Updates on Economic Substance and Fund Annual Return (“FAR”) filings for Private Funds

Economic Substance requirements extend to Partnerships

On 29 June 2021 the Cayman Islands Government published the International Tax Co-operation (Economic Substance) (Amendment of Schedule) Regulations, 2021 and the International Tax Co-operation (Economic Substance) (Prescribed Dates) (Amendment) Regulations, 2021.  These amendments bring general partnerships, limited partnerships, exempted limited partnerships and foreign limited partnerships within the scope of the economic substance requirements with effect from 30 June 2021.

Partnerships, that satisfy the requirements of being relevant entities, are now required to notify the Tax Information Authority (TIA) of their operations in the Islands annually whether they are conducting relevant activities.  Partnerships that are conducting relevant activities must satisfy the ES Test and must file an annual return via the DITC Portal.

Partnerships that are not relevant entities (such as local partnerships licensed by the Trade and Business Licensing Act) and partnerships that are tax resident outside the Islands must notify the TIA of their operations but will be treated as out of scope for compliance with the ES requirements.  Accordingly, those partnerships will be exempted from having to satisfy the ES Test and will not have to file an annual return.

New economic substance guidance is available on the DITC’s website which can be found by clicking on this link

Economic Substance Notifications

Economic Substance Notifications (ESN) for the financial year commenced 2021 can now be submitted.  Entities wishing to submit their ESNs in advance of dissolution, liquidation and/or de-registration during 2021 may want to take advantage of this submission window.

Entities are encouraged to ensure they have been correctly classified on the ESN submitted via CAP and to ensure they are complying with all applicable requirements.

Further, for investments funds that are claiming the exemption from compliance with the ES obligations, those entities should provide CIMA/GIIN or FI numbers for themselves or for the investment fund that directly or indirectly invests/operates through the entity, if applicable.

Fund Annual Return (FAR) filings for Private Funds

In our 30 March 2021 newsletter we included updates on the Private Fund FAR Form (FAR Form).  To refresh, reporting requirements to be submitted via the FAR Form, when audited financial statements for 2020 are submitted to the Authority, are detailed in the Private Funds (Annual Returns) Regulations, 2021.

We await the publication of the FAR Form by the Cayman Islands Monetary Authority.  The deadline for filing audited accounts for 2020 and the FAR Form has been extended to 30 September 2021.  In the interim, Private Funds will not be subject to any penalties for non-compliance with section 13 of the Private Funds Act (2021 Revision).

AMS Law will issue a further update on the release of the FAR Form.

Please contact Stefanie Suckoo at stefanie.suckoo@amslaw.com or (345) 324-6382 to discuss how this may affect your business and how AMS Financial Group can assist you with compliance.