On 9 January, Anguilla’s House of Assembly approved a suite of legislation on Economic Substance, part of a package of measures to enable Anguilla to meet its international commitments on tax transparency.
Specifically, the Economic Substance rules will require entities registered in Anguilla (which are engaged in “relevant activities” and not exempt) to demonstrate that they are conducting ‘real’ economic activity and have substantial presence in the jurisdiction.
To achieve this, the following Acts, and associated regulations, have been amended:
• The Companies Act;
• The International Business Companies Act;
• The Limited Liabilities Company Act; and
• The Limited Partnerships Act.
Once enacted, all entities incorporated under the above legislation will be required to complete an annual information return setting out the nature of their business. If the activity they conduct is deemed ‘relevant’ (examples include banking, shipping, fund management, amongst others) they must provide further information. This information may include, for instance, the location of their premises, the number of employees and annual operating expenditure as well as a description of the core-income generating activities conducted in Anguilla in relation to the relevant activity. To note, an entity is exempt if it is centrally managed and controlled or if it conducts its relevant activity in a jurisdiction where the rate at which the company may be charged tax is 10% or higher, and the company is resident for tax purposes in that jurisdiction.
The requirement for Anguilla and other jurisdictions- including all UK Overseas Territories with a financial centre and Crown Dependencies – to introduce these provisions stems in large part from an increased global focus on countries’ taxation regimes and demands for territories to comply with international tax good governance standards. One of the most vocal advocates is the European Union who in 2017 drew up a ‘Blacklist’ of countries deemed to have harmful tax regimes, and entered into discussions with these countries on how their systems could be reformed, for example through additional accounting and tax reporting requirements.
The implementation of the Economic Substance rules is just one element of a broader effort by the Government of Anguilla, in partnership with the UK Government and industry, to meet its commitments on taxation reform and transparency with international standard-setters including the EU, the Organisation of Economic Development (OECD) and the Caribbean Financial Action Task Force (CFATF).
The requirements placed on small jurisdictions such as Anguilla must not be under-estimated and they continue to increase in scale and complexity. However, the Government of Anguilla has been clear that it is committed to the highest standards of governance on taxation matters and to ensuring that entities registered in Anguilla are transparent and operate in the best interests of citizens. These changes are an important demonstration of that commitment.
Parliament’s approval of this legislation is the culmination of much hard work by officials from the Ministry of Finance (MFEDICT), the Financial Services Commission (AFSC) and representatives from Anguilla’s financial services industry. The Governor’s Office has been pleased to work in close partnership with officials on the development of these rules. In particular, we commend MFEDICT officials Permanent Secretary Larry Franklin, Compliance Manager Marisa Harding-Hodge and Gerry Halischuk and Tina Bryan, Director and Deputy Director of the AFSC for their efforts in driving forward this important agenda.
The Governor’s Office would also like to thank the financial services industry for their constructive engagement, with whom we will continue to work closely on financial and taxation reform in Anguilla.
– Press Release
