Most of the jurisdictions that had made commitments to the EU to introduce substance requirements successfully passed legislation before the 2018 year-end deadline, in addition to providing guidance around the application of the legislation. In March 2019 and with a subsequent review in May, the EU published an updated list, moving those jurisdictions who had reached the requisite standard off the list, or onto a Greylist or the Blacklist depending upon their respective progress. As a result, a majority of jurisdictions have since been adapting their local substance legislations and providing additional guidance on economic substance requirements.
In addition to the BVI and Cayman, several other jurisdictions that will be affected by the EU substance legislation include Anguilla, Bahamas, Bermuda, and the Crown Dependencies of Jersey and Guernsey. Failure to comply with substance requirements could lead to grave consequences, such as incurring significant fines or being struck off by local registries.
In the context of the EU Economic Substance legislation, “substance” is a broad term that encompasses various areas of a business, including management, control, operations, physical presence and decision-making procedures. It is thus crucial for entities incorporated in relevant jurisdictions to assess whether they are carrying out ‘Relevant Activities’ as prescribed and whether there is a need to demonstrate “substance”. Equally important is for directors of such entities to demonstrate that they have shown regard towards the legislation by resolving that their company is either in or out of scope and, if in scope, that they have or are taking steps to comply with the new legislation.
Ultimately, it is important to gain clarity and assurance of compliance, without which a damaged reputation, financial penalties and other sanctions could result. To do so, however, can be a complex process that is open to various interpretations.
To help you navigate the EU substance requirements in the BVI, Cayman Islands and other jurisdictions, Vistra offers a comprehensive range of options – from a classification check to a full review, as well as advisory services on registering your status with the regulator.
The BVI, Cayman Islands and other similar jurisdictions remain attractive centres for incorporations and structuring, as they continue to offer legal certainty, tax neutrality and a stable and competitive business environment. In fact, many of the structures established in these jurisdictions will not need to establish substance, and can continue to conduct business with little impact to their operations. It is important to understand that all structures will need to be assessed on their own merits. That said, the BVI and Cayman remain open for business, and entities that can demonstrate due compliance with and regard for substance legislation will be the ones to win in the long term.
For more information on how Vistra can help your business come into compliance with EU Economic Substance requirements, please contact your Account Manager or the relevant personal listed below:
|BVI||Rexella Hodge||+1 284 852 2550|
|Cayman Islands||Jeffrey Goddard||+1 345 769 9381|
|China||Reyna Hu||+86 21 2090 0598 Ext. 6602|
|Cyprus||Alexis Alexandrou||+357 25 272703|
|Guernsey||Julian Carey||+44 1481 754 123|
|Hong Kong||Effy Yeung & Jessica Far||+852 2848 0323
& +852 2848 0321
|Indonesia||Miguel Latorre||+62 21 5099 6400|
|Jersey||Steve Rowland||+44 1534 504707|
|Legal Services||Debbie Farman & Debbie Wilmot||+44 117 918 1221
& +1 284 852 3813
|Malaysia||Olivier Too||+603 2092 9458|
|Malta||Marco Bugelli||+356 22 586 423|
|Mauritius||Shahed Hoolash||+230 260 7072|
|Seychelles||Neil Puresh||+248 4325 600|
|Singapore||Chin Wai Hun||+65 6854 8035|
|Switzerland||Klara von Rotz & Ingrida Gereiko||+41 44 296 68 32|
|Taiwan||Nadine Feng||+886 2 2718 1220|
|UAE||Rajiv Kumar Singh||+971 4 351 8330|
|United Kingdom||Victor Hjalt||+44 20 3872 7387|
EU Economic Substance Solutions