【Offshore Companies】

The regulations of “Economic Substance” in Cayman Islands (the Law) and BVI (the Act) (Part 2)

• Part 1

● 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)

What are the key dates?

The Law/Act became law in Cayman/in the BVI on 1 January 2019. Existing companies will need to comply with economic substance requirements by 30 June 2019 and meet the reporting obligation within one year of 30 June 2019.

New companies that are incorporated on or after 1 January 2019 must comply with the economic substance requirements immediately. However, new companies have one year from the date of incorporation to meet reporting obligations.

Are there penalties for non-compliance?

We do not currently have full details of how the legislation will be applied. We do, however, anticipate penalties may apply if a legal entity has not complied with the economic substance requirements during any financial period ending on or before 31 December 2019.

Hence, it is critical that clients take steps now to determine whether their entity, and the activities it is engaged in, will fall within the scope of the substance requirements.