Version 3.0 of the Cayman Islands guidance notes (“Guidance”) on the Cayman Islands’ economic substance legislation provides additional assistance in interpreting the International Tax Co-operation (Economic Substance) Law (the “ES Law”).
The Guidance now includes a framework of industry-specific case studies along with an explanation of how the Tax Information Authority (“TIA”) will interpret the ES Law terms “adequate” and “appropriate” in relation to the ES Law’s requirements for economic substance (the “ES Test”, described in more detail below). The release of the Guidance follows a period of industry collaboration and demonstrates the Cayman Islands’ continued commitment to a reputable economic substance regime in line with global standards.
The ES Law requires that every “entity” (see below) must notify the TIA annually by way of an Economic Substance Notification (“ESN”) whether or not it is carrying on a “relevant activity” (see below) under the ES Law and if so, whether or not it is a “relevant entity”. The ESN must be filed as a prerequisite to an entity filing its annual return with the Cayman Islands General Registry’s Corporate Administration Portal, in each case by 31 March. Going forward, we strongly recommended that both the ESN and the annual return are filed prior to 31 January each year, otherwise an entity’s ability to obtain a certificate of good standing from the Cayman Islands General Registry authorities will be impaired. Foreign companies must also file an ESN by the same deadline, notwithstanding that such entities are not required to file an annual return.
“Entities” required to file an ESN include all legal persons registered with the Cayman Islands General Registry. This includes companies incorporated under the Companies Law (the “Companies Law”), limited liability companies registered under the Limited Liability Companies Law, limited liability partnerships registered in accordance with the Limited Liability Partnership Law, 2017 and companies incorporated outside of the Cayman Islands and registered under the Companies Law.
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Cayman Islands Updated Economic Substance Guidance