International financial centres including BVI, Cayman, Guernsey and Jersey have passed new laws on economic substance, which have effect from 1 January 2019, to meet the requirements of the EU Code of Conduct Group.

In March 2019 the EU Council formally approved the legislation in Jersey and Guernsey, and clearly signalled its intention to approve the laws passed by Cayman and BVI subject to amendments to be agreed by the end of the year.

The OECD has launched consultation on similar principles and is expected to introduce its own substance requirements in due course.

The economic substance laws share the common objective of requiring certain entities to demonstrate economic substance in the jurisdictions in which they are tax resident, but jurisdictions have taken slightly differing approaches to the drafting of their respective laws.

Our team is able to advise clients in relation to their companies in each of our relevant jurisdictions and across service lines, as companies may carry out more than one relevant economic activity, offering expertise in relation to the implications for holding companies, investment funds and fund managers, banks, insurance businesses and companies carrying on financing and leasing business.