In response to the requirements of the European Union (“EU”) Code of Conduct Group for Business Taxation, the Companies and Limited Partnerships (Economic Substance) Ordinance 2018 and accompanying Regulations (the “Substance Legislation”) came into force on 1 January 2019 in the Turks and Caicos Islands (“TCI”). The TCI is compliant with these EU and other OECD substance requirements, i.e. it is a white listed jurisdiction. Similar substance legislation exists in other international financial centres, such as the Cayman Islands, British Virgin Islands, Bermuda, Isle of Man, Jersey and others.
Tests are introduced for entities carrying out specified types of business, or relevant activities, to satisfy legal economic substance requirements and those entities that are caught must comply with extended reporting requirements and sharing of information obligations. The penalties for non-compliance include financial penalties, spontaneous exchange of relevant information with relevant EU Member States and (eventually) removal from the Register of Companies, and/or liquidation or dissolution.
Directors should consider certain key questions and carry out assessments of the underlying business activities carried out by their companies to comply with the reporting obligations and deadlines.
Our team of specialists can map, review and advise on existing holding company and other structures, contracts and governance arrangements, including with outsourced third-party service providers, agreements and other documentation. We are experienced in working closely with boards, shareholders, family offices and company administrators and can assist and guide clients in navigating through the Substance Legislation and reporting requirements.