Overview by Bell Rock Group Financial Services Limited on the Cayman Islands International Tax Co-operation (Economic Substance) Law, 2018 and how it may affect Cayman Islands companies and entities.

1. Cayman Economic Substance
Bell Rock Group - Entity Management Services
January 2019
www.bellrockgroup.com

2. The Economic Substance Law – Cayman Islands
A new economic substance bill was passed by the Cayman Islands legislature on 17 December
2018.
This new legislation, entitled The International Tax Co-operation (Economic Substance) Law,
2018 (the Economic Substance Law), will only affect Relevant Entities (as defined below) in the
Listed Countries who, effective 1 January 2019, will be required to demonstrate ‘adequate
economic substance’ in the Cayman Islands.
Step 1: Classification of Relevant Entity
The Economic Substance Law will only apply to Relevant Entities. Relevant Entities will generally
include most Cayman LLC’s, Cayman exempted companies and registered foreign companies.
However, it does not apply to:
a) investment funds;
b) entities through which investment funds invest or operate, whether directly or
indirectly; or
c) registered foreign companies that are centrally managed and controlled outside of
Cayman and are tax compliant in other relevant jurisdictions.
A Relevant Entity is defined as any of the below, except for (a), (b) and (c) above:
• a company, other than a domestic company, that is:
o incorporated under the Companies Law or
o a limited liability company registered under the Limited Liability Companies
Law, unless its business is centrally managed and controlled outside of Cayman
and it is tax resident outside of the Islands
• a limited liability partnership that is registered under the Limited Liability Partnership
Law, 2017, unless its business is centrally managed and controlled outside of Cayman
and it is tax resident outside of the Islands
• a company that is incorporated outside of the Islands, registered under the Companies
Law and centrally managed and controlled in Cayman (unless it is tax resident outside
the Cayman Islands).
Step 2: Relevant Activities conducted by Relevant Entities
If an entity is deemed as a Relevant Entity as per Step 1 above, this Relevant Entity will be
required to file a notice with the designated authority stating whether or not it has carried out
any of the following activities (the Relevant Activities) in the previous financial year:
• Banking business
• Distribution and service centre business
• Finance and leasing business
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3. • Fund management business
• Headquarters business
• Holding company business
• Insurance business
• Intellectual property holding business
• Shipping business
Filing of Relevant Activities
All Relevant Entities will be required to file notice, whether conducting Relevant Activities or
not. Those conducting Relevant Activities will need to provide a basic return detailing
particulars including, but not limited to, income, expenses, assets, management, employees
and physical presence. The economic substance of the Relevant Entity will be assessed by
applicable authorities with the assistance of this notice. Relevant Entities who fall short of the
Substance Test requirements will be given some direction to improve. Should a Relevant Entity
fail to meet the requirements, a fine of up to USD10,000 may be issued. Should the Relevant
Entity continue to fail to meet the requirements in following years, it may be subject to
increased fines and a potential striking-off.
Step 3: The Economic Substance Test
A Relevant Entity conducting any of the above Relevant Activities will be required to satisfy a
three-tiered economic substance test (the Substance Test). To pass the Substance Test, a
Relevant Entity must:
• conduct Cayman Islands core income generating activities in relation to that Relevant
Activity
• be directed and managed in an appropriate manner in or from within the Cayman
Islands in relation to that Relevant Activity
• taking into account the level of income generated form that Relevant Activity carried out
in or from within the Cayman Islands:
o have an adequate number of full-time employees / personnel with appropriate
qualifications in the Cayman Islands
o have adequate physical assets or physical presence in the Cayman Islands
(including maintaining a place of business)
o have adequate operating expenditure incurred in or from within the Cayman
Islands.
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4. What are Core Income Generating Activities?
Core income generating activities are defined as activities that are being carried out in Cayman and are of
central importance to a Relevant Entity in terms of generating income. Depending on the Relevant Activity,
core income generating activities will differ.
Outsourcing of Core Income Generating Activities
The Substance Test above is satisfied in relation to a Relevant Activity if the Relevant Entity outsources its
Cayman Islands core income generating activities, in relation to that Relevant Activity, to a third-party
within the jurisdiction. The Relevant Entity must, however, be able to prove that it is able to monitor and
control the Cayman Islands core income generating activities being carried out.
Additional Guidelines
Additional guidelines will be provided at a later date which are anticipated to assist all Relevant Entities
with the requirements of the Substance Test.
Achieving Compliance – Bell Rock Group
Bell Rock Group would advise that all entities undergo a review as per the steps laid out herein in order to
decipher whether they are deemed as Relevant Entities, and if so, whether such Relevant Entities conduct
Relevant Activities. From there, Relevant Entities are advised to take the necessary steps to ensure
compliance. The Relevant Entity may satisfy the economic substance test if its CIGAs are conducted by
another person in the Cayman Islands, provided that the Relevant Entity is able to monitor and control the
carrying out of the CIGAs by such other person. Service provider arrangements may therefore be used for
purposes of maintaining a sufficient physical presence in the Cayman Islands.
Bell Rock Group provides solutions to meet the requirements:
• Physical Office Space with dedicated work-stations, high-speed-internet, registered address, mailing address, mail
forwarding, website design, telephone number, fax number and receptionist,
• Dedicated Management - Professional, Experienced & Qualified Directors. Our professionals each have over 18
years of senior level industry experience, having worked for leading financial institutions.
• Board Support & Company Secretary
• Accounting Services
• AML Compliance Services - appointment of MLRO, Deputy MLRO & AML Compliance Officer
• Attendance to annual filings and updates on economic substance requirements
• Immigration - We offer a full service for hiring non-Caymanian employees, including placing recruitment ads,
shortlisting and interviewing candidates, collecting all necessary documentation and submitting work permit
applications. In addition, we can assist with applications for Permission to Reside and Residential Certificates.
• Payroll services
• Premises and residential accommodation - If you are moving with a spouse, children and/or pets you will need
advice on customs duties, schools, transport, hiring home help and much more. We are happy to provide you with
local information and contacts that will help make the move as easy and efficient as possible
• Running your office - Once you are set up, Bell Rock can provide ongoing corporate services and management
services as a cost effective alternative to employing staff for these purposes in the Cayman Islands.
www.bellrockgroup.com

5. Bell Rock Group
10 Market Street
758 Camana Bay
Grand Cayman, KY1-9006
Cayman Islands
T: 1 345 325 3884
E: info@bellrockgroup.com
www.bellrockgroup.com
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