Understanding Economic Substance
The Crown Dependencies have enhanced their commitment to meet the Organisation of Economic Co-operation and Development’s (OECD) principles for improving global tax transparency by introducing an Economic Substance Test.
All companies’, and certain partnerships, which are tax resident in the Channel Islands and are undertaking a relevant activity are required to comply with the Economic Substance Requirements. The relevant activities are: banking business, distribution and service centre business, financing and leasing business, fund management business, headquartering business, pure equity holding body, insurance business, intellectual property business, shipping business.
PwC have developed an innovative Substance Tool that can be used to identify where the key risks of non-compliance under these rules lie. We can then aid you in developing and implementing any changes necessary to your policies and procedures to mitigate the risk of failing the test, and assist you with preparing necessary supporting documentation and in preparing your entities' tax returns.
We've developed an innovative tool that will enable you to identify whether the Crown Dependencies’ Economic Substance Test applies and aid your determination as to whether it has been met. The tool will produce a traffic light report so that you may identify any areas of concern and, if remedial action is necessary, provide you with the opportunity to implement any changes needed before the conclusion of the first financial year for which the Economic Substance Test applies.
We can provide you with tailored advice on the application of the Economic Substance Test to your business, whether the test is likely to be met, and what changes may be necessary to your policies and procedures to mitigate the risk of failing the test.
The introduction of this test will increase the level of detail required on your companies’ tax returns. We can use our innovative information technology solutions, which includes our Substance Tool, to prepare your tax returns efficiently and reduce your time spent on the increasing administrative burden that companies now face.
We can assist in resolving enquiries raised by the tax authorities. Particularly, should you use our Substance Tool, critical information will be collected and stored on your own servers that will aid with the preparation of defence packs to help support how you have satisfied the Economic Substance Test.
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