Economic Substance

HomeServicesPrivate Client & CorporateCorporateEconomic Substance

Economic Substance

Economic Substance legislation was brought into force in a number of jurisdictions where we provide services to take effect from 1 January 2019.

This was as a result of recommendations by the Code of Conduct Group for the EU Council to assist with assessing:

  • Tax transparency
  • Fair taxation
  • Implementation of anti-BEPS measures

The scope of substance legislation varies from jurisdiction to jurisdiction.  However, where an entity carries out a ‘relevant activity’ and is ‘tax resident’ in that jurisdiction they must ensure that they have sufficient substance to comply with the legislation.

Relevant activities are:

  • Banking
  • Insurance
  • Fund management
  • Financing and leasing
  • Headquarters
  • Shipping
  • Distribution and service centres
  • Holding entity
  • Intellectual property

Holding entities and intellectual property have different requirements for substance but all others need to evidence:

  • Management and control in the jurisdiction
  • Core Income Generating Activities (CIGA) are undertaken in the jurisdiction in relation to the relevant activity
  • That it maintains adequate physical premises in the jurisdiction
  • It has adequate number of appropriate employees in the jurisdiction
  • Adequate expenditure is incurred in the jurisdiction in relation to the relevant activity

There will be ongoing reporting obligations in relation to substance and the level and frequency of reporting will depend on the jurisdiction of the entity, its tax residency and whether or not it is carrying out a relevant activity

PraxisIFM Trust Limited can assist with providing substance in BVI, Guernsey, Jersey and the Isle of Man by performing core income generating activities.

FACTSHEETS AND GUIDANCE NOTES
BVI Economic Substance and Guidance Notes
Guernsey Economic Substance and Guidance Notes
Isle of Man Economic Substance and Guidance Notes
Jersey Economic Substance and Guidance Notes

Who to contact

View all our people