The Cayman Islands government recently passed an amendment to supplement its economic substance law. The amendments reflect feedback received from the EU Commission and the FHTP Secretariat.
As most Cayman Islands entities will now be aware, all must file a notification with the Registrar of Companies prior to filing their annual return, even if the entity is not a “relevant entity”.
Where an entity claims tax residence outside of the Cayman Islands information on the immediate parent, ultimate parent and ultimate beneficial owner of the entity must be provided to the Tax Information Authority (TIA). Under the new provisions the TIA is required to exchange that information with the relevant competent authorities.
The amendment also introduced appropriate functions and powers for the TIA to monitor and verify outsourcing of core income generating activities as well as impose a fine where a relevant entity that is required to satisfy the economic substance test fails to prepare and submit to the TIA its annual report within the specified time. The penalty is CI$5,000 with an additional penalty of CI$500 for each day the breach continues.