ECONOMIC SUBSTANCE REQUIREMENTS

The OECD and the EU have been working with various low/zero tax jurisdictions to introduce Economic Substance Requirements (ESR) in their domestic legislation. In response BVI, Cayman, The Bahamas, the Channel Islands, Mauritius, United Arab Emirates and other low/zero tax jurisdictions have introduced economic substance legislation.

In the past few years, more than 100 jurisdictions have adopted the OECD’s Base Erosion Profit Shifting (BEPS) project with regard to anti-abuse measures. The intention is to combat tax avoidance by multinationals who are shifting profits from high-tax jurisdictions to entities in low/zero tax jurisdictions without adequate economic substance.

Amicorp has an in-depth knowledge of the ESR legislation and can assist with the substance requirements in the various jurisdictions.

Our ESR services include:

Initial Assessment & Classification
  • Assessment of ESR applicability - whether entity is in-scope of ESR or not
  • Annual documenting (Board resolutions/minutes) and annual filing of classification - whether entity is in scope of ESR or not
  • Classification under one or more of the relevant activities
  • Impact of the ESR requirements per classification
Substance Services & Solutions
  • Securing local substance through facilitating and documenting board meetings, access to office space, administration services, employee management
  • Preferential alternative structuring and implementation thereof
ESR Annual Reporting

Where Amicorp acts as registered agent it will provide:

  • Annual notification if entity is in scope of ESR or not;
  • Annual reporting of activities and turnover, employees, office, expenditures, etc., to demonstrate that ESR is adequately met.
Documentation
  • Maintenance of adequate documentation relating to ESR Classification and key data on economic substance
  • Reply to Notices of the Taxation Authorities to provide additional information 
Effective dates and deadlines

For most jurisdictions the ESR legislation has been in effect since January 1, 2019. (For the UAE it was April1, 2019). For entities incorporated after January 1, 2019: the requirements apply as from the start of the relevant activities.

For entities incorporated before 2019, the initial financial period is deemed to commence June 30, 2019, while the effective dates to meet the economic substance requirements (if applicable) are October 1, 2019 for BVI entities, and July 1, 2019 for entities in other jurisdictions that introduced ESR legislation.

Our broad service offerings can enhance the governance in these jurisdictions and help you to stay compliant with Economic Substance Requirements. For more information, enquiries or proposal requests, please contact the local teams in the applicable jurisdictions or our dedicated team of ESR experts esr@amicorp.com.


Our professionals

CAYMAN ISLANDS - Kimbert Solomon
THE BAHAMAS - Marvin Taylor
BVI - Adam McDonnell
UAE - Tina Cherniavska
BARBADOS – Careen Byfield