End of June is the expiry date for a grace period for off-shore jurisdictions in implementing economic substance requirements.
The OECD document “Resumption of Application of Substantial Activities Factor to No or only Nominal Tax jurisdictions” has imposed a global standard that requires no or nominal tax jurisdictions to introduce economic substance requirements in order to avoid that their tax regimes being regarded as constituting harmful tax practices (in force since 1 January 2019 with the six-month grace period).
This document sets out the background, rationale, and detailed information around reinstating the substantial activities factor.
Scope of the document includes headquarters business, distribution and service center business, finance and leasing, fund management, banking, insurance, shipping, holding company business, and intellectual property (“IP”) holding business. Requirements do not refer to entities registered in such jurisdictions that are identified as tax residents in other jurisdictions.