From 1 January 2019, various offshore jurisdictions have enacted economic substance (ES) requirements, although there are differences and local nuances in each of the respective jurisdictions involved. Generally speaking, the introduction of ES requirements in such traditional ‘no or nominal tax jurisdictions’ has raised concerns amongst individuals or corporations who have been using offshore companies, whether in the conduct of a trade or business, funds or investment management, family-owned businesses or trust structures using offshore companies for the holding of investments or real properties, multinational groups with an offshore listing vehicle and/or holding companies, and so forth. As such, the impact of the ES requirements on the use of entities in such no or nominal tax jurisdictions needs to be assessed, immediately and on an ongoing basis.

In this legal update we provide an outline of the broad global context and the general ES requirements for information and discussion, while specific details of the ES requirements that may apply to specific entities in specific offshore jurisdictions should be considered in consultation together with lawyers of the particular jurisdictions in question.

Specifically, we consider the types of entities and activities that may be impacted, the potential implications and options that may be available to comply or address the ES requirements, including whether companies may “relocate” or obtain tax residency in another jurisdiction such as Hong Kong, which we suggest careful analysis should be undertaken in review.

To view a Chinese version of this update: