Cayman Regulatory Update – 2021 Economic Substance Returns Reminder and Updates

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2021 Economic Substance Returns Reminder

According to The International Tax Co-Operation (Economic Substance) Act (2021 Revision) (the “ES Act”), a relevant entity carrying on any Relevant Activities should file an economic substance return (“ES Return”) and submit the same to the Cayman Islands Tax Information Authority (the “TIA”) via the Department for International Tax Co-Operation of the Cayman Islands Government (DITC) portal within 12 months of the relevant financial year end

For example, any relevant entities having its financial year ended 31 December 2020, the ES Return reporting deadline will be 31 December 2021 (i.e. 12 months of an entity’s financial year end). 

Failure to satisfy ES Return

Where a relevant entity, that is required to satisfy the economic substance test, fails to prepare and submit to the TIA the required ES Return within the specified time, the TIA shall by notice in writing impose a penalty of five thousand dollars CI$5,000)and an additional penalty of five hundred dollars (CI$500) for each day during which the failure to comply continues.

2021 Economic Substance Regime Updating

With effect from 30 June 2021, the ES requirements have been extended to Cayman Islands exempted limited partnerships and foreign limited partnership registered in the Cayman Islands (collectively, “Partnership”).  Under this new requirement, all Partnerships shall notify TIA annually on whether or not it is carrying on a relevant activity by lodging an Economic Substance Notification upon renewal of the Partnership.

According to the International Tax Co-Operation (Economic Substance) (Prescribed Dates) (Amendment) Regulations, 2021, partnership formed on or after 1 July 2021 that carrying on any Relevant Activities will be obliged to satisfy the ES test under the ES Act from the date on which it commences the Relevant Activities.  Where the partnership was in existence prior to 1 July 2021 that carrying on any Relevant Activities will be required to satisfy the ES test from 1 January 2022

A copy of the Media Release issued by the Cayman Islands Ministry of Financial Services can be found via the below link:

https://www.mfs.ky/news/economic-substance-requirements-extended-to-partnerships/

If you have any questions regarding the above, please feel free to contact your Sertus Client Services Representative or contact us at info@sertus-inc.com.

Disclaimer Kindly note that this eNews is not exhaustive but just intended to provide a general reference.  This is not a legal advice and should not be regarded as a substitute for a specific legal advice that meet your circumstances.  Sertus does not accept any responsibility for any errors or omissions of the contents of this eNew

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