New Cayman Islands Economic Substance Guidance Notes
A new version of the Guidance Notes for Economic Substance for Geographically Mobile Activities (Guidance Notes) was recently published by the Cayman Islands Tax Information Authority (TIA).
The revised Guidance Notes can be found here on the TIA website.
The key change to the Guidance Notes was the inclusion of detailed sector specific guidance for each of the relevant activities. The sector specific guidance sets out the scope of each relevant activity, the types of activities that are likely to be considered a relevant activity and the core income generating activities that are required to be performed for that relevant activity. The Guidance Notes also include several worked examples of typical scenarios for each relevant activity, serving as a helpful reference.
Amendments have also been made to the Guidance Notes to reflect the various legislative changes over the past twelve months, such as:
- The requirement to provide information to the TIA on the immediate parent, ultimate parent and ultimate beneficial owner of the entity where an entity claims tax residence outside of the Cayman Islands and the requirement for the TIA to then exchange that information with the relevant competent authorities
- The TIA now having appropriate functions and powers for it to monitor and verify outsourcing of core income generating activities
- The power for the TIA to now 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 Economic Substance Report within the specified time (the penalty is CI$5,000 with an additional penalty of CI$500 for each day the breach continues)
Please see our client alert here.