The new economic substance rules for corporate groups: practical implications

The Crown Dependencies and certain Overseas Territories have introduced economic substance rules to avoid being classified as non-cooperative jurisdictions and blacklisted under EU Code of Conduct Group requirements. Traditionally these territories have provided tax neutral and commercially flexible companies for international investment structures. The new rules have implications for international groups, particularly for corporate tax residence and scoping the activities of group companies. The rules vary between territories, and we are yet to see their full impact (particularly as the guidance is still in draft), but there are common themes. Groups will need to review their existing arrangements and consider appropriate jurisdictions for new investments.