Tax expert advises on economic substance

Monica Dixie, pictured, from professional services provider Equiom, issued the advice as economic substance regimes bed in across the Crown Dependencies and other jurisdictions.

The new rules have been implemented to address European Union concerns over economic substance – essentially, demonstrating that firms based here have factors such as staffing levels that match their profits. Guernsey should also find out next month whether it has done enough to stay off an EU tax blacklist.

‘The documentation of this is key. There will be enquiries raised.

‘If the Guernsey government doesn’t think an entity has substance, they will write and tell you so,’ said Miss Dixie when she spoke at a seminar organised by Equiom at the Old Government House hotel.

‘You need to evidence that you have got substance as to why the people that have been working on it are sufficient for the activities of that entity.

‘If you don’t have the documentation to back that up, it’s going to be a difficult discussion to have.

‘Ultimately, at some point this is probably going to be reviewed by EU member states coming over and making sure it is enforced. Therefore Guernsey’s government will want sufficient information so that they can prove to EU member states that they are backing this up, that it’s not just legislation.’

The Equiom Solutions tax director added: ‘So if you don’t mind those criteria, what are the penalties for that? What are the sanctions? There are three main sanctions. Financial penalties, reporting and strike off.

‘The financial penalties are quite significant.’