Economic
Substance

Economic substance legislation (the Substance Laws) is now in force across several offshore jurisdictions, including BVI, Cayman Islands, Jersey and Guernsey. If your business is a relevant entity carrying out certain activities in these jurisdictions, you’ll need to show that you have an appropriate level of substance.

The Substance Laws have applied in BVI, Cayman Islands, Jersey and Guernsey since 1 January 2019. Compliance isn’t optional, and there are practical steps you should already be taking. These include:

• Confirming your tax residence and entity classification
• Reviewing how your contracts and outsourcing arrangements are structured
• Organising governance, employment and premises arrangements
• Capturing the right business information for reporting to the relevant tax office

The penalties for non-compliance are serious. They range from financial penalties and sharing information with EU Member States to being struck off the company register – and in some jurisdictions, even imprisonment.

We’ve worked closely with boards, shareholders, family offices and administrators of companies affected by the Substance Laws. We know the challenges, and we can help you navigate these requirements and reduce risk.

To support compliance, we’ll map and review your existing structures, contracts and governance agreements. We’ll advise on changes and provide template board papers, resolutions and filings. And we’ll update contracts and prepare the documentation you need for reporting.

If you’d like to understand how the Substance Laws affect your business, or need help putting the right measures in place, get in touch with a member of our team or your usual Mourant contact.