● Cayman:
The International Tax Co-operation (Economic Substance) Law, 2018 (as amended) (the Law)
● BVI:
The BVI Economic Substance (Companies & Limited Partnership) Act, 2018 (the Act)
The Law/Act applies to all legal entities that carry on relevant activities unless they are resident for tax purposes in a jurisdiction outside of Cayman Islands/BVI (except for jurisdictions included in the EU list of non-cooperative jurisdictions).
A Cayman company that is tax resident outside the Cayman Islands in a jurisdiction in which it is subject to tax, is not in scope and substance will not be required. The same applies for Cayman entities which do not conduct a relevant activity: substance will not be required. Relevant Entities (defined in the Law as Cayman entities that are in scope) must make an annual report as to whether or not they are carrying on one or more of a defined list of relevant activities.
Specifically, any BVI company that is a tax resident outside of the BVI, is not in scope and substance will not be required. The same applies for BVI entities which do not conduct a relevant activity: substance will not be required.
Relevant activities identified by the EU and more recently by the OECD include:
Please note that substance requirements for companies conducting Holding Company activities are expected to be considerably less onerous than for other relevant activities.
The Tax Information Authority of Cayman has published Guidance on satisfying the economic substance test. This is not fully prescriptive and therefore each structure will need to be looked at on a case by case basis.
Please also note it may not be obvious whether your Cayman or BVI company fits into one of these categories.
《to be continued...》