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Economic Substance

Economic Substance legislation has been introduced in the Crown Dependencies and British Overseas Territories.

The legislation is designed to improve tax transparency and ensure that companies resident in Bermuda, British Virgin Islands, Cayman, Guernsey, Isle of Man and Jersey are not being used to avoid tax in other jurisdictions. The legislation came into effect on 1 January 2019 with reporting to tax authorities due from January 2020.

We are waiting for the comprehensive guidance notes from each jurisdiction. The economic substance requirements will vary depending on the actual activity of the company.

In general economic substance will include:

  • that the company is directed and managed in the jurisdiction
  • that the company conducts core income-generating activity in the jurisdiction
  • and has adequate people, premises and expenditure in the jurisdiction.

 

Not every client will be impacted by this change and we expect that most will meet the substance requirements or will not be caught by the new rules. We are currently working to establish the exact requirements for all our clients and our expert teams will be in touch shortly should this be relevant to you.


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