The Government of Bermuda, on December 20, 2019, passed the economic substance amendment No. 2 act (2019) which entered into effect on December 24. The Minister of Finance also issued updated regulations which took effect on December 24, along with final guidance notes.
Following a review by the OECD and the European Code of Conduct Group (the 'CoCG') and several months of further consultations with both organizations, the Barbados government repealed the business companies (economic substance) Act, 2018-41, and replaced it with the recently enacted companies (economic substance) Act 2019-43 ('the Barbados Act') and the economic substance guidelines Version 1 ('the Barbados guidelines').
The United Arab Emirates (UAE) Ministry of Finance, on January 5, 2020, published Frequently Asked Questions (the ‘FAQs’) with respect to the UAE economic substance regulations. The FAQs clarify certain aspects of applying the economic substance regulations and the guidance on the regulations. Although the FAQs provide additional clarity on certain key areas, other areas may require further clarity.
Multinationals should determine whether the substance requirements apply to their business/entities and begin planning how they can demonstrate the required economic substance requirements in various jurisdictions.
In Bermuda, companies should be completing and submitting their economic substance declarations.
In Barbados, all resident companies (other than those being grandfathered) must comply with the economic substance rules from fiscal period commencing on or after January 1, 2020. As the Barbados government goes through this transition period various government agencies are expected to announce additional measures and guidelines in order to clarify the scope and application of the Act.
In the UAE, entities should assess whether and which of their activities fall within the scope of the economic substance regulations, and what steps to take in seeking to meet the economic substance test with respect to each relevant activity. This is both a qualitative and quantitative assessment that would involve consideration of operational, financial, tax/transfer pricing, legal and governance matters.