On 1 January 2019, Guernsey and Jersey introduced Economic Substance Rules to address the European Union (“EU”) concerns regarding the lack of economic substance requirements for companies doing business in and through these jurisdictions.
Companies that are tax resident in either Guernsey or Jersey must assess whether they are performing one of the impacted “relevant activities” included in the legislation and if so ensure they are able to demonstrate that they have sufficient substance in the jurisdiction as detailed by the rules. Broadly, a company that is in scope of the Economic Substance Rules is required to demonstrate the following:
Failure to meet the requirements of the rules can lead to financial penalties and ultimately strike off.
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