With new economic substance legislation (the Substance Laws) coming into force in a number of offshore jurisdictions, certain relevant entities in BVI, Cayman Islands, Jersey and Guernsey, that are performing certain relevant activities, will have to demonstrate an appropriate level of substance.
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Overview
The Substance Laws took effect in each of BVI, Cayman Islands, Jersey and Guernsey from 1 January 2019.
There are a number of actions which relevant entities must be undertaking to ensure compliance – from clarifying tax residence and entity classification, to the structuring of contractual and outsourcing arrangements, the organisation of corporate governance, employment and premises arrangements, and the capturing of relevant business information required in due course for the preparation and filing of reporting information to the relevant tax office.
The penalties for non-compliance include financial penalties, spontaneous exchange of relevant information with relevant EU Member States and (eventually) striking off the relevant company registers and, in some jurisdictions, imprisonment.
Our team has experience of working closely with boards, shareholders, family offices and administrators of companies which are in scope of the Substance Laws and can assist in navigating these issues.
To facilitate compliance we can map, review and advise on existing structures, contracts and governance agreements, and provide template board papers and resolutions, filings, contract updates and other documentation, to support economic substance compliance.
If you'd like any more information or assistance with the impact of the Substance Laws on your business, please get in touch with a member of the team or your usual Mourant contact.
Useful Links
Click here to view our Economic Substance Updates and Guides for all jurisdictions.
BVI
The Economic Substance (Companies and Limited Partnerships) Act, 2018 came into force on 1 January 2019, imposing economic substance requirements on companies and certain limited partnerships in the BVI. This Update summarises the core requirements of the economic substance regime introduced by this legislation.
Cayman Islands
The International Tax Co-operation (Economic Substance) Law, 2018 came into force on 1 January 2019 and imposes economic substance requirements on companies and LLCs in the Cayman Islands.
Guernsey
With effect from 1 January 2019, Guernsey tax resident companies undertaking specified activities are required to demonstrate that they each have a substantive presence in Guernsey.
Read Further Guidance (April 19)
Update: Self-managed funds to be brought within scope of Guernsey's economic substance requirements (September 2020)
Update: Partnerships to be brought within scope of Guernsey's economic substance requirements
Jersey
The Taxation (Companies – Economic Substance) (Jersey) Law 201- (the Substance Law) came into force on 1 January 2019 requiring tax resident companies undertaking specific activities to demonstrate that they have a substantive presence in Jersey.
Read Guide (September 2022)
Read Further Guidance (April 2019)
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