International Tax Co-operation (Economic Substance) Regulations 2020

06 May 2020

The Cabinet of the Cayman Islands, exercising its powers under the International Tax Co-operation (Economic Substance) Law, 2020 (the "Law") has released the International Tax Co-operation (Economic Substance) Regulations 2020 (the "Regs").

The Regs require certain Cayman Islands entities (and foreign entities registered in the Cayman Islands) ("Relevant Entities") that carry on certain in-scope activities ("Relevant Activities") to include additional prescribed information when submitting their annual report to the Tax Information Authority (the "Authority"). The Law outlines other key information that Relevant Entities will need to submit in their annual report to the Authority.

The Authority will use this information to determine whether the Relevant Entity in question satisfies the economic substance test under the law (the "ES Test").

Additional information required by the Authority
In order to comply with the reporting requirements under the Regs, the Relevant Entity must provide the following additional details:

  • The name and address of the Relevant Entity’s immediate parent, ultimate parent and ultimate beneficial owner and any other information as may reasonably be required by the Authority to identify the Relevant Entity’s immediate parent, ultimate parent and ultimate beneficial owner.
  • Information as may reasonably be required by the Authority in respect of expenditure incurred in respect of a person other than the Relevant Entity who is conducting core income generating activities for Relevant Activities on behalf of the Relevant Entity.
  • Information as may reasonably be required by the Authority to ensure compliance with section 4(4) of the Law.
  • A copy of the Relevant Entity’s financial statements or books of account for the relevant entity’s financial year.
  • Information as may reasonably be required by the Authority in respect of employees who are conducting core income generating activities for Relevant Activities including the number of employees and appropriate qualifications of such employees.
  • Confirmation of —
    • compliance with the requirements under section 4(3) of the Law;
    • the number of board meetings held in the Islands; and
    • the number of board meetings held outside in the Islands.
  • Confirmation of compliance with the requirements under section 4(5) of the Law.

In order to meet the reporting requirements under the law, the Relevant Entity must prepare and submit the annual report to the Authority no later than twelve months after the last day of the end of each financial year.

The annual report can be submitted by way of an online portal (the “ES Portal”). A user guide outlining the rules and procedures for use of the ES Portal will be released by the Authority at a later date. The filing of the first report is to be made by 31 December 2020.

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