An important deadline is approaching for many entities carrying on a relevant activity under the International Tax Co-operation (Economic Substance) Act relating to the Cayman Islands economic substance regime.
The regime’s reporting deadline is 12 months after the end of an entity’s financial year. That means that all entities with a 31 December financial year end must file their next Economic Substance Return by 31 December 2021.
There are risks associated with missing this deadline. Geoff Ruddick, Partner, Paradigm Governance Partners, notes that there are sanctions for filing the return late.
He explains: “There is a penalty for filing the return late while further penalties can be imposed for each day it remains outstanding. It is also important that the returns are completely accurate. There are also sanctions for supplying false or misleading information. Our message is simply to get these done on time and accurately.”
All of the relevant forms, including the Economic Substance Return, are available at the Department for International Tax Cooperation (DITC) website. Returns will be reviewed by the Tax Information Authority, which will judge whether the ES test has been satisfied. The DITC may contact the filing entity to request additional information.
It is also important that a relevant entity that conducted a relevant activity prior to 1 January 2021 (for the purposes of the ES Act) has made the Authority aware of the identity of its Responsible Person. This could be a director, manager or equivalent fiduciary, who will be the primary contact point for the Authority.
The Responsible Person will have access to the DITC portal to file ES Returns.
There are sanctions for filing these late. A penalty of more than $6,000 can be imposed while a further $610 can be imposed as a fine for each day that an ES Return continues to remain outstanding. There are also sanctions for knowingly or wilfully supplying false or misleading information.
With CIMA now able and willing to issue fines for missing deadlines and regulatory filings, here at Paradigm Governance Partners we are keen to help. We have developed a series of handy guides and other advice around upcoming deadlines to help our clients and partners stay on top of things.