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The Revenue Service has said it will take a "pragmatic" approach to assessing whether companies have met economic substance requirements this year while government-imposed restrictions were in place.
The official Revenue Service guidance on economic substance has not changed, however there has been a formal recognition that measures introduced to protect people’s health may have disrupted normal operating practices and restricted some businesses' ability to meet those requirements.
Economic substance requirements were introduced locally two years ago in order to address EU Council concerns over our lack of legal substance requirements for entities doing business in or through Guernsey.
Given the "ongoing and evolving nature" of the pandemic, Revenue Service Director Nicola Forshaw said a temporary framework has been put in place in light of the current border restrictions in place in Guernsey.
"The Revenue Service will take a pragmatic approach when assessing whether the substance requirements have been met by a company during periods where government imposed restrictions were in place, including restrictions imposed by governments in other jurisdictions," she said. "It will consider the following elements are appropriate for any temporary framework for Covid-19 related adjustments to the economic substance guidance:
It is expected that Covid-19 measures will only impact on the ability of companies to comply with the directed and managed test of the Economic Substance Requirements. It is still expected that companies will continue to meet the other economic substance tests.
Companies should maintain and retain relevant records that show what their policy was in respect of restrictions on travel for the company officers and the period of time for which that policy was in place. Similarly for any government imposed restrictions.
Where Covid-19 measures have meant that a company does not fully meet the Economic Substance Requirements, a Revenue Service Inspector will undertake a review. Such a review may require the company to provide objective and sufficient evidence of their specific circumstances hindering their compliance.
Where the Revenue Service is required to exchange information with EU Member States on a company as a result of its failure to comply, the exchange would include information that companies provide on the impact of Covid-19 measures.
These requirements will be withdrawn as soon as the circumstances permit.
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