The Guernsey Revenue Service announced yesterday further amendments to Guernsey’s economic substance legislation to bring “self-managed” funds in scope of economic substance requirements.
Under these new amendments, a company that is a fund will be treated as a self-managed fund if it does not have an external fund manager. Where a company that is a self-managed fund either is tax resident in Guernsey or has exempt status, it will become subject to economic substance requirements in Guernsey as if it was carrying on the relevant activity of “fund management”, even though it will not be receiving any management fees.
This extension of substance requirements to self-managed funds was originally announced in the updated guidance on economic substance requirements that was published on 22 November 2019, although the amendments will take effect from 1 October 2020 and so will not be retroactive.
Self-managed funds will need to ensure that from 1 October 2020 they comply with economic substance requirements in Guernsey, which include requirements as to location and frequency of board meetings, location of “core income generating activities” and adequate personnel, premises and expenses. Guernsey funds are required to appoint a Guernsey-based fund administrator, and this administrator can help with satisfying these requirements. Read further details about Guernsey’s economic substance requirements as they apply to the funds industry.
The new amendments will also update economic substance legislation to make it clear that funds (other than self-managed funds) are out of scope of economic substance requirements. This has always been the case under published guidance and it is helpful to have this now in the legislation.