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Economic Substance

Economic Substance legislation came into effect in the Crown Dependencies and Overseas Territories on 1 January 2019.

What does this mean?

These regulations require entities with tax residence and income in impacted jurisdictions to evidence adequate local resources, facilities and control over income generating activities. Impacted jurisdictions are Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey (and from 2020, Mauritius).

How can we help?

Estera has significant experience in gathering and reporting company data and we are uniquely placed to help our clients understand and respond to the new legislation. Our assessment of substance determination is a staged approach and, based on the outcome of each stage, we are able to react accordingly.

These stages are outlined below:

1. Is the entity in question in scope of the new law? 

Our experts will determine if an entity has established tax residency in a jurisdiction which is subject to this new law. Should this analysis be positive, a substance test will follow.

2. Does the entity meet the substance requirements?

Estera will perform a substance test on entities in scope, which may include a request for additional information from clients. The substance requirements differ depending on the type of relevant activity the entity performs. Our tests include a gap-analysis versus the requirements for adequate control, people, facilities and expenditure. Should the substance test not be met, enhanced substance or restructuring may be required.

3. How can the entity enhance its substance?

Clients whose entities do not meet the substance requirements will be required to add substance or restructure the entity. For standard structures, solutions may be straightforward including additional corporate services or director activities. For more complex structures, we can facilitate the development and implementation of tailor-made solutions.

Please contact us to find out how we can be of assistance.

Brendan Dowling profile photograph

Brendan Dowling

Managing Director

Jersey

+44 1534 844 802

brendan.dowling@estera.com


Alison Dyer-Fagundo profile photograph

Alison Dyer-Fagundo

Managing Director

Bermuda

Richard Gordon profile photograph

Richard Gordon

Corporate Director

Cayman Islands

Ethan Levner profile photograph

Ethan Levner

Managing Director Guernsey and Group Head of Corporate Development

Guernsey
United Kingdom

+44 20 7002 7606

ethan.levner@estera.com


Gary O'Connor profile photograph

Gary O'Connor

Managing Director

Isle of Man

+44 1624 605 702

gary.oconnor@estera.com


Gareth Thomas profile photograph

Gareth Thomas

Managing Director

BVI

+1 284 393 1301

gareth.thomas@estera.com