The Cayman Islands has recently introduced new legislation from January 1st 2019 requiring certain legal entities to demonstrate adequate economic substance regarding taxation in the Cayman Islands. Any company registered in the Cayman Islands going forward must adhere to the new guidelines which have been implemented as a result of OECD guidance and concerns from the EU Code of Conduct Group (COCG).
*Please note that newly incorporated LLCs or LLPs after January 1st have to uptake the new legislation with immediate effect upon commencing the relevant activities. Any LLC or LLP that was incorporated prior to the 1st of January 2019 have a gestation period of implementation until the July 1st 2019.
Further detail, in the form of principles based guidance notes, is expected to be finalised over the next few weeks with sector specific guidance being developed during 2019, and we will provide further updates when guidance is approved and available from
Jurisdictions with low or zero corporation similar to the Cayman Islands are not the only countries having to implement the Base Erosion and Profit Shifting framework. The legislation addresses the same issues with the following other UK Overseas Territories:
The Isle of Man.
BVI (click to read more about the BVI substance update).
The Cayman Islands Tax Information Authority (TIA) will release more detailed guidance and notes will be finalised over the coming weeks, covering the following points:
Which entities will need to demonstrate economic substance in the Cayman Islands.
Sector specific guidance on reporting obligations.
What authorities will have access to the information and under which circumstances.
The new legislation demonstrates the continued commitment of the Cayman Islands to uphold international best practices.