Are you sure?
×
Please confirm...
Book a Call
×
Please enter your contact details below and someone from Appleby will get in touch with you.
Name
Required
Email
Valid email required
Phone
Please enter either your email or a phone number, or both.
We will store and use this information for the purpose of contacting you to discuss economic substance matters.
We will not add you to our mailing lists without your approval.
Please
click here
to open our Privacy Policy in a new tab.
Economic Substance Entity Classification Questionnaire - Guernsey
Please answer the following questionnaire to initially classify an Entity for the purpose of Economic Substance.
Please note that the types of entities that are considered "relevant entities" for the purpose of the Economic Substance regime will soon be expanded to include certain types of partnerships that are not currently listed in the drop down below. This section of the questionnaire will be updated once these amendments have come into force. If your Entity Type is a partnership that is not listed below but you would like to prepare for the eventuality of it being in scope, please
click here
to contact any member of Appleby's regulatory team for bespoke advice.
Section 1 - Entity Type
Type of Entity
Registered company incorporated in Guernsey
Incorporated cell company incorporated in Guernsey (ICC)
Incorporated cell of an ICC
Protected cell company incorporated in Guernsey
A foreign company incorporated outside of Guernsey but tax resident in Guernsey
Other
The Entity is not within scope of the Economic Substance regime by virtue of its type. However, if the Entity is a protected cell of a protected cell company incorporated in Guernsey, the protected cell company to which the cell belongs will be responsible for the cell's compliance with the Economic Substance regime in Guernsey.
The Entity is of a type that may fall under the Economic Substance regime in Guernsey. It will be necessary to continue with the analysis.
The Entity is of a type that may fall under the Economic Substance regime in Guernsey. It will be necessary to continue with the analysis.
Is the Entity a collective investment vehicle?
Yes
No
Unsure
It is possible that a collective investment scheme will be exempt from the requirements of the Economic Substance regime. If the entity is, or might be, a collective investment scheme, it will be necessary for us to obtain full information on the structure and day-to-day business activities of the entity in order to provide any guidance.
Please
click here
to book a call with one of our legal experts.
The Entity is not exempted from the Economic Substance regime by virtue of being an Investment Fund. It is necessary to continue the analysis.
Section 2 - Tax Residence
Is the Entity (i) centrally managed or controlled outside Guernsey in a country or territory where the highest rate at which any company may be charged to tax on any part of its income is 10% or higher and (ii) resident for tax purposes in such country?
Yes
No
Entities that are tax resident outside Guernsey are not in scope of the Economic Substance regime. However, consideration should be given to how foreign tax residence can be evidenced and whether an Economic Substance regime exists in the jurisdiction of tax residence.
Section 3 - Relevant Activities
Does the Entity carry on deposit-taking business
,
for which the entity must be regulated by the Banking Supervision (Bailiwick of Guernsey) Law, 1994 (as amended)?
Yes
No
Unsure
Your responses indicate that the Entity is a resident company carrying on the relevant activity of banking business and therefore in scope of the Economic Substance regime. To meet the economic substance test, the Entity must:
1. Be directed and managed in Guernsey.
2. Having regard to the level of banking business activity carried on in Guernsey:
(a) have an adequate number of employees in relation to that activity who are physically present in Guernsey (whether or not employed by the resident company or by another entity and whether on temporary or long-term contracts);
(b) incur adequate expenditure in Guernsey; and
(c) have adequate physical assets in Guernsey.
3. Conduct core-income generating activity in respect of such banking business
Outsourcing of core income-generating activities within Guernsey is permitted and counts towards satisfying the substance requirements so long as the relevant entity is able to monitor and control the carrying out of that activity by that other person.
Directed and managed in Guernsey
To show that any relevant activity is "managed and directed" in Guernsey as set out above, it will be necessary to show that:
1. the Entity's board of directors meets in Guernsey at an adequate frequency having regard to the amount of decision-making required at that level;
2. at such board meetings, there is a quorum of directors physically present in Guernsey;
3. the minutes of such board meetings record the making of strategic decisions of the Entity at the meeting;
4. the directors of the Entity have the necessary knowledge and expertise to discharge the duties of the board; and
5. the minutes of all board meetings and the records of the resident company are kept in Guernsey.
What constitutes an adequate number of meetings in Guernsey will be dependent on the relevant activities of the Entity. However, it is generally expected that the majority of board meetings will be held in the Guernsey, with a quorum of directors physically present in order to meet the requirement. It is also expected that even for companies with a minimal level of activity there will be at least one meeting of its board of directors.
Adequacy
The term "Adequate" is not defined in the Economic Substance regime and therefore has its ordinary meaning of "enough or satisfactory for a particular purpose". What is adequate for each company will be dependent on the particular facts of the company and its business activity. A company will have to ensure it maintains and retains appropriate records to demonstrate the adequacy of the resources utilised and expenditure incurred. It is expected that an Entity fully licensed to carry on regulated banking business in Guernsey will generally be operating in Guernsey with adequate resources and expenditure, as a meaningful local footprint is a prerequisite to the issuance of this type of banking licence.
Core Income-Generating Activities
The core income-generating activities (CIGA) for an Entity conducting banking business are:
1. raising funds, managing risk including credit, currency and interest risk;
2. taking hedging positions;
3. providing loans, credit or other financial services to customers; and
4. managing capital and preparing reports and returns to the Guernsey Financial Services Commission or any body or entity with equivalent functions relating to the supervision or regulation of such business.
It is not necessary for an Entity to perform all of the CIGA listed above, but it must perform the CIGA that generate the income it has. The CIGA that generate the income must be performed in Guernsey and where this involves making relevant decisions, then the majority of those making the decisions must be present in Guernsey when the decision is made.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on distribution and service centre business
, meaning either or both of the following (a) purchasing from a foreign connected persons
(i) component parts or materials for goods; or (ii) goods ready for sale, and reselling such component parts, materials or goods outside of Guernsey; or (b) providing services to a foreign connected person in connection with the business?
Yes
No
Unsure
Your responses indicate that the Entity is a resident company carrying on the relevant activity of distribution and service centre business and therefore in scope of the Economic Substance regime. To meet the economic substance test, the Entity must:
1. Be directed and managed in Guernsey.
2. Having regard to the level of distribution and service centre business activity carried on in Guernsey:
(a) have an adequate number of employees in relation to that activity who are physically present in Guernsey (whether or not employed by the resident company or by another entity and whether on temporary or long-term contracts);
(b) incur adequate expenditure in Guernsey; and
(c) have adequate physical assets in Guernsey.
3. Conduct core-income generating activity in respect of such distribution and service centre business
Outsourcing of core income-generating activities within Guernsey is permitted and counts towards satisfying the substance requirements so long as the relevant entity is able to monitor and control the carrying out of that activity by that other person.
Directed and managed in Guernsey
To show that any relevant activity is "managed and directed" in Guernsey as set out above, it will be necessary to show that:
1. the Entity's board of directors meets in Guernsey at an adequate frequency having regard to the amount of decision-making required at that level;
2. at such board meetings, there is a quorum of directors physically present in Guernsey;
3. the minutes of such board meetings record the making of strategic decisions of the Entity at the meeting;
4. the directors of the Entity have the necessary knowledge and expertise to discharge the duties of the board; and
5. the minutes of all board meetings and the records of the resident company are kept in Guernsey.
What constitutes an adequate number of meetings in Guernsey will be dependent on the relevant activities of the Entity. However, it is generally expected that the majority of board meetings will be held in the Guernsey, with a quorum of directors physically present in order to meet the requirement. It is also expected that even for companies with a minimal level of activity there will be at least one meeting of its board of directors.
Adequacy
The term "Adequate" is not defined in the Economic Substance regime and therefore has its ordinary meaning of "enough or satisfactory for a particular purpose". What is adequate for each company will be dependent on the particular facts of the company and its business activity. A company will have to ensure it maintains and retains appropriate records to demonstrate the adequacy of the resources utilised and expenditure incurred.
Core Income-Generating Activities
The core income-generating activities (CIGA) for an Entity conducting distribution and service centre business are:
1. transporting and storing goods, components and materials;
2. managing stocks;
3. taking orders; and
4. providing consulting or other administrative services.
It is not necessary for an Entity to perform all of the CIGA listed above, but it must perform the CIGA that generate the income it has. The CIGA that generate the income must be performed in Guernsey and where this involves making relevant decisions, then the majority of those making the decisions must be present in Guernsey when the decision is made.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Other Relevant Activities
It is not uncommon for an Entity to undertake more than one relevant activity. For example, an entity conducting distribution and service centre business may also be conducting headquarters business
, financing and leasing business
or intellectual property business
. Where an Entity conducts more than one relevant activity, the applicable economic substance test will have to be met in respect of each one.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on fund management business?
Yes
No
Unsure
Your responses indicate that the Entity is a resident company carrying on the relevant activity of fund management business and therefore in scope of the Economic Substance regime. To meet the economic substance test, the Entity must:
1. Be directed and managed in Guernsey.
2. Having regard to the level of fund management business activity carried on in Guernsey:
(a) have an adequate number of employees in relation to that activity who are physically present in Guernsey (whether or not employed by the resident company or by another entity and whether on temporary or long-term contracts);
(b) incur adequate expenditure in Guernsey; and
(c) have adequate physical assets in Guernsey.
3. Conduct core-income generating activity in respect of such fund management business.
Outsourcing of core income-generating activities within Guernsey is permitted and counts towards satisfying the substance requirements so long as the relevant entity is able to monitor and control the carrying out of that activity by that other person.
Directed and managed in Guernsey
To show that any relevant activity is "managed and directed" in Guernsey as set out above, it will be necessary to show that:
1. the Entity's board of directors meets in Guernsey at an adequate frequency having regard to the amount of decision-making required at that level;
2. at such board meetings, there is a quorum of directors physically present in Guernsey;
3. the minutes of such board meetings record the making of strategic decisions of the Entity at the meeting;
4. the directors of the Entity have the necessary knowledge and expertise to discharge the duties of the board; and
5. the minutes of all board meetings and the records of the resident company are kept in Guernsey.
What constitutes an adequate number of meetings in Guernsey will be dependent on the relevant activities of the Entity. However, it is generally expected that the majority of board meetings will be held in the Guernsey, with a quorum of directors physically present in order to meet the requirement. It is also expected that even for companies with a minimal level of activity there will be at least one meeting of its board of directors.
Adequacy
The term "Adequate" is not defined in the Economic Substance regime and therefore has its ordinary meaning of "enough or satisfactory for a particular purpose". What is adequate for each company will be dependent on the particular facts of the company and its business activity. A company will have to ensure it maintains and retains appropriate records to demonstrate the adequacy of the resources utilised and expenditure incurred. It is expected that an Entity that is regulated under The Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended) in Guernsey will generally be operating in Guernsey with adequate resources and expenditure, as a meaningful local footprint is a prerequisite to regulation under that legislation.
Core Income-Generating Activities
The core income-generating activities (CIGA) for an Entity conducting fund management business are:
1. taking decisions on the holding and selling of investments,
2. calculating risk and reserves;
3. taking decisions on currency or interest fluctuations and hedging positions;
4. preparing reports and returns to investors and the Guernsey Financial Services Commission or any body or entity with equivalent functions relating to the supervision or regulation of such business.
It is not necessary for an Entity to perform all of the CIGA listed above, but it must perform the CIGA that generate the income it has. The CIGA that generate the income must be performed in Guernsey and where this involves making relevant decisions, then the majority of those making the decisions must be present in Guernsey when the decision is made. Note that the fund itself is not included.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on insurance business?
, meaning undertaking insurance business within the meaning of the Insurance Business (Bailiwick of Guernsey) Law, 2002 (as amended) carried on by a licensee within the meaning of that Law.
Yes
No
Unsure
Your responses indicate that the Entity is a resident company carrying on the relevant activity of insurance business and therefore in scope of the Economic Substance regime. To meet the economic substance test, the Entity must:
1. Be directed and managed in Guernsey.
2. Having regard to the level of insurance business activity carried on in Guernsey:
(a) have an adequate number of employees in relation to that activity who are physically present in Guernsey (whether or not employed by the resident company or by another entity and whether on temporary or long-term contracts);
(b) incur adequate expenditure in Guernsey; and
(c) have adequate physical assets in Guernsey.
3. Conduct core-income generating activity in respect of such insurance business.
Outsourcing of core income-generating activities within Guernsey is permitted and counts towards satisfying the substance requirements so long as the relevant entity is able to monitor and control the carrying out of that activity by that other person.
Directed and managed in Guernsey
To show that any relevant activity is "managed and directed" in Guernsey as set out above, it will be necessary to show that:
1. the Entity's board of directors meets in Guernsey at an adequate frequency having regard to the amount of decision-making required at that level;
2. at such board meetings, there is a quorum of directors physically present in Guernsey;
3. the minutes of such board meetings record the making of strategic decisions of the Entity at the meeting;
4. the directors of the Entity have the necessary knowledge and expertise to discharge the duties of the board; and
5. the minutes of all board meetings and the records of the resident company are kept in Guernsey.
What constitutes an adequate number of meetings in Guernsey will be dependent on the relevant activities of the Entity. However, it is generally expected that the majority of board meetings will be held in the Guernsey, with a quorum of directors physically present in order to meet the requirement. It is also expected that even for companies with a minimal level of activity there will be at least one meeting of its board of directors.
Adequacy
The term "Adequate" is not defined in the Economic Substance regime and therefore has its ordinary meaning of "enough or satisfactory for a particular purpose". What is adequate for each company will be dependent on the particular facts of the company and its business activity. A company will have to ensure it maintains and retains appropriate records to demonstrate the adequacy of the resources utilised and expenditure incurred.
Core Income-Generating Activities
The core income-generating activities (CIGA) for an Entity conducting insurance business are:
1. predicting and calculating risk; and
2. insuring or re-insuring against risk and providing insurance business services to clients.
It is not necessary for an Entity to perform all of the CIGA listed above, but it must perform the CIGA that generate the income it has. The CIGA that generate the income must be performed in Guernsey and where this involves making relevant decisions, then the majority of those making the decisions must be present in Guernsey when the decision is made.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on finance and leasing business
, being the business of providing credit facilities of any kind for consideration?
Yes
No
Unsure
Your responses indicate that the Entity is a resident company carrying on the relevant activity of financing and leasing business and therefore in scope of the Economic Substance regime. To meet the economic substance test, the Entity must:
1. Be directed and managed in Guernsey.
2. Having regard to the level of financing and leasing business activity carried on in Guernsey:
(a) have an adequate number of employees in relation to that activity who are physically present in Guernsey (whether or not employed by the resident company or by another entity and whether on temporary or long-term contracts);
(b) incur adequate expenditure in Guernsey; and
(c) have adequate physical assets in Guernsey.
3. Conduct core-income generating activity in respect of such financing and leasing business.
Outsourcing of core income-generating activities within Guernsey is permitted and counts towards satisfying the substance requirements so long as the relevant entity is able to monitor and control the carrying out of that activity by that other person.
Directed and managed in Guernsey
To show that any relevant activity is "managed and directed" in Guernsey as set out above, it will be necessary to show that:
1. the Entity's board of directors meets in Guernsey at an adequate frequency having regard to the amount of decision-making required at that level;
2. at such board meetings, there is a quorum of directors physically present in Guernsey;
3. the minutes of such board meetings record the making of strategic decisions of the Entity at the meeting;
4. the directors of the Entity have the necessary knowledge and expertise to discharge the duties of the board; and
5. the minutes of all board meetings and the records of the resident company are kept in Guernsey.
What constitutes an adequate number of meetings in Guernsey will be dependent on the relevant activities of the Entity. However, it is generally expected that the majority of board meetings will be held in the Guernsey, with a quorum of directors physically present in order to meet the requirement. It is also expected that even for companies with a minimal level of activity there will be at least one meeting of its board of directors.
Adequacy
The term "Adequate" is not defined in the Economic Substance regime and therefore has its ordinary meaning of "enough or satisfactory for a particular purpose". What is adequate for each company will be dependent on the particular facts of the company and its business activity. A company will have to ensure it maintains and retains appropriate records to demonstrate the adequacy of the resources utilised and expenditure incurred.
Core Income-Generating Activities
The core income-generating activities (CIGA) for an Entity conducting financing and leasing business are:
1. agreeing funding terms;
2. identifying and acquiring assets to be leased (in the case of leasing);
3. setting the terms and duration of any financing or leasing;
4. monitoring and revising any agreements; and
5. managing any risks.
It is not necessary for an Entity to perform all of the CIGA listed above, but it must perform the CIGA that generate the income it has. The CIGA that generate the income must be performed in Guernsey and where this involves making relevant decisions, then the majority of those making the decisions must be present in Guernsey when the decision is made.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Other Relevant Activities
It is not uncommon for an Entity to undertake more than one relevant activity. For example, an entity conducting financing and leasing business may also be conducting headquarters business
, distribution and service centre business
or intellectual property business
. Where an Entity conducts more than one relevant activity, the applicable economic substance test will have to be met in respect of each one.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on shipping business
, being any of the following activities involving the operation of a ship (which excludes certain vessels) anywhere in the world other than solely between Guernsey and Jersey or within the territorial waters of Guernsey (a) the business of transporting, by sea, persons, animals, goods or mail; (b) the renting or chartering of ships for the purpose described in paragraph (a); (c) the sale of travel tickets or equivalent and ancillary services connected with the operation of a ship; (d) the use, maintenance or rental of containers, including trailers and other vehicles or equipment for the transport of containers, used for the transport of anything by sea; or (e) the management of the crew of a ship?
Yes
No
Unsure
Your responses indicate that the Entity is a resident company carrying on the relevant activity of shipping business and therefore in scope of the Economic Substance regime. To meet the economic substance test, the Entity must:
1. Be directed and managed in Guernsey.
2. Having regard to the level of shipping business activity carried on in Guernsey:
(a) have an adequate number of employees in relation to that activity who are physically present in Guernsey (whether or not employed by the resident company or by another entity and whether on temporary or long-term contracts);
(b) incur adequate expenditure in Guernsey; and
(c) have adequate physical assets in Guernsey.
3. Conduct core-income generating activity in respect of such shipping business.
Outsourcing of core income-generating activities within Guernsey is permitted and counts towards satisfying the substance requirements so long as the relevant entity is able to monitor and control the carrying out of that activity by that other person.
Directed and managed in Guernsey
To show that any relevant activity is "managed and directed" in Guernsey as set out above, it will be necessary to show that:
1. the Entity's board of directors meets in Guernsey at an adequate frequency having regard to the amount of decision-making required at that level;
2. at such board meetings, there is a quorum of directors physically present in Guernsey;
3. the minutes of such board meetings record the making of strategic decisions of the Entity at the meeting;
4. the directors of the Entity have the necessary knowledge and expertise to discharge the duties of the board; and
5. the minutes of all board meetings and the records of the resident company are kept in Guernsey.
What constitutes an adequate number of meetings in Guernsey will be dependent on the relevant activities of the Entity. However, it is generally expected that the majority of board meetings will be held in the Guernsey, with a quorum of directors physically present in order to meet the requirement. It is also expected that even for companies with a minimal level of activity there will be at least one meeting of its board of directors.
Adequacy
The term "Adequate" is not defined in the Economic Substance regime and therefore has its ordinary meaning of "enough or satisfactory for a particular purpose". What is adequate for each company will be dependent on the particular facts of the company and its business activity. A company will have to ensure it maintains and retains appropriate records to demonstrate the adequacy of the resources utilised and expenditure incurred.
Core Income-Generating Activities
The core income-generating activities (CIGA) for an Entity conducting shipping business are:
1. managing crew(including hiring, paying and overseeing crew members);
2. overhauling and maintaining ships;
3. overseeing and tracking deliveries; and
4. determining what goods to order and when to deliver them, organising and overseeing voyages.
It is not necessary for an Entity to perform all of the CIGA listed above, but it must perform the CIGA that generate the income it has. The CIGA that generate the income must be performed in Guernsey and where this involves making relevant decisions, then the majority of those making the decisions must be present in Guernsey when the decision is made.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on intellectual property business
, being the business of holding any intellectual property assets
, from which identifiable income accrues to the business (such income being separately identifiable from any income generated from any tangible asset in which the right subsists)?
Yes
No
Unsure
Your responses indicate that the Entity is a resident company with income from intellectual property assets and therefore in scope of the Economic Substance regime. To meet the economic substance test, the Entity must:
1. Be directed and managed in Guernsey.
2. Having regard to the level of intellectual property holding activity carried on in Guernsey:
(a) have an adequate number of employees in relation to that activity who are physically present in Guernsey (whether or not employed by the resident company or by another entity and whether on temporary or long-term contracts);
(b) incur adequate expenditure in Guernsey; and
(c) have adequate physical assets in Guernsey.
3. Conduct core-income generating activity in respect of such intellectual property assets.
Outsourcing of core income-generating activities within Guernsey is permitted and counts towards satisfying the substance requirements so long as the relevant entity is able to monitor and control the carrying out of that activity by that other person.
Directed and managed in Guernsey
To show that any relevant activity is "managed and directed" in Guernsey as set out above, it will be necessary to show that:
1. the Entity's board of directors meets in Guernsey at an adequate frequency having regard to the amount of decision-making required at that level;
2. at such board meetings, there is a quorum of directors physically present in Guernsey;
3. the minutes of such board meetings record the making of strategic decisions of the Entity at the meeting;
4. the directors of the Entity have the necessary knowledge and expertise to discharge the duties of the board; and
5. the minutes of all board meetings and the records of the resident company are kept in Guernsey.
What constitutes an adequate number of meetings in Guernsey will be dependent on the relevant activities of the Entity. However, it is generally expected that the majority of board meetings will be held in the Guernsey, with a quorum of directors physically present in order to meet the requirement. It is also expected that even for companies with a minimal level of activity there will be at least one meeting of its board of directors.
Adequacy
The term "Adequate" is not defined in the Economic Substance regime and therefore has its ordinary meaning of "enough or satisfactory for a particular purpose". What is adequate for each company will be dependent on the particular facts of the company and its business activity. A company will have to ensure it maintains and retains appropriate records to demonstrate the adequacy of the resources utilised and expenditure incurred.
Core Income-Generating Activities
The core income-generating activities (CIGA) for an Entity conducting intellectual property holding are:
1. taking strategic decisions and managing (as well as bearing) the principal risks related to development and subsequent exploitation of the intangible asset generating income;
2. taking the strategic decisions and managing (as well as bearing) the principal risks relating to acquisition by third parties and subsequent exploitation and protection of the intangible asset;
3. carrying on the underlying trading activities through which the intangible assets are exploited leading to the generation of revenue from third parties; and
4. research and development, branding or distribution.
It is not necessary for an Entity to perform all of the CIGA listed above, but it must perform the CIGA that generate the income it has. The CIGA that generate the income must be performed in Guernsey and where this involves making relevant decisions, then the majority of those making the decisions must be present in Guernsey when the decision is made.
High Risk IP companies
Certain Entities carrying on intellectual property holding business are classified as "high risk" and subject to more stringent treatment under the Economic Substance regime. In particular:
1. The burden of proof of compliance is reversed and the Entity will not comply with the requirements of the Economic Substance regime unless it provides sufficient information to satisfy the Director of the Revenue Service that the test is met.
2. Whether or not the requirements of the Economic Substance regime are met, certain information in respect of the Entity will be provided to the competent tax authorities in the jurisdiction where any holding body, ultimate holding body or ultimate beneficial owner resides (as well as the Entity's jurisdiction of incorporation if not incorporated in Guernsey).
An Entity will be considered a "high risk" IP company if:
1. it does not carry out research and development, branding or distribution as part of its Guernsey core-income generating activities
; or
2. it:
(a) did not create the intellectual property in an intellectual property asset which it holds for the purposes of its business,
(b) acquired the intellectual property asset -
(i) from a connected person, or
(ii) in consideration for funding research and development by another person situated in a country or territory other than Guernsey; and
(c) licences the intellectual property asset to one or more connected persons or otherwise generates income from the asset in consequence of activities (such as facilitating sale agreements) performed by foreign connected persons.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Other Relevant Activities
It is not uncommon for an Entity to undertake more than one relevant activity. For example, an entity conducting intellectual property business may also be conducting distribution and service centre business
, financing and leasing business
or headquarters business
. Where an Entity conducts more than one relevant activity, the applicable economic substance test will have to be met in respect of each one.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on headquarters business
, being the business of providing any of the following services to one or more of its foreign connected persons
: (a) the provision of senior management; (b) the assumption or control of material risk for activities carried out by or assets owned by, any of those connected persons; or (c) the provision of substantive advice in connection with the assumption or control of risk referred to in paragraph (b)?
Yes
No
Unsure
Your responses indicate that the Entity is a resident company carrying on the relevant activity of headquarters business and therefore in scope of the Economic Substance regime. To meet the economic substance test, the Entity must:
1. Be directed and managed in Guernsey.
2. Having regard to the level of headquarters business activity carried on in Guernsey:
(a) have an adequate number of employees in relation to that activity who are physically present in Guernsey (whether or not employed by the resident company or by another entity and whether on temporary or long-term contracts);
(b) incur adequate expenditure in Guernsey; and
(c) have adequate physical assets in Guernsey.
3. Conduct core-income generating activity in respect of such headquarters business.
Outsourcing of core income-generating activities within Guernsey is permitted and counts towards satisfying the substance requirements so long as the relevant entity is able to monitor and control the carrying out of that activity by that other person.
Directed and managed in Guernsey
To show that any relevant activity is "managed and directed" in Guernsey as set out above, it will be necessary to show that:
1. the Entity's board of directors meets in Guernsey at an adequate frequency having regard to the amount of decision-making required at that level;
2. at such board meetings, there is a quorum of directors physically present in Guernsey;
3. the minutes of such board meetings record the making of strategic decisions of the Entity at the meeting;
4. the directors of the Entity have the necessary knowledge and expertise to discharge the duties of the board; and
5. the minutes of all board meetings and the records of the resident company are kept in Guernsey.
What constitutes an adequate number of meetings in Guernsey will be dependent on the relevant activities of the Entity. However, it is generally expected that the majority of board meetings will be held in the Guernsey, with a quorum of directors physically present in order to meet the requirement. It is also expected that even for companies with a minimal level of activity there will be at least one meeting of its board of directors.
Adequacy
The term "Adequate" is not defined in the Economic Substance regime and therefore has its ordinary meaning of "enough or satisfactory for a particular purpose". What is adequate for each company will be dependent on the particular facts of the company and its business activity. A company will have to ensure it maintains and retains appropriate records to demonstrate the adequacy of the resources utilised and expenditure incurred.
Core Income-Generating Activities
The core income-generating activities (CIGA) for an Entity conducting headquarters business are:
1. taking relevant management decisions,
2. incurring expenditures on behalf of group entities; and
3. co-ordinating group activities.
It is not necessary for an Entity to perform all of the CIGA listed above, but it must perform the CIGA that generate the income it has. The CIGA that generate the income must be performed in Guernsey and where this involves making relevant decisions, then the majority of those making the decisions must be present in Guernsey when the decision is made.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Other Relevant Activities
It is not uncommon for an Entity to undertake more than one relevant activity. For example, an entity conducting headquarters business may also be conducting distribution and service centre business
, financing and leasing business
or intellectual property business
. Where an Entity conducts more than one relevant activity, the applicable economic substance test will have to be met in respect of each one.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Does the Entity carry on pure equity holding company business
, defined as the business of being a holding body
that has as its primary function the acquisition and holding of shares or equitable interests in other companies and does not carry on any commercial activity?
Yes
No
Unsure
Your responses indicate that the Entity is a resident company which is a pure equity holding company and therefore in scope of the Economic Substance regime. To meet the economic substance test, the Entity must:
1. Comply with all obligations applicable to it under its governing law; and.
2. ensure that there is:
(a) an adequate level of persons in Guernsey proportionate to the level of activity carried on in Guernsey; and
(b) an adequate physical presence in Guernsey,
in each case for holding and managing the holding company business.
Adequacy
The term "Adequate" is not defined in the Economic Substance regime and therefore has its ordinary meaning of "enough or satisfactory for a particular purpose". What is adequate for each company will be dependent on the particular facts of the company and its business activity. A company will have to ensure it maintains and retains appropriate records to demonstrate the adequacy of the resources utilised and expenditure incurred. Given the limited activities of most small scale passive holding companies, we do not expect much will be required to evidence adequate persons or physical presence. If the Entity has a large number of subsidiaries or is particularly active the required persons and physical presence will increase.
Interpretation of Terms
The information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Although the Entity is of a type that could be within the scope of the legislation, your responses indicate that the business does not carry on a relevant activity and is not an IP company or a holding company business and on that basis compliance with the Economic Substance regime is not required. Please note, however, that this conclusion depends on your responses being accurate in all respects, which we have not been able to verify. We caution that the information provided above includes certain terms that are defined in the legislation or expanded upon in supplemental materials, and others that are legal terms of art that may not directly reflect their ordinary meaning. The correct interpretation of these terms is essential to ensuring that the analysis is accurate. For that reason, legal advice should be taken on the legislation and its application to your particular business.
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
You have selected "Unsure" for one or more answers in Section 3.
In order to determine whether the Entity carries on the relevant activity or is an IP company or a holding company business, it will be necessary for us to obtain full information on day-to-day business activities of the entity and consider the Entity's core income-generating activities (where relevant).
Actions to Take
We recommend that you
click here
to book a call with one of our legal experts.
You should also be aware that our affiliated group of companies, Appleby Global Services (
AGS
) in Bermuda, Cayman, Jersey and Isle of Man, stands ready to assist with economic substance compliance matters. AGS offers registered office, director and fiduciary services, as well as assistance in meeting statutory requirements in respect of record keeping, reporting and filing. We are pleased to offer our clients both legal advice and corporate solutions to meet your needs in a single cost-effective and joined-up service.
Collective Investment Vehicle
×
A
"collective investment vehicle"
is not defined for the purpose of the Economic Substance Regime in Guernsey but is likely to include any scheme or arrangement for the collective or pooled investment of money which is either open-ended or operates on the principle of risk spreading.
Deposit-Taking Business
×
An entity carries on deposit-taking business for the purpose of the Banking Supervision (Bailiwick of Guernsey) Law, 1994 (as amended) if it (a) in the course of the business money received by way of deposit is lent to others, or (b) any other activity of the business is financed to any material extent out of the capital of or the interest on money received by way of deposit.
Foreign Connected Person
×
A "foreign connected person" in respect of an Entity includes (i) any person who has control of the Entity or if that person and persons connected with that person together have control of the Entity, each of them and (ii) any parent; or (iii) any sister company, provided, in each case, they are not resident or regarded as resident in Guernsey.
Finance and Leasing Activity
×
A finance and leasing activity is defined as: Providing credit facilities of any kind for consideration to any person; consideration may include interest; includes hire purchase/leasing/conditional sale or credit sale; if advance or credit repayment right is assigned on, the assignee is deemed to be providing the credit facility; and exists where there is no crossover with activities under banking, fund management or insurance business regulations (So, by way of example, an inter-group company loan where interest is charged falls within the definition).
Fund Management Business
×
The definition of "fund management business" is widely defined and includes all companies that are registered under the Protection of Investors (Bailiwick of Guernsey) Law, 1987("POI Law") to carry on management within the meaning of the POI Law but also those companies that would be required to register if it was not for a specific exemption within the POI Law, such as where the company provides fund management services to a scheme that is not offered to the public.
Where there is no investment manager appointed, in or outside of Guernsey, the company acting as a trustee to the scheme or a corporate member of a partnership will be the entity carrying on fund management business.
Long-Term Business and General Business
×
"Long-term business" means any business specified in Schedule 1 to the Insurance Business (Bailiwick of Guernsey) Law 2002 (
click here
to view the Schedule).
Intellectual Property Assets
×
"Intellectual property assets" means any intellectual property right in intangible assets, including but not limited to copyright, patents, trademarks, brand, and technical know-how.
Intellectual Property
×
It should be noted that amendments have been announced to remove this provision. Please contact us for the latest information.
Holding Body
×
The Entity will be a "holding body" in respect of any other company if it (i) holds a majority of the voting rights in that company; (ii) is a shareholder of that company and has the right to appoint or remove a majority of its board of directors; or (iii) is a shareholder of that company and controls alone, pursuant to an agreement with other shareholders or members, a majority of the voting rights in the first body.
Distribution and Service Centre Business
×
Distribution and service centre business means either or both of the following (a) purchasing from a foreign connected persons
1
(i) component parts or materials for goods; or (ii) goods ready for sale, and reselling such component parts, materials or goods outside of Guernsey; or (b) providing services to a foreign connected person in connection with the business.
1
A "foreign connected person" in respect of an Entity includes (i) any person who has control of the Entity or if that person and persons connected with that person together have control of the Entity, each of them and (ii) any parent; or (iii) any sister company, provided, in each case, they are not resident or regarded as resident in Guernsey.
Headquarters Business
×
Headquarters business is the business of providing any of the following services to one or more of its foreign connected persons
1
: (a) the provision of senior management; (b) the assumption or control of material risk for activities carried out by or assets owned by, any of those connected persons; or (c) the provision of substantive advice in connection with the assumption or control of risk referred to in paragraph (b).
1
A "foreign connected person" in respect of an Entity includes (i) any person who has control of the Entity or if that person and persons connected with that person together have control of the Entity, each of them and (ii) any parent; or (iii) any sister company, provided, in each case, they are not resident or regarded as resident in Guernsey.
Financing and Leasing Business
×
Finance and leasing business is the business of providing credit facilities of any kind for consideration
1
.
1
A finance and leasing activity is defined as: Providing credit facilities of any kind for consideration to any person; consideration may include interest; includes hire purchase/leasing/conditional sale or credit sale; if advance or credit repayment right is assigned on, the assignee is deemed to be providing the credit facility; and exists where there is no crossover with activities under banking, fund management or insurance business regulations (So, by way of example, an inter-group company loan where interest is charged falls within the definition).
Intellectual Property Business
×
Intellectual property business is the business of holding any intellectual property assets
1
, from which identifiable income accrues to the business (such income being separately identifiable from any income generated from any tangible asset in which the right subsists).
1
"Intellectual property assets" means any intellectual property right in intangible assets, including but not limited to copyright, patents, trademarks, brand, and technical know-how.