ETNC List Update: Bahamas and Turks and Caicos Islands

Non-Cooperative Tax Jurisdictions List Update: Bahamas Inscription and Turks and Caicos Islands Distribution According to Eligibility Criteria

The European Commission's February 5, 2024 update to the Non-Cooperative Tax Jurisdictions (NCTI) list reveals accelerating international tax compliance policy and transparency standard harmonization. The Bahamas, Antigua and Barbuda, Belize, Russia, and Seychelles were added to the initially established enumeration by the February 2024 update. However, the Bahamas, along with Belize and Seychelles, were subsequently removed from the ETNC list by arrêté of 18 April 2025 (published 7 May 2025), having satisfied transparency and cooperation requirements. French taxpayers maintaining economic, asset-based, or financial relations with jurisdictions remaining on the ETNC list must conduct complete reassessment of applicable taxation and urgently consider operations restructuring to avoid increased tax burden.

Article 238-0 A of the French Tax Code (CGI) establishes the criteria under which a State or territory may be included on the French NCTI list by ministerial order. The French list partly reflects the European Union list of non-cooperative jurisdictions for tax purposes, but the two lists are not identical. NCTI classification has important French tax consequences, but those consequences are neither uniform nor automatic: each withholding tax, exclusion from a favourable regime, reporting obligation or adverse presumption must be linked to the specific French tax provision that creates it, to the relevant NCTI category and to the taxpayer's factual situation.

First Criterion: International Tax Transparency Non-Compliance and Information Exchange Refusal

The first NCTI inscription criterion under Article 238-0 A CGI identifies states or territories manifestly refusing to establish or effectively applying international fiscal transparency standards and automatic information exchange mechanisms (AEOI) instituted per the unique standard established by the OECD and adopted in French law. This criterion encompasses jurisdictions refusing to adhere to the Convention on Mutual Administrative Assistance in Tax Matters or refusing to participate in the Common Reporting Standard (CRS), being deemed non-cooperative because they constitute significant obstacles to international anti-tax fraud and systematic tax evasion combat.

Anguilla and Panama remain inscribed under this preliminary criterion (the Seychelles, initially inscribed, were removed by the arrêté of 18 April 2025). Persons or entities falling within the scope of French tax rules and maintaining bank accounts, investments or taxable flows involving jurisdictions that remain on the ETNC list may be exposed to aggravated French tax consequences — without the mitigation mechanisms available for cooperative jurisdictions — depending on the nature of the transaction, the applicable French tax rule and the official ETNC list in force at the date of the payment or transaction. French nationality is not, in itself, the operative criterion.

Second Criterion: Extraterritorial Fiscal Devices and Structures Without Real Economic Substance

The second Article 238-0 A, 2 bis, 1° CGI criterion concerns identification of states or territories inscribed on the European Union's December 5, 2017 blacklist, regularly updated, facilitating through specialized regulatory or fiscal devices the creation and promotion of juridical structures or commercial entities lacking practical real economic substance and functioning exclusively to receive external-source income and redirect it to ultimate owners or beneficiaries domiciled elsewhere. This directly contravenes international tax compliance objectives and aggressive tax planning combat engaged by the OECD through the BEPS project (Base Erosion and Profit Shifting).

The Bahamas and Turks and Caicos Islands were specifically inscribed under this second criterion due to specialized juridical regimes (notably International Business Company Act societies) permitting business structure creation imposable at zero or near-zero rates benefiting from considerable fiscal advantages in exchange for constitution rights and annual renewal rights. These structures typically serve as fiscal intermediaries and empty shells generating no real economic activity in these jurisdictions, justifying inscription and French derogatory tax regime application.

Third Criterion: Transparency Obligation Non-Compliance, Harmful Fiscal Preferences, BEPS Non-Conformity

Article 238-0 A(2bis-2°) CGI's third enumerated criterion groups states or territories refusing or failing to implement essential OECD BEPS project provisions regarding automatic information exchange, minimal effective taxation, elimination of harmful preferential tax regimes, or maintaining special fiscal structures or measures destined exclusively or principally to attract foreign investors by offering abnormally low taxation rates without real economic counterpart. Guam, the U.S. Virgin Islands, Palau, American Samoa, Panama and Vietnam are classified under this multifactorial criterion.

Fiscal Consequences: Main List, Secondary List and Increased Withholding Must Be Distinguished

NCTI status does not trigger one single automatic consequence for every French-source payment. Increased withholding must be analysed under the relevant French tax provision and by reference to the exact category of NCTI involved. In particular, Article 187 CGI reserves the 75% rate for non-cooperative States or territories within Article 238-0 A other than those mentioned in sub-paragraph 2° of paragraph 2 bis of that same article. Jurisdictions on that secondary list, such as Panama on the 2026 list, must therefore not be treated automatically as triggering the Article 187 75% rate.

Where an increased withholding is in fact applicable, it operates at source under the conditions of the relevant provision, subject to exceptions, treaty relief, proof to the contrary and refund or challenge procedures. The analysis must therefore identify the payment, the beneficiary, the precise legal basis for the jurisdiction's listing and the official list in force at the date of payment.

Secondary Consequences: Charge Non-Deductibility and Revenue Distribution Presumption

Beyond increased source withholding, Article 238A CGI institutes absolute non-deductibility regime for amounts paid to NCTI residents or entities. This means payments made as legitimate professional charges (goods purchases, services, consulting, management or administration fees) are not deductible from the French taxpayer's taxable fiscal income making such payments, unless the taxpayer furnishes irrefutable proof that questioned operations correspond to real transactions substantively justified per normal commercial practices. The administration and administrative courts regard this proof burden as particularly heavy.

Furthermore, Article 123 bis CGI establishes legal presumption that all fund transfers to NCTI-established entities presumptively constitute taxable revenue distributions per non-distributed benefit taxation or categorized income taxation. This radically inverts proof burden since the taxpayer must then demonstrate the transfer is not distribution, substantiating this assertion by complete documentation of actual transfer nature (structured loan, prior debt reimbursement, capital contribution, investment) and justifying transfer non-artificiality.

Structural Implications: Heightened Trust and Complex Asset Structure Taxation

For taxpayers having established or holding trust or trust-like structures in NCTIs—particularly Bahamas or Turks and Caicos Islands where such structures are particularly common and benefit from specialized regulatory frameworks—NCTI inscription triggers heightened supplemental taxation, notably through annual 1.5% levy on the total market value of property or rights held by the trust. This levy operates independently of any ordinary tax the trust might generate, constituting a sort of over-taxation tax applied indifferently and severely.

Restructuring Opportunities and Adaptation Strategies: Viable Alternative Evaluation

For French taxpayers having established or holding asset structures in Bahamas or Turks and Caicos Islands, NCTI inscription justifies urgent and complete strategic structure reassessment, since now-applicable French tax regime renders such structures extremely fiscally expensive. This reassessment must explore several alternative hypotheses: (1) pure and simple NCTI-established entity liquidation and asset repatriation to France or non-NCTI cooperative jurisdiction; (2) restructuring and third-jurisdiction asset transfer offering comparable fiscal advantages but holding cooperative jurisdiction status (notably certain European Union member states or information-exchange agreement signatory jurisdictions); (3) juridical structure modification and NCTI interposition elimination between French taxpayer and final investment; (4) investment management contract renegotiation and financial flow modification to minimize increased withholding tax impact.

Fiscal Impact Quantification and Inaction Cost Evaluation

Before commencing restructuring, precise current structure maintenance fiscal cost evaluation is essential—meaning supplemental taxes the taxpayer will bear maintaining structure involving NCTIs. This evaluation must account for any increased withholding actually applicable, charge non-deductibility, revenue distribution presumption, and supplemental income declarations the tax authority might require for current and three to five prior fiscal years at audit stage. This comparative cost permits determining whether restructuring presents apparent fiscal interest justifying restructuring expense and administrative cost engagement.

Voluntary Regularization and Ruling Request: Penalty Minimization During Restructuring

During restructuring, the taxpayer has major strategic interest in commencing voluntary regularization procedure before the tax administration, notably requesting tax ruling (rescrit fiscal) per Article L. 80 B LPF substantiating the new planned structure. This proactive approach potentially permits benefiting from penalty reductions or complete penalty abandonment per Article 1729 CGI circumstances existence, where the taxpayer demonstrates engaging in self-initiated regularization steps before any tax audit.

Frequently Asked Questions Regarding NCTI Taxation

Which countries and territories are currently inscribed on France's NCTI list from the 2024 update?

Following the most recent update — the arrêté of 15 April 2026, published in the Official Journal on 26 April 2026 — the French ETNC list comprises eleven territories: Antigua and Barbuda, Anguilla, Guam, the Turks and Caicos Islands, the U.S. Virgin Islands, Palau, Panama, Russia, American Samoa, Vanuatu and Vietnam. Vietnam was added; Fiji, Samoa and Trinidad and Tobago were removed. The Bahamas do not appear on this list. This list is regularly updated per Article 238-0 A CGI criteria. Before engaging operations involving another jurisdiction, its NCTI status should be verified with the French tax administration.

Are the Bahamas currently a French non-cooperative jurisdiction (ETNC)?

No. The Bahamas were added to the list in February 2024 but were removed by the arrêté of 18 April 2025, and they do not appear on the list updated by the arrêté of 15 April 2026. The increased withholding where legally applicable, the non-deductibility rule of Article 238 A CGI and the other ETNC consequences described in this archived article therefore do not apply to the Bahamas as the list currently stands. The ETNC regime always operates by reference to the official list in force at the date of the relevant payment or transaction: for any jurisdiction concerned, that status must be verified as at that date with the French tax administration.

If I owned an NCTI structure before inscription, may I recover prior assessments?

No. NCTI inscription occurs on a specific date and applies from a defined effective date (generally the first day of the third month following publication). However, prior-established assessments cannot be retroactively challenged per NCTI presumption, unless the administration conducts complete audit demonstrating the structure already possessed evasion character before official NCTI inscription.

May a double taxation convention reduce the any increased withholding actually applicable impact?

Potentially, but rarely substantially. Double taxation prevention conventions contain provisions permitting foreign tax credits for taxes paid in the other state, but this reduction cannot exceed equivalent tax the revenue would be subjected to in the resident country. Where an increased French withholding is legally applicable and substantially exceeds ordinary treaty rates, any foreign tax credit available in the beneficiary's residence jurisdiction may be insufficient to neutralise the French tax burden, generating residual double taxation.

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