Economic Substance Requirements Extended to Partnerships
Following Cabinet approval, the Cayman Islands Government has today published the International Tax Co-operation (Economic Substance) (Amendment of Schedule) Regulations, 2021; and the International Tax Co-operation (Economic Substance) (Prescribed Dates) (Amendment) Regulations, 2021. Both regulations will come into force on 30 June 2021.
These regulations bring general partnerships, limited partnerships, exempted limited partnerships and foreign limited partnerships into scope for economic substance requirements. As a result, all partnerships will be required to notify with the Tax Information Authority (TIA).
If the partnership engages in activity that is relevant for economic substance, it also will be required to file an economic substance return. Because investment funds, domestic companies, and local partnerships do not conduct relevant economic substance activities, they must notify with TIA but they are not required to file an economic substance return.
Minister for Financial Services and Commerce, the Hon. André Ebanks, said the regulations address the European Union’s tax good governance initiative, which has assessed tax regimes in countries including Cayman, Bermuda, Guernsey, Isle of Man and Jersey. Following the assessment, the EU requested these countries to extend economic substance requirements to partnerships.
“These changes ensure that Cayman remains strong and cooperative with international tax compliance”, Minister Ebanks said
Partnerships formed on or after 1 July 2021 are required to meet economic substance requirements from the date on which they commence relevant activity. Partnerships formed prior to 1 July 2021 must satisfy the economic substance test from 1 January 2022.