Закон страна: Каймановы острова; язык закона: Английский
GUIDANCE: Economic Substance For Geographically Mobile Activities
РУКОВОДСТВО: Требования экономического присутствия для географически мобильных видов деятельности на Каймановых островах
I. Legislative Framework
A. ES Law
This Guidance for the International Tax Cooperation (Economic Substance) Law, 2018 (the “ES Law”) provides support for understanding the law’s scope, and how to comply with the law.
The economic substance concepts underpinning the ES Law are similar to those found in legal systems of other jurisdictions.
The common denominator for these systems is the OECD Forum on Harmful Tax Practices (“FHTP”), which setsthe global standard that requires companies to have substantial activities in a jurisdiction (also known as “economic substance”).
Over 125 jurisdictions around the world are members of the OECD BEPS Inclusive Framework. The FHTP is a sub-body of the Inclusive Framework, and is responsible for assessing and monitoring the substantial activities standard for all member jurisdictions.
The ES Law was enacted in response to the work of the OECD and the European Union (EU) on fair taxation. Please refer to the Section VII below headed “External Reference Materials” for background information on that work. This is useful context for gaining insight into the international standard developed by the FHTP. That standard requires geographically mobile activities to have substance regardless of whether the activities are conducted in a no or nominal tax jurisdiction or in a preferential tax regime of a jurisdiction that has corporate income tax.
3. Summary of the ES Law
The ES Law came into force on 1 January 2019.
A “relevant entity” is subject to the ES Law from the date on which the relevant entity commences a “relevant activity” unless the relevant entity was in existence prior to 1 January 2019, in which case it must comply with the ES Law by 1 July 2019.
The ES Law requires a relevant entity to satisfy the economic substance test (“ES Test”). The ES Test requires that a relevant entity:
- (a) conducts Cayman Islands core income generating activities (“Cayman Islands CIGA”) in relation to that relevant activity;
- (b) is directed and managed in an appropriate manner in the Islands in relation to that relevant activity; and
- (c) having regard to the level of relevant income derived from the relevant activity carried out in the Islands –
- (i) has an adequate amount of operating expenditure incurred in the Islands;
- (ii) has an adequate physical presence (including maintaining a place of business or plant, property and equipment) in the Islands; and
- (iii) has an adequate number of full-time employees or other personnel with appropriate qualifications in the Islands.
The ES Test is described in more detail in Section III below headed “The Economic Substance Test (“ES Test”)”.
A relevant entity may satisfy the ES Test by outsourcing the conduct of its Cayman Islands CIGA to another person provided that the relevant entity is able to monitor and control the carrying out of the Cayman Islands CIGA. Cayman Islands CIGA means activities that are of central importance to a relevant entity in terms of generating income and that are being carried out in the Islands.
Please refer to Section II.A headed “Relevant Entity”, Section II.B below headed “Relevant Activities” and to Section III.A.2 below headed “Cayman Islands Core Income Generating Activities (Cayman Islands CIGA)” for the meaning of those key terms.
4. The Authority
The Tax Information Authority is the “Authority” for the purposes of the ES Law. The Authority’s functions under the ES Law include administering the ES Law, determining whether a relevant entity satisfies the ES Test in respect of its relevant activities, monitoring compliance with the ES Law, and sharing information with other competent authorities.
The Authority is the sole dedicated channel in the Cayman Islands for international cooperation on matters involving the provision of tax related information. The Authority is a function of the Department for International Tax Cooperation (DITC) within the Cayman Islands Government’s Ministry of Financial Services and Home Affairs. The Authority has statutory responsibilities under the Tax Information Law (2017 Revision) in addition to those under the ES Law.
5. Notification and Reporting
Starting in 2020, relevant entities must notify the Authority annually
- (a) whether or not they are carrying on a relevant activity,
- (b) if the relevant entity is carrying on a relevant activity, whether or not all or any part of the relevant entity’s gross income in relation to the relevant activity is subject to tax in a jurisdiction outside of the Islands and, if so, shall provide appropriate evidence to support that tax residence as may be required by the Authority, and
- (c) the date of the end of its financial year.
The Authority will specify the time, form and manner of such notification.
Relevant entities carrying on relevant activities that are required to satisfy the ES Test must prepare and submit to the Authority a report for the purpose of the Authority’s determination whether the ES Test has been satisfied in relation to that relevant activity within twelve months after the last day of the end of each financial year commencing on or after 1 January 2019. Such report shall be in the form approved by the Authority with the prescribed information as of the end of the relevant financial year.
For the avoidance of doubt, the timing for compliance with the notification and reporting obligations are separate from timing of compliance with the ES Testspecified in Section III.A.1 below headed “Compliance with the economic substance test”.
B. ES Regulations
The Cabinet may make regulations (“ES Regulations”) regarding any matter that may be prescribed under the ES Law, amending the Schedule to the ES Law, further defining the scope of relevant entities that are required to satisfy the ES Test, further defining the scope of relevant activities, and providing for such matters as may be necessary or convenient for carrying out or giving effect to the ES Law and its administration.
The ES Regulations may –
- (a) make different provision in relation to different cases or circumstances; or
- (b) contain such transitional, consequential, incidental or supplementary provisions as appear to Cabinet to be necessary or expedient for the purposes of the ES Regulations.
The ES Regulations may also provide for such savings, transitional and consequential provisions to have effect in connection with the coming into operation of any provision of the ES Law as are necessary or expedient.
The International Tax Co-operation (Economic Substance) (Prescribed Dates) Regulations, 2018 came into force on 1 January 2019. Those ES Regulations prescribe the date from which the ES Test must be satisfied and the date for the purposes of submitting a report to the Authority.
The International Tax Co-operation (Economic Substance) (Amendment of Schedule) Regulations, 2019 came into force on 22 February 2019. Those ES Regulations amended the definition of “relevant entity” in the Schedule to the ES Law. This Guidance uses the new definition of relevant entity as stated in Section II.A below headed “Relevant Entity”.
C. This Guidance
This Guidance has been issued by the Authority pursuant to section 5 of the ES Law with the approval of the Cabinet and after private sector consultation. This Guidance has been published in the Gazette and on the “Economic Substance” webpage of the Authority’s website along with other relevant materials:
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