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1 January 2019, The British Virgin Islands and the Cayman Islands, along with other major offshore jurisdictions, introduced economic substance laws. 
The BVI Economic Substance (Companies and Limited Partnership) Act, 2018 and the Cayman Islands International Tax Co-Operation (Economic Substance) Law, 2018 both became effective on 1 January 2019. These economic substance rules were a response to the European Union and the OECD efforts to enhance tax transparency.

Generally, a relevant entity that engages in one more of the Relevant Activities (as defined in the respective legislations) would be required to comply with economic substance rules including maintaining an appropriate level of economic substance in the jurisdiction.

Relevant Activities include:

  • Holding Company
  • Banking Business
  • Distribution and service center
  • Finance and Leasing
  • Fund management
  • Headquarter business
  • Insurance business
  • Intellectual Property holding
  • Shipping business