Like many jurisdictions, the Cayman Islands has introduced economic substance requirements for nine business sectors in the last two years, together with a reporting obligation for those in scope businesses who have carried out one or more of the nine activities. Since the publication of the Islands' economic substance law in December 2018, the Islands' government has continued to invest resources in ensuring the law can be understood and complied with by those who are in scope. For example, high level guidance to the Islands' economic substance law was issued in 2019, while July 2020 saw the publication of the first detailed sector-specific guidance to the law, following feedback from the OECD and EU Commission, as well as from industry stakeholders. This detailed guidance was welcomed by the industry as it has given greater certainty to those businesses whose operations were potentially in scope. The guidance was followed this August by the publication of regulations setting out additional specific information to be reported by those businesses who have an obligation to report to the Islands' competent authority on their compliance with economic substance. Looking ahead, this Autumn is expected to see the Islands' government announce the go live date of the online reporting system which will ensure that in scope entities will be able to report within the deadline, just two years since the law was first published; and the Islands' competent authority will then begin the task of assessing the data that has been submitted. Watch this space for further developments!
The DITC is currently developing a system to facilitate reporting under the International Tax Co-operation (Economic Substance) Law (2020 Revision) (As Amended) (the “ES Law”), and will notify industry once the system is operational and ready to use.