Legal experts have highlighted a report that Bermuda could be added to the European Union’s “grey list” on tax matters today.

Harneys, a global offshore law firm with an office on the island, added that inclusion on Annex II — for co-operative jurisdictions that have committed to further enhancements — was not expected to result in penalties or sanctions.

An article by partners at the company said: “The European Union Competition Council is meeting on February 24, 2022 to review their list of countries that make up Annex II, also known as the grey list.

“The EU groups countries into two lists depending on the level of co-operation and commitment to EU taxation standards.

“Annex I is a list of noncooperative jurisdictions and Annex II comprises co-operative jurisdictions that have substantially met all international tax standards set out by the EU but have committed to further enhancements.”

It added: “The EU Commission is reported to be putting forward a recommendation to the Council of the EU to add the BVI [British Virgin Islands] and Bermuda to Annex II, along with ten other jurisdictions, based on commitments made to the OECD [Organisation for Economic Co-operation and Development].”

The article added that the two countries were proposed for the list under different criteria. In Bermuda’s case the criterion reportedly related to "zero or nominal corporate income tax“.

It explained: “Inclusion on the list means that the EU monitors for progress towards addressing the recommendations by the required deadline.

“Once a jurisdiction meets all its commitments, it is removed from the annex.

“Indeed, the BVI and Bermuda were removed from Annex II in 2020 after their respective economic substance regimes were further extended to collective investments schemes.

“It is important to note that this EU decision does not mean that any direct penalties or sanctions will be imposed by EU member states on BVI or Bermuda structures and is limited in scope to EU member states and not any other jurisdiction.

“Both jurisdictions take their international obligations seriously and have already been finalising the necessary steps to ensure successful implementation of the OECD recommendations.”

Andrew Fahie, the British Virgin Islands Premier, said this month that his Government was watching reports about the jurisdiction’s possible inclusion on the list.

An article on the BVI News website quoted him saying that “so much work” was done to make sure that the country remained “within the boundaries of where we are supposed to be”.

Mr Fahie said: “We are monitoring if it is so and to see if it has been a leak that it may be so or it may not be so.

“So, we can’t take chances and make statements unless it is announced in that way.

“We are doing our work in the background to make sure we get to the bottom of this matter, and we will be reporting to the public accordingly.”

It was confirmed in February 2020 that Bermuda was removed from the EU’s grey list and added to the “white list”.

Another 15 jurisdictions joined the co-operative list after they “managed to implement all the necessary reforms to comply with EU tax good governance principles ahead of the agreed deadline”, the European Council's Economic and Financial Affairs Council said.

In Bermuda's case, Ecofin was satisfied that the island had delivered on its last remaining economic substance commitment, dealing with EU concerns over collective investment vehicles.

Curtis Dickinson, who resigned as finance minister last week, said at the time of the removal that the announcement reflected “the tremendous team effort between the Ministry of Finance, the Registrar of Companies, the Bermuda Monetary Authority, the Attorney-General's Chambers and industry stakeholders”.

He added: “We delivered on our commitment to implement all the necessary reforms to comply with EU tax good governance principles ahead of the agreed deadline, addressing all of the EU's concerns.”

A spokeswoman for the Ministry of Finance said: “The Ministry of Finance has been fully engaged with the EU and the OECD on tax matters and has kept local stakeholders regularly updated on the meetings and correspondence with relevant EU agencies.

“We remain committed to co-operation and compliance in global tax standards.”

• UPDATE: This story has been updated to include a comment from the Ministry of Finance.