexus approach) in place. Grandfathering in accordance with FHTP timelines.
2.	China (People’s Republic of)	Reduced rate for high & new tech enterprises	Not harmful1	No harmful features.
3.	Colombia	Software regime	Abolished	No grandfathering provided.
4.	France	Reduced corporation tax rate on IP income2	Not harmful (amended)	Substance requirements (nexus approach) in place. No grandfathering provided.
5.	Hungary	IP regime for royalties and capital gains	Not harmful (amended)	Substance requirements (nexus approach) in place. Grandfathering in accordance with FHTP timelines.
6.	Israel	Amended preferred enterprise regime	Not harmful (amended)	Substance requirements (nexus approach) in place. Grandfathering in accordance with FHTP timelines.
7.	Italy	Taxation of income from intangible assets	Not harmful (amended) except for the extension to new entrants for trademark3 between 1 July 2016 and 31 December 2016, which is harmful	Substance requirements (nexus approach) in place and grandfathering in accordance with FHTP timelines, except for extension as noted.
8.	Luxembourg	Partial exemption for income/gains derived from certain IP rights	Abolished	Grandfathering in accordance with FHTP timelines.
9.	Netherlands	Innovation box	Not harmful (amended)	Substance requirements (nexus approach) in place. Grandfathering in accordance with FHTP timelines.
10.	Portugal	Partial exemption for income from certain intangible property	Not harmful (amended)	Substance requirements (nexus approach) in place. Grandfathering in accordance with FHTP timelines.
11.	Spain	Partial exemption for income from certain intangible assets (Federal regime)	Not harmful (amended)4	Substance requirements (nexus approach) in place. Grandfathering in accordance with FHTP timelines.
12.	Spain	Partial exemption for income from certain intangible assets (Basque country)	Not harmful (amended)5	Substance requirements (nexus approach) in place. Grandfathering in accordance with FHTP timelines.
13.	Spain	Partial exemption for income from certain intangible assets (Navarra)	Not harmful (amended)6	Substance requirements (nexus approach) in place. Grandfathering in accordance with FHTP timelines.
14.	Switzerland - Canton of Nidwalden	Licence box	Not harmful (amended)	Substance requirements (nexus approach) in place. Grandfathering in accordance with FHTP timelines.
15.	Turkey	Technology development zones regime	Not harmful (amended) except for the extension to new entrants between 1 July 2016 and 19 October 2017, which is harmful	Substance requirements (nexus approach) in place and grandfathering in accordance with FHTP timelines, except for extension as noted.
16.	United Kingdom	Patent box	Not harmful (amended)	Substance requirements (nexus approach) in place. Grandfathering in accordance with FHTP timelines.

Note: See table 6.1 of the 2015 BEPS Action 5 Report (OECD, 2015[1]).

1. While the regime did not technically comply with the nexus approach, it was considered functionally equivalent and therefore evaluated as not harmful, given its distinct features and safeguards and the willingness of China to provide additional information.

2. Formerly known as “Reduced rate for long term capital gains and profits from the licensing of IP rights”.

3. The Italian IP regime did not and does not include in the eligible assets any marketing related assets other than trademarks.

4. Spain’s partial exemption for income from certain intangible assets was inconsistent with the nexus approach for IP assets acquired from related parties for the period from 1 January 2017 to 31 December 2017 and for new taxpayers entering the regime in the period from 1 July 2016 to 31 December 2017.

5. See previous table note.

6. See previous table note.

Table 2.3. Non-IP regimes

	Jurisdiction	Regime	Status	Comments
1.	Argentina	Promotional regime for software industry	Not harmful	No harmful features.
2.	Australia	Conduit foreign income	Not harmful	No harmful features.
3.	Brazil	PADIS – Semiconductors industry	Not harmful	No harmful features.
4.	Canada	Life insurance business	Potentially harmful but not actually harmful	Ring-fencing implicated, but no harmful economic effects in practice. Regime is subject to annual monitoring.
5.	China (People’s Republic of)	Reduced rate for advanced technology services enterprises	Not harmful	No harmful features.
6.	Colombia	Foreign portfolio investment	Not harmful1	No harmful features.
7.	Greece	Offshore engineering and construction	Not harmful (amended)	Ring-fencing removed. No grandfathering provided
8.	India	Deductions in respect of certain incomes of offshore banking units and international financial services centre	Not harmful	No harmful features.
9.	India	Special provisions in respect of newly established units in special economic zones	Not harmful	No harmful features.
10.	India	Special provisions relating to income of shipping companies – tonnage tax scheme	Not harmful	No harmful features.
11.	India	Taxation of profit and gains of life insurance business	Not harmful	No harmful features.
12.	Indonesia	Public / listed company regime	Out of scope	No income from geographically mobile activities.
13.	Indonesia	Investment allowance regime	Out of scope	No income from geographically mobile activities.
14.	Indonesia	Special economic zone regime	Out of scope	No income from geographically mobile activities.
15.	Indonesia	Tax holiday regime	Out of scope	No income from geographically mobile activities.
16.	Japan	Special zones for international competitiveness development	Not harmful2	No harmful features.
17.	Japan	Measures for the promotion of research and development	Not harmful3	No harmful features.
18.	Latvia	Shipping taxation regime	Not harmful	No harmful features.
19.	Latvia	Special economic zones	Disadvantaged areas regime	Subject to monitoring to ensure continued low risk of BEPS.
20.	Luxembourg	Private asset management company (Société de gestion de patrimoine familial)	Not harmful4	No harmful features.
21.	Luxembourg	Investment company in risk capital (Société d’investissement en capital à risque)	Not harmful5	No harmful features.
22.	South Africa	Headquarter company	Potentially harmful but not actually harmful	Ring-fencing implicated, but no harmful economic effects in practice. Regime is subject to annual monitoring.
23.	South Africa	Exemption of income in respect of ships used in international shipping	Not harmful	No harmful features.
24.	Switzerland – cantonal level	Auxiliary company regime (previously referred to as domiciliary company regime)	In the process of being eliminated6	Regular reporting on progress is provided to FHTP.
25.	Switzerland – cantonal level	Mixed company regime	In the process of being eliminated7	Regular reporting on progress is provided to FHTP.
26.	Switzerland – cantonal level	Holding company regime	In the process of being eliminated8	Regular reporting on progress is provided to FHTP.
27.	Switzerland – federal level	Commissionaire ruling regime	In the process of being eliminated9	Regular reporting on progress is provided to FHTP.
28.	Switzerland – federal level	Newly established or re-designed enterprises	Disadvantaged areas regime	Subject to monitoring to ensure continued low risk of BEPS.
29.	Turkey	Shipping regime	Not harmful	No harmful features.

Note: See table 6.2 of the 2015 BEPS Action 5 Report (OECD, 2015[1]).

1. This conclusion was reached by the FHTP without reaching any conclusion that Colombia’s regime was within the scope of the work of the FHTP.

2. This regime was considered prior to the approval of the BEPS Action Plan.

3. See previous table note.

4. See previous table note.

5. See previous table note.

6. The tax reform bill, approved in June 2016 by the Federal Parliament was rejected by the Swiss voters on 12 February 2017. The Swiss Government immediately initiated steps for a new proposal to abolish the regimes. The new federal legislation was approved by Parliament on 28 September 2018. Subject to the Swiss constitutional approval process, the intention is for the reform to become effective by 1 January 2020.

7. See previous table note.

8. See previous table note.

9. See previous table note.

Regimes not listed in the 2015 BEPS Action 5 report

16.  The following tables present the results of the review of preferential regimes that are not listed in the 2015 BEPS Action 5 report (OECD, 2015[1]) and that have been reviewed since October 2015, as at 24 January 2019. The results are presented according to the categories of regime.

Table 2.4. IP regimes

	Jurisdiction	Regime	Status	Comments
1.	Andorra	Special regime for exploitation of certain intangibles1	Not harmful (amended)	Substance requirements (nexus approach) in place. Grandfathering in accordance with FHTP timelines.
2.	Curaçao	Innovation box	Not harmful	New regime, designed in compliance with FHTP standards.
3.	Greece	Tax patent incentives	Under review	Regime under review by FHTP.
4.	India	Tax on income from patent	Not harmful	Substance requirements (nexus approach) in place
5.	Ireland	Knowledge development box	Not harmful	New regime, designed in compliance with FHTP standards.
6.	Israel	Preferred technological enterprise regime	Not harmful	New regime, designed in compliance with FHTP standards.
7.	Korea	Special taxation for transfer, acquisition, etc. of technology	Not harmful (amended)	Substance requirements (nexus approach) in place. No grandfathering provided.
8.	Liechtenstein	IP box	Abolished	Grandfathering in accordance with FHTP timelines.
9.	Lithuania	IP regime	Not harmful	New regime, designed in compliance with FHTP standards.
10.	Luxembourg	IP regime	Not harmful	New regime, designed in compliance with FHTP standards.
11.	Malta	Patent box	Abolished	Grandfathering in accordance with FHTP timelines.
12.	Panama	City of knowledge technical zone	Not harmful (amended)	Substance requirements (nexus approach) in place. No grandfathering provided.
13.	Panama	General IP regime	Not harmful	New regime, designed in compliance with FHTP standards.
14.	San Marino	IP regime provided by law no. 102/2004	Abolished	No grandfathering provided.
15.	San Marino	IP regime	Not harmful	New regime, designed in compliance with FHTP standards.
16.	Singapore	IP development incentive	Not harmful2	New regime, designed in compliance with FHTP standards.
17.	Slovak Republic	Patent-box	Not harmful	New regime, designed in compliance with FHTP standards.
18.	Turkey	5/B regime	Not harmful	New regime, designed in compliance with FHTP standards.
19.	Viet Nam	IP benefits	Under review	Regime under review by FHTP.
IP regimes that are also reviewed as non-IP regimes3
20.	Aruba	Exempt company	In the process of being eliminated/amended	Potentially harmful features will be addressed.
21.	Barbados	International business companies	Abolished	Grandfathering in accordance with FHTP timelines.
22.	Barbados	International societies with restricted liability	Abolished	Grandfathering in accordance with FHTP timelines.
23.	Belize	International business companies	Abolished	Grandfathering in accordance with FHTP timelines.
24.	Botswana	International financial services company	Abolished	No grandfathering provided.
25.	Brunei Darussalam	Pioneer services companies	Under review	Regime under review by FHTP.
26.	Curaçao	Curaçao investment company4	Not harmful (amended)	Substance requirements (nexus approach) in place. No grandfathering provided.
27.	Curaçao	Export facility	Abolished	No grandfathering provided.
28.	Jordan	Aqaba special economic zone	Under review	Regime under review by FHTP.
29.	Jordan	Development zone	Potentially harmful	Ring-fencing addressed; substance requirements (nexus approach) not yet addressed.
30.	Kazakhstan	Special economic zones	Under review	Regime under review by FHTP.
31.	Kenya	Special economic zone	Not operational	Regime not operational.
32.	Lithuania	Free economic zone taxation regime	Disadvantaged areas regime	Subject to monitoring to ensure continued low risk of BEPS.
33.	Macau (China)	Macau offshore institution	Abolished	Grandfathering in accordance with FHTP timelines.
34.	Malaysia	Biotechnology industry	Abolished	Grandfathering in accordance with FHTP timelines.
35.	Malaysia	MSC Malaysia	Abolished	Grandfathering in accordance with FHTP timelines.
36.	Malaysia	Pioneer status – High technology	Out of scope (amended)	No income from geographically mobile activities. Grandfathering in accordance with FHTP timelines.
37.	Malaysia	Principal hub	Abolished	Grandfathering in accordance with FHTP timelines.
38.	Mauritius	Global business license 1	Abolished	Grandfathering in accordance with FHTP timelines.
39.	Mauritius	Global business license 2	Abolished	Grandfathering in accordance with FHTP timelines.
40.	Mongolia	Free trade zones	In the process of being eliminated	Potentially harmful features will be addressed.
41.	Paraguay	Investment of capital from abroad	Under review	Regime under review by FHTP.
42.	Saint Kitts and Nevis	Companies act	Under review	Regime under review by FHTP.
43.	Saint Kitts and Nevis	Nevis business corporation	Under review	Regime under review by FHTP.
44.	Saint Kitts and Nevis	Nevis LLC	Under review	Regime under review by FHTP.
45.	Saint Lucia	International business company	Abolished5	Grandfathering in accordance with FHTP timelines.
46.	Saint Lucia	International partnership	Abolished6	Grandfathering in accordance with FHTP timelines.
47.	Saint Lucia	International trust	Abolished7	Grandfathering in accordance with FHTP timelines.
48.	Saint Vincent and the Grenadines	International business companies	Abolished	Grandfathering in accordance with FHTP timelines.
49.	Saint Vincent and the Grenadines	International trusts	Abolished	Grandfathering in accordance with FHTP timelines.
50.	San Marino	New companies regime provided by art. 73, law no. 166/2013	Not harmful (amended)	Substance requirements (nexus approach) in place. Grandfathering in accordance with FHTP timelines.
51.	San Marino	Regime for high-tech start-up companies under law no. 71/2013 and delegated decree no. 116/2014	Not harmful (amended)	Substance requirements (nexus approach) in place. Grandfathering in accordance with FHTP timelines.
52.	Seychelles	Companies special license	Abolished	Grandfathering in accordance with FHTP timelines.
53.	Seychelles	International business companies	Abolished	No grandfathering provided.
54.	Seychelles	International trade zone	Abolished	Grandfathering in accordance with FHTP timelines.
55.	Singapore	Development and expansion incentive - services	Abolished	Grandfathering in accordance with FHTP timelines.
56.	Singapore	Pioneer service company	Abolished	Grandfathering in accordance with FHTP timelines.
57.	Thailand	International headquarters and treasury centre	Not operational	No grandfathering provided.
58.	Thailand	Regional operating headquarters 1	Not operational	No grandfathering provided.
59.	Thailand	Regional operating headquarters 2	Not operational	No grandfathering provided.
60.	United States	Foreign-derived intangible income (FDII)	Under review	Regime under review by FHTP.
61.	Uruguay	Benefits under law 16.906 for biotechnology	Abolished	No grandfathering provided.
62.	Uruguay	Benefits under lit S art. 52 for biotechnology and for software	Not harmful (amended)	Substance requirements (nexus approach) in place. Grandfathering in accordance with FHTP timelines.
63.	Uruguay	Free zones	Not harmful (amended)	Substance requirements (nexus approach) in place. No grandfathering provided.
64.	Viet Nam	Export processing zone	Out of scope	No income from geographically mobile activities.

1. Formerly known as “Companies involved in the international exploitation of intangible assets”.

2. Subject to final adoption of new legislation.

3. Some preferential regimes provides for benefits to both income from IP and other non-IP geographically mobile activities. These “dual category” regimes are reviewed as both an IP regime and a non-IP regime and therefore have to comply with both substantial activities requirements and two separate conclusions are applicable to the regime.

4. Formerly known as “Tax exempt entity”.

5. Subject to final adoption of new legislation closing the grandfathered regime to IP assets acquired from related parties.

6. Subject to final adoption of new legislation closing the grandfathered regime to IP assets acquired from related parties.

7. Subject to final adoption of new legislation closing the grandfathered regime to IP assets acquired from related parties.

Table 2.5. Headquarters regimes

	Jurisdiction	Regime	Status	Comments
1.	Barbados	International business companies1	Abolished2	Grandfathering provided, see table note.
2.	Chile	Business platform regime	Potentially harmful but not actually harmful From 1 January 2022: Abolished3	Ring-fencing factor implicated, but no harmful economic effects in practice. Regime is subject to annual monitoring.
3.	Kenya	Special economic zone4	Not operational	Regime not operational.
4.	Malaysia	Principal hub5	In the process of being amended	Substantial activities factor addressed; ring-fencing not yet addressed.
5.	Mauritius	Global business license 1	Abolished	Grandfathering in accordance with FHTP timelines.
6.	Mauritius	Global business license 2	Abolished	Grandfathering in accordance with FHTP timelines.
7.	Mauritius	Global headquarters administration regime	Not harmful	No harmful features.
8.	Panama	Multinational headquarters	Not harmful (amended)	Ring-fencing removed. Substance requirements (non-IP) in place. Grandfathering in accordance with FHTP timelines.
9.	Philippines	Regional or area headquarters	Out of scope	No income from geographically mobile activities.
10.	Philippines	Regional operating headquarters	In the process of being eliminated	Potentially harmful features will be addressed.
11.	Seychelles	Companies special license6	Abolished	Grandfathering in accordance with FHTP timelines.
12.	Singapore	Development and expansion incentive – services	Not harmful	No harmful features.
13.	Singapore	Pioneer service company	Not harmful	No harmful features.
14.	Thailand	International headquarters and treasury centre	Potentially harmful7	Grandfathering beyond FHTP timelines.
15.	Thailand	Regional operating headquarters 1	Abolished8	Grandfathering provided, see table note.
16.	Thailand	Regional operating headquarters 2	Potentially harmful9	Grandfathering beyond FHTP timelines.
17.	Turkey	Regional headquarters / regional management centre	Out of scope	No income from geographically mobile activities.

1. Also reviewed as a financing and leasing regime.

2. Subject to the confirmation of the closure of the grandfathered regime to new activities and new assets, which will be verified by the FHTP at the next opportunity.

3. In accordance with Law No. 21,047 no new taxpayers will benefit from this regime as from 23 November 2017. With regard to existing business platform companies, the law provides for a grandfathering period which expires by 31 December 2021. Therefore, this regime will be considered completely abolished by 1 January 2022.

4. Also reviewed as a distribution and service centre regime.

5. Also reviewed as a financing and leasing regime.

6. Also reviewed as a financing and leasing regime.

7. The regime has been abolished, however due to legal constraints the benefits of the regime remain available after 30 June 2021, beyond the agreed FHTP timelines.

8. Subject to the confirmation of the closure of the grandfathered regime to new activities, which will be verified by the FHTP at the next opportunity.

9. The regime has been abolished, however due to legal constraints the benefits of the regime remain available after 30 June 2021, beyond the agreed FHTP timelines.

Table 2.6. Financing and leasing regimes

	Jurisdiction	Regime	Status	Comments
1.	Antigua and Barbuda	International business corporations	Abolished	No grandfathering provided.
2.	Andorra	Intercompany and financing regime	Abolished	Grandfathering in accordance with FHTP timelines.
3.	Aruba	Exempt company	In the process of being eliminated/amended	Potentially harmful features will be addressed.
4.	Barbados	International business companies1	Abolished2	Grandfathering provided, see table note.
5.	Barbados	International financial services	Abolished3	Grandfathering provided, see table note.
6.	Barbados	International trusts4	Abolished	No grandfathering provided.
7.	Belize	International business companies	Not harmful (amended)	Ring-fencing removed. Substance requirements (non-IP) in place. Grandfathering in accordance with FHTP timelines.
8.	Botswana	International financial services company	Not harmful (amended)	Ring-fencing removed. No grandfathering provided.
9.	Curaçao	Curaçao investment company5	Not harmful (amended)	Substance requirements (non-IP) in place. No grandfathering provided.
10.	Georgia	International financial company	Potentially harmful but not actually harmful	Ring-fencing implicated, but no harmful economic effects in practice. Regime is subject to annual monitoring.
11.	Hong Kong (China)	Profits tax concession for corporate treasury centres	Not harmful (amended)	Ring-fencing removed. No grandfathering provided.
12.	Hong Kong (China)	Profits tax concessions for aircraft lessors and aircraft leasing managers	Not harmful	No harmful features.
13.	Kazakhstan	AIFC	Under review	Regime under review by FHTP.
14.	Malaysia	Treasury management centre	Abolished	Grandfathering in accordance with FHTP timelines.
15.	Malaysia	Labuan leasing	Not harmful (amended)	Ring-fencing removed. Substance requirements (non-IP) in place. No grandfathering provided.
16.	Malaysia	Principal hub6	In the process of being amended	Substantial activities factor addressed; ring-fencing not yet addressed.
17.	Mauritius	Global treasury activities	Not harmful	No harmful features.
18.	Montserrat	International business companies	Potentially harmful but not actually harmful	Ring-fencing implicated, but no harmful economic effects in practice. Regime is subject to annual monitoring.
19.	Saint Kitts and Nevis	Nevis LLC	Under review	Regime under review by FHTP.
20.	Saint Kitts and Nevis	Nevis business corporation	Under review	Regime under review by FHTP.
21.	Saint Kitts and Nevis	Companies act	Under review	Regime under review by FHTP.
22.	Saint Lucia	International business company	Abolished7	Grandfathering in accordance with FHTP timelines.
23.	Saint Lucia	International trusts8	Abolished	Grandfathering in accordance with FHTP timelines.
24.	Saint Lucia	International partnership	Abolished9	Grandfathering in accordance with FHTP timelines.
25.	Saint Vincent and the Grenadines	International business companies	Abolished	Grandfathering in accordance with FHTP timelines.
26.	Saint Vincent and the Grenadines	International trusts10	Abolished	Grandfathering in accordance with FHTP timelines.
27.	San Marino	Financing regime provided by law no. 102/2004	Abolished	No grandfathering provided.
28.	Seychelles	International business companies	Abolished	No grandfathering provided.
29.	Seychelles	Companies special license11	Abolished	Grandfathering in accordance with FHTP timelines.
30.	Singapore	Aircraft leasing scheme	Not harmful	No harmful features.
31.	Singapore	Finance and treasury centre	Not harmful	No harmful features.
32.	Sint Maarten	Tax exempt company	Under review	Regime under review by FHTP. Jurisdiction affected by hurricane.

1. Also reviewed as a headquarters regime.

2. Subject to the confirmation of the closure of the grandfathered regime to new activities and new assets, which will be verified by the FHTP at the next opportunity.

3. Subject to the confirmation of the closure of the grandfathered regime to new activities, which will be verified by the FHTP at the next opportunity.

4. Also reviewed as a holding company regime.

5. Formerly known as “Tax exempt entity”.

6. Also reviewed as a headquarters regime.

7. Subject to final adoption of new legislation closing the grandfathered regime to new activities and new assets.

8. Also reviewed as a holding company regime.

9. Subject to final adoption of new legislation closing the grandfathered regime to new activities and new assets

10. Also reviewed as a holding company regime.

11. Also reviewed as a headquarters regime.

Table 2.7. Banking and insurance regimes

	Jurisdiction	Regime	Status	Comments
1.	Antigua and Barbuda	International banking	Abolished	No grandfathering provided.
2.	Australia	Offshore banking unit	In the process of being amended	Potentially harmful features will be addressed.
3.	Barbados	Exempt insurance	Abolished1	Grandfathering provided, see table note.
4.	Barbados	Qualifying insurance companies	Abolished	Grandfathering in accordance with FHTP timelines.
5.	Barbados	Insurance regime	Not harmful	New regime, designed in compliance with FHTP standards.
6.	Canada	International banking centres	Abolished	No grandfathering provided.
7.	Hong Kong (China)	Profits tax concession for professional reinsurers	Not harmful (amended)	Ring-fencing removed. No grandfathering provided.
8.	Hong Kong (China)	Profits tax concession for captive insurers	Not harmful (amended)	Ring-fencing removed. No grandfathering provided.
9.	Macau (China)	Macau offshore institution	Abolished	Grandfathering in accordance with FHTP timelines.
10.	Malaysia	Re-insurance and re-takaful business2	Not harmful (amended)	Grandfathering in accordance with FHTP timelines.
11.	Malaysia	Labuan financial services	Not harmful (amended)	Ring-fencing removed. Substance requirements (non-IP) in place. Grandfathering in accordance with FHTP timelines.
12.	Mauritius	Captive insurance	Not harmful (amended)	Substance requirements (non-IP) in place. Grandfathering in accordance with FHTP timelines.
13.	Mauritius	Banks holding a banking licence under the Banking Act 2004 (‘Segment B banking’)	Abolished	Grandfathering in accordance with FHTP timelines.
14.	Mauritius	Banks holding a banking licence under the Banking Act 2004	Not harmful	New regime, designed in compliance with FHTP standards.
15.	Mauritius	Investment banking	Not harmful	No harmful features.
16.	Nigeria	Free trade zones3	Under review	Regime under review by FHTP.
17.	Seychelles	Non-domestic insurance business	Abolished	Grandfathering in accordance with FHTP timelines.
18.	Seychelles	Offshore banking	Abolished	No grandfathering provided.
19.	Seychelles	Fund administration business	Not harmful (amended)	Substance requirements (non-IP) in place. Grandfathering in accordance with FHTP timelines.
20.	Seychelles	Securities businesses under the securities act	Not harmful (amended)	Substance requirements (non-IP) in place. Grandfathering in accordance with FHTP timelines.
21.	Seychelles	Reinsurance business	Abolished	No grandfathering provided.
22.	Singapore	Insurance business development	Not harmful (amended)	Ring-fencing removed. Grandfathering in accordance with FHTP timelines.
23.	Singapore	Financial sector incentive	Not harmful	No harmful features.
24.	Thailand	International banking facilities	Abolished	Grandfathering in accordance with FHTP timelines.

1. Subject to the confirmation of the closure of the grandfathered regime to new activities, which will be verified by the FHTP at the next opportunity.

2. Formerly known as “Inward re-insurance and offshore insurance”.

3. Also reviewed as a distribution and service centre regime.

Table 2.8. Distribution centre and service centre regimes

	Jurisdiction	Regime	Status	Comments
1.	Andorra	Companies involved in international trade	Abolished	Grandfathering in accordance with FHTP timelines.
2.	Aruba	Free zone	In the process of being eliminated/amended	Potentially harmful features will be addressed.
3.	Barbados	Fiscal incentives act	Out of scope	No income from geographically mobile activities.
4.	Costa Rica	Free trade zone	Not harmful (amended)1	Ring-fencing removed. Substance requirements (non-IP) in place. No grandfathering provided.
5.	Curaçao	Export facility	Abolished	No grandfathering provided.
6.	Curaçao	E-Zone	Out of scope (amended)	Income from geographically mobile activities removed. No grandfathering provided.
7.	Gabon	Special economic zone	Under review	Regime under review by FHTP.
8.	Georgia	Free industrial zone	Out of scope	No income from geographically mobile activities.
9.	Georgia	Special trade company	Out of scope	No income from geographically mobile activities.
10.	Georgia	Virtual zone person	Potentially harmful but not actually harmful	Ring-fencing and substantial activities factor implicated, but no harmful economic effects in practice. Regime is subject to annual monitoring.
11.	Jordan	Aqaba special economic zone	Under review	Regime under review by FHTP.
12.	Jordan	Development zones	Potentially harmful	Ring-fencing addressed; substance requirements (non-IP) not yet addressed.
13.	Jordan	Free trade zones	Abolished	No grandfathering provided.
14.	Kazakhstan	Special economic zones	Under review	Regime under review by FHTP.
15.	Kenya	Export processing zone	Out of scope	No income from geographically mobile activities.
16.	Kenya	Special economic zone2	Not operational	Regime not operational.
17.	Korea	Foreign investment zone	Out of scope	No income from geographically mobile activities.
18.	Korea	Free economic zone / free trade zone	Out of scope	No income from geographically mobile activities.
19.	Lithuania	Free economic zone taxation regime	Not harmful	No harmful features.
20.	Malaysia	Approved service projects	Out of scope	No income from geographically mobile activities.
21.	Malaysia	Green technology services	Not harmful	No harmful features.
22.	Malaysia	Malaysian international trading company	Out of scope	No income from geographically mobile activities.
23.	Malaysia	Special economic regions	Not harmful (amended)	Ring-fencing removed. Substance requirements (non-IP) in place. Grandfathering in accordance with FHTP timelines.
24.	Mauritius	Freeport zone	Out of scope (amended)	Income from geographically mobile activities removed. Grandfathering in accordance with FHTP timelines.
25.	Mongolia	Free trade zones	In the process of being eliminated	Potentially harmful features will be addressed.
26.	Nigeria	Free trade zones3	Under review	Regime under review by FHTP.
27.	Panama	Colon free zone	Out of scope	No income from geographically mobile activities.
28.	Panama	Panama-Pacifico special economic zone	Not harmful (amended)	Ring-fencing removed. Substance requirements (non-IP) in place. Grandfathering in accordance with FHTP timelines.
29.	Paraguay	Free zone	Out of scope	No income from geographically mobile activities.
30.	Peru	Special economic zone 1 (Ceticos / ZED)	Out of scope	No income from geographically mobile activities.
31.	Peru	Special economic zone 2 (Zofratacna)	Not harmful	No harmful features.
32.	Saint Kitts and Nevis	Fiscal incentives act	Out of scope	No income from geographically mobile activities.
33.	Seychelles	International trade zone	Out of scope (amended)	No income from geographically mobile activities. Grandfathering in accordance with FHTP timelines
34.	Singapore	Global trader programme	Not harmful	No harmful features.
35.	Thailand	International trade centre	Potentially harmful4	Grandfathering beyond FHTP timelines.
36.	Trinidad and Tobago	Free trade zones	In the process of being eliminated5	Potentially harmful features will be addressed.
37.	Uruguay	Free zones	Not harmful (amended)	Ring-fencing removed. Substance requirements (non-IP) in place. Grandfathering in accordance with FHTP timelines.
38.	Uruguay	Shared service centre	Not harmful (amended)	Ring-fencing removed. No grandfathering provided.
39.	Viet Nam	Disadvantaged areas	Under review	Regime under review by FHTP.
40.	Viet Nam	Economic zones	Under review	Regime under review by FHTP.
41.	Viet Nam	Export processing zone	Out of scope	No income from geographically mobile activities.
42.	Viet Nam	Industrial parks/zones	Out of scope	No income from geographically mobile activities.

1. Subject to final adoption of new legislation.

2. Also reviewed as a headquarters regime.

3. Also reviewed as a banking and insurance regime.

4. The regime has been abolished, however due to legal constraints the benefits of the regime remain available after 30 June 2021, beyond the agreed FHTP timelines.

5. Regime closed to new entrants on administrative basis and legal changes are forthcoming, which will be reviewed by the FHTP.

Table 2.9. Shipping regimes

	Jurisdiction	Regime	Status	Comments
1.	Antigua and Barbuda	Tonnage tax1	Not harmful (amended)	Ring-fencing removed. No grandfathering provided.
2.	Aruba	Shipping and aviation	Not harmful	No harmful features.
3.	Barbados	Shipping regime	Not harmful (amended)	Ring-fencing removed. No grandfathering provided.
4.	Hong Kong (China)	Profits tax exemptions for ship operators	Not harmful	No harmful features.
5.	Liberia	Shipping regime	Not harmful	No harmful features.
6.	Lithuania	Tonnage tax regime	Not harmful	No harmful features.
7.	Malta	Tonnage tax system	Not harmful	No harmful features.
8.	Mauritius	Shipping regime	Not harmful	No harmful features.
9.	Panama	Shipping regime	Not harmful	No harmful features.
10.	Singapore	Maritime sector incentive	Not harmful	No harmful features.

Note: The determination of substantial activity in the context of shipping regimes recognises that significant core income generating activities within shipping are performed in transit outside of the jurisdiction of the shipping regime, and that the value creation attributable to the core income generating activities that occur from a fixed location is more limited than for other types of regimes for mobile business income. The determination further considered whether the regime was designed to ensure that the qualifying taxpayer handles all corporate law and regulatory compliance of the shipping company with any additional obligations within the jurisdiction such as ship registration including compliance with International Maritime Organisation (“IMO”) regulations, customs and manning requirements (noting the various regulatory requirements for shipping identified in the Consolidated Application Note) consistent with the IMO definition.

1. This regime will apply from 2021. The shipping regime under the Antigua and Barbuda Merchant Shipping Act 2006 has been abolished.

Table 2.10. Holding company regimes

	Jurisdiction	Regime	Status	Comments
1.	Andorra	Holding company regime	Not harmful (amended)	Ring-fencing removed. Grandfathering in accordance with FHTP timelines.
2.	Barbados	International societies with restricted liability	Abolished1	Grandfathering provided, see table note.
3.	Barbados	International trusts2	Abolished	No grandfathering provided.
4.	Saint Lucia	International trusts3	Abolished	Grandfathering in accordance with FHTP timelines.
5.	Saint Vincent and the Grenadines	International trusts4	Abolished	Grandfathering in accordance with FHTP timelines.

1. Subject to the confirmation of the closure of the grandfathered regime to new activities and new assets, which will be verified by the FHTP at the next opportunity.

2. Also reviewed as a financing and leasing regime.

3. Also reviewed as a financing and leasing regime.

4. Also reviewed as a financing and leasing regime.

Table 2.11. Fund management regimes

	Jurisdiction	Regime	Status	Comments
1.	Malaysia	Foreign fund management	Not harmful	No harmful features.

Table 2.12. Miscellaneous regimes

	Jurisdiction	Regime	Status	Comments
1.	Aruba	Investment promotion	Under review	Regime under review by FHTP.
2.	Aruba	IPC	Under review	Regime under review by FHTP.
3.	Aruba	San Nicolas	Abolished	Grandfathering in accordance with FHTP timelines.
4.	Barbados	Credit for foreign currency earnings / Credit for overseas project or services	Abolished	No grandfathering provided.
5.	Brunei Darussalam	Pioneer services companies	Under review	Regime under review by FHTP.
6.	Malaysia	Biotechnology industry	Not harmful (amended)	Substance requirements (non-IP) in place. Grandfathering in accordance with FHTP timelines.
7.	Malaysia	International currency business unit	Under review	Regime under review by FHTP.
8.	Malaysia	MSC Malaysia	Not harmful (amended)	Ring-fencing removed. Substance requirements (non-IP) in place. Grandfathering in accordance with FHTP timelines.
9.	Malaysia	Pioneer status – Contract R&D	Not harmful (amended)	Substance requirements (non-IP) in place. Grandfathering in accordance with FHTP timelines.
10.	Maldives	Reduced tax rates on profits sourced outside Maldives	In the process of being eliminated	Potentially harmful features will be addressed.
11.	Mauritius	Partial exemption system	Not harmful	New regime, designed in compliance with FHTP standards.
12.	Paraguay	Investment guarantee	Under review	Regime under review by FHTP.
13.	Paraguay	Investment of capital from abroad	Under review	Regime under review by FHTP.
14.	San Marino	New companies regime provided by art. 73, law no. 166/2013	Not harmful	No harmful features.
15.	San Marino	Regime for high-tech start-up companies under law no. 71/2013 and delegated decree no. 116/2014	Not harmful	No harmful features.
16.	Singapore	DEI-Legal services	Abolished	Grandfathering in accordance with FHTP timelines.
17.	Singapore	International growth scheme	Abolished	Grandfathering in accordance with FHTP timelines.
18.	United States	Foreign-derived intangible income (FDII)	Under review	Regime under review by FHTP.
19.	Uruguay	Benefits under law 16.906 for biotechnology	Not harmful (amended)	Substance requirements (non-IP) in place. No grandfathering provided.
20.	Uruguay	Benefits under lit S art. 52 for biotechnology and for software	Not harmful (amended)	Substance requirements (non-IP) in place. No grandfathering provided.
21.	Uruguay	Financial company reorganisation	Abolished	Regime abolished before FHTP assessment No grandfathering provided.
22.	Uruguay	Investment law incentives under law 16.096	Out of scope	No income from geographically mobile activities.
23.	Uruguay	Tax system according to the source principle	Out of scope	No divergence from the jurisdiction’s general tax system.

References

[1] OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264241190-en.