Potential extension of Economic Substance rules to Channel Island partnerships
20 November, 2020
The Code of Conduct Group (Business Taxation) (COCG) recommended that jurisdictions that introduced Economic Substance (ES) legislation should extend the requirements to partnerships, in its report issued 20 November 2020 to the Council of the European Union.
Referencing its review of the EU list of non-cooperative jurisdictions for tax purposes for October 2021, the COCG recommended that legal frameworks should be updated such that:
- from 1 July 2021, new partnerships would be within scope; and
- partnerships in existence before 1 July 2021 would be in scope from 1 January 2022.
At the time of writing, political commitments have yet to be made by the governments of either Jersey or Guernsey.
It also remains uncertain how the ES test might be applied to partnerships - which are transparent for tax purposes - and whether specific exemptions would apply. We would expect, however, that the fund exemption provided to companies under current ES laws would be extended to partnerships.
There is no need for action at the current time, but affected businesses will want to monitor developments closely over the coming months.
If you have any questions in relation to the above, please do not hesitate to get in touch with your usual PwC contact or any of the individuals listed below.
Contact us
