Economic substance returns due soon

Economic substance (ES) returns must be filed with the Department for International Tax Cooperation (DITC) no later than 31 December 2022 for applicable year ends, by all “Relevant Entities” carrying out “Relevant Activities” to avoid incurring penalties.

Since the deadline is a Saturday, the filing must be completed ahead of the deadline: by Friday, 30 December 2022. ES returns must be filed within 12 months of the relevant entity’s financial year.

In addition, all entities are required to file an annual economic substance notification (ESN) with the Cayman Islands General Registry, as a prerequisite to filing an annual return on or before 31 January each year. Failure to do this, might also result in penalties.

In addition to filing the ESN, Cayman Island entities must also file an annual return and pay registration fees to the Registrar in January. From February 1, any entity that has not satisfied these requirements will not be in good standing and will accrue penalties from March 31. It is advisable to confirm with the entities Registered Agent to ensure that these filings have been completed in advance of the regulatory deadlines.

Considerations when winding up funds

Fund managers considering winding up a Cayman vehicle should think carefully about the best legal solution to achieve their aims – and act quickly and with care for all regulatory considerations.

The year-end deadline has already passed for most entities. But we would like to remind entities of their requirement to satisfy all applicable regulatory requirements until such time as the entity is wound up or dissolved. If any such requirements have not been adhered to, the remediation of deficiencies together with any mandated deregistration filing particulars, must be completed prior to termination.

In many instances, termination cannot be completed until all outstanding regulatory requirements are satisfied. That means that many entities should reserve for applicable 2023 related fees and costs. In particular, terminating entities should consider any obligations in relation to anti-money laundering, beneficial ownership, the Common Reporting Standard, FATCA and economic substance.

DRLA registration due soon

Directors registered with the Cayman Islands Monetary Authority (CIMA) under the Directors Registration and Licensing Act (Revised) (DRLA) have until 15 January, 2023, to renew their licence and pay their annual licensing registration fee.

But beware: that date is a Sunday. Therefore, the real deadline will be Friday, 13, January, 2023. Failure to file by this date could result in penalties. Registration renewals can be effective by logging on to the CIMA connect portal ( Registered directors should take care to scrutinize their list of covered entities to rectify any errors or omissions.

Moreover, if you are no longer a director of a covered entity by December 31, 2022, certain steps should be taken to notify CIMA via the portal and pay the deregistration fee.

A CIMA-registered director who fails to pay the prescribed fee by 15 January will be subject to a surcharge of 1/12 of the fee for every month or part of a month after 15 January that the fee is not paid. Failure to pay the annual fee due also constitutes a minor breach under the Administrative Fines Regime and a potential monthly fine of $6,100 (capped at $24,390).

In addition, registration renewals for mutual and private funds registered with CIMA under the Mutual Funds and Private Funds Act (Revised) and entities registered under the Securities Investment Business Act (Revised) (SIBA) are also due by 15 January 2023.