Economic substance requirements for corporate tax residency in Guernsey, Jersey and Isle of Man

Wed 16 Jan 2019

In response to concerns from the EU, Guernsey, Jersey and the Isle of Man have introduced legislation requiring businesses purporting to be tax resident on the island to demonstrate sufficient economic substance. These requirements take effect for accounting periods commencing on or after 1 January 2019.

Guidance on the key aspects of this new requirement (including links to the relevant jurisdiction’s legislation) can be found, for example on the Guernsey Government website here.

The legislation applies to companies with any income from:

• banking;
• insurance;
• shipping;
• fund management (but not collective investment vehicles);
• financing and leasing;
• headquarters, distribution and service centres;
• holding company (pure equity holding companies); or
• intellectual property (for which there are specific requirements for high risk scenarios).

The requirement is for such companies to demonstrate they are:

• Being directed and managed in the island;
• Conducing core income generating activities in the island; and
• Having adequate people, premises and expenditure in the island.

For a further discussion on the implications of these developments for your business, please get in touch with a member of the Mazars international tax team.