{"id":462,"date":"2024-07-06T16:14:27","date_gmt":"2024-07-06T16:14:27","guid":{"rendered":"https:\/\/cedsto3.dreamhosters.com\/mbh\/commercial-entities-substance-requirements-act-2018\/"},"modified":"2024-07-07T16:02:06","modified_gmt":"2024-07-07T16:02:06","slug":"commercial-entities-substance-requirements-act-2018","status":"publish","type":"post","link":"https:\/\/cedsto3.dreamhosters.com\/mbh\/commercial-entities-substance-requirements-act-2018\/","title":{"rendered":"Commercial Entities (Substance Requirements) Act, 2018"},"content":{"rendered":"\n<style type=\"text\/css\" data-created_by=\"avia_inline_auto\" id=\"style-css-av-lybqrb8x-b3df99cd7abd86b9346984accb47042e\">\n.avia-section.av-lybqrb8x-b3df99cd7abd86b9346984accb47042e{\nbackground-color:#3d3d3d;\nbackground-image:url(https:\/\/cedsto3.dreamhosters.com\/mbh\/wp-content\/uploads\/2024\/07\/corporate-services-bg-2.jpg);\nbackground-repeat:no-repeat;\nbackground-position:50% 0%;\nbackground-attachment:scroll;\n}\n<\/style>\n<div id='av_section_1'  class='avia-section av-lybqrb8x-b3df99cd7abd86b9346984accb47042e main_color avia-section-no-padding avia-no-border-styling  avia-builder-el-0  el_before_av_section  avia-builder-el-first  avia-full-stretch avia-bg-style-scroll av-minimum-height av-minimum-height-60 av-height-percent  container_wrap fullsize'  data-section-bg-repeat='stretch' data-av_minimum_height_pc='60' data-av_min_height_opt='percent'><div class='container av-section-cont-open' ><main  role=\"main\" itemprop=\"mainContentOfPage\"  class='template-page content  av-content-full alpha units'><div class='post-entry post-entry-type-page post-entry-462'><div class='entry-content-wrapper clearfix'>\n<div class='flex_column_table av-av_three_fifth-b1ac823ad80d104edd5272d6a6b85521 sc-av_three_fifth av-equal-height-column-flextable'><div  class='flex_column av-av_three_fifth-b1ac823ad80d104edd5272d6a6b85521 av_three_fifth  avia-builder-el-1  el_before_av_two_fifth  avia-builder-el-first  first flex_column_table_cell av-equal-height-column av-align-bottom  '     ><style type=\"text\/css\" data-created_by=\"avia_inline_auto\" id=\"style-css-av-lybqp871-4538c009fb090ead89067e066c1fe55e\">\n#top .av-special-heading.av-lybqp871-4538c009fb090ead89067e066c1fe55e{\npadding-bottom:10px;\ncolor:#ffffff;\nfont-size:42px;\n}\nbody .av-special-heading.av-lybqp871-4538c009fb090ead89067e066c1fe55e .av-special-heading-tag .heading-char{\nfont-size:25px;\n}\n#top #wrap_all .av-special-heading.av-lybqp871-4538c009fb090ead89067e066c1fe55e .av-special-heading-tag{\nfont-size:42px;\n}\n.av-special-heading.av-lybqp871-4538c009fb090ead89067e066c1fe55e .special-heading-inner-border{\nborder-color:#ffffff;\n}\n.av-special-heading.av-lybqp871-4538c009fb090ead89067e066c1fe55e .av-subheading{\nfont-size:15px;\n}\n\n@media only screen and (min-width: 480px) and (max-width: 767px){ \n#top #wrap_all .av-special-heading.av-lybqp871-4538c009fb090ead89067e066c1fe55e .av-special-heading-tag{\nfont-size:0.8em;\n}\n}\n\n@media only screen and (max-width: 479px){ \n#top #wrap_all .av-special-heading.av-lybqp871-4538c009fb090ead89067e066c1fe55e .av-special-heading-tag{\nfont-size:0.8em;\n}\n}\n<\/style>\n<div  class='av-special-heading av-lybqp871-4538c009fb090ead89067e066c1fe55e av-special-heading-h1 custom-color-heading blockquote modern-quote  avia-builder-el-2  avia-builder-el-no-sibling  av-inherit-size'><h1 class='av-special-heading-tag'  itemprop=\"headline\"  >Legal Update<\/h1><div class=\"special-heading-border\"><div class=\"special-heading-inner-border\"><\/div><\/div><\/div><\/div><div class='av-flex-placeholder'><\/div><div  class='flex_column av-av_two_fifth-ae2cd6b1f49e83f5dbcce51aa112b1d0 av_two_fifth  avia-builder-el-3  el_after_av_three_fifth  avia-builder-el-last  flex_column_table_cell av-equal-height-column av-align-bottom  '     ><\/div><\/div><!--close column table wrapper. Autoclose: 1 --><\/div><\/div><\/main><!-- close content main element --><\/div><\/div><div id='av_section_2'  class='avia-section av-av_section-7af9a1a620ce4f39c9b9e05e20762bd9 main_color avia-section-default avia-no-border-styling  avia-builder-el-4  el_after_av_section  el_before_av_section  avia-bg-style-scroll container_wrap fullsize'  ><div class='container av-section-cont-open' ><div class='template-page content  av-content-full alpha units'><div class='post-entry post-entry-type-page post-entry-462'><div class='entry-content-wrapper clearfix'>\n<div class='flex_column_table av-av_four_fifth-8a58639afa400a410e48c8abf84368e2 sc-av_four_fifth av-equal-height-column-flextable'>\n<style type=\"text\/css\" data-created_by=\"avia_inline_auto\" id=\"style-css-av-av_four_fifth-8a58639afa400a410e48c8abf84368e2\">\n.flex_column.av-av_four_fifth-8a58639afa400a410e48c8abf84368e2{\nbackground-color:#ffffff;\n}\n<\/style>\n<div  class='flex_column av-av_four_fifth-8a58639afa400a410e48c8abf84368e2 av_four_fifth  avia-builder-el-5  el_before_av_three_fourth  avia-builder-el-first  first flex_column_table_cell av-equal-height-column av-align-bottom  '     ><p><br \/>\n\n<style type=\"text\/css\" data-created_by=\"avia_inline_auto\" id=\"style-css-av-av_hr-3a876428eececa9d35452247ddb053af\">\n#top .hr.hr-invisible.av-av_hr-3a876428eececa9d35452247ddb053af{\nheight:50px;\n}\n<\/style>\n<div  class='hr av-av_hr-3a876428eececa9d35452247ddb053af hr-invisible  avia-builder-el-7  el_after_av_codeblock  avia-builder-el-last '><span class='hr-inner '><span class=\"hr-inner-style\"><\/span><\/span><\/div><\/p><\/div><\/div><!--close column table wrapper. Autoclose: 1 --><div class='flex_column_table av-av_three_fourth-8a58639afa400a410e48c8abf84368e2 sc-av_three_fourth av-equal-height-column-flextable'>\n<style type=\"text\/css\" data-created_by=\"avia_inline_auto\" id=\"style-css-av-av_three_fourth-8a58639afa400a410e48c8abf84368e2\">\n.flex_column.av-av_three_fourth-8a58639afa400a410e48c8abf84368e2{\nbackground-color:#ffffff;\n}\n<\/style>\n<div  class='flex_column av-av_three_fourth-8a58639afa400a410e48c8abf84368e2 av_three_fourth  avia-builder-el-8  el_after_av_four_fifth  el_before_av_one_fourth  first flex_column_table_cell av-equal-height-column av-align-bottom  '     ><p>\n<style type=\"text\/css\" data-created_by=\"avia_inline_auto\" id=\"style-css-av-lybqpj0i-8656cc3b6aad3b81dd38c0d718e3b133\">\n#top .av-special-heading.av-lybqpj0i-8656cc3b6aad3b81dd38c0d718e3b133{\npadding-bottom:10px;\ncolor:#020202;\nfont-size:38px;\n}\nbody .av-special-heading.av-lybqpj0i-8656cc3b6aad3b81dd38c0d718e3b133 .av-special-heading-tag .heading-char{\nfont-size:25px;\n}\n#top #wrap_all .av-special-heading.av-lybqpj0i-8656cc3b6aad3b81dd38c0d718e3b133 .av-special-heading-tag{\nfont-size:38px;\n}\n.av-special-heading.av-lybqpj0i-8656cc3b6aad3b81dd38c0d718e3b133 .special-heading-inner-border{\nborder-color:#020202;\n}\n.av-special-heading.av-lybqpj0i-8656cc3b6aad3b81dd38c0d718e3b133 .av-subheading{\nfont-size:15px;\n}\n\n@media only screen and (min-width: 480px) and (max-width: 767px){ \n#top #wrap_all .av-special-heading.av-lybqpj0i-8656cc3b6aad3b81dd38c0d718e3b133 .av-special-heading-tag{\nfont-size:0.8em;\n}\n}\n\n@media only screen and (max-width: 479px){ \n#top #wrap_all .av-special-heading.av-lybqpj0i-8656cc3b6aad3b81dd38c0d718e3b133 .av-special-heading-tag{\nfont-size:0.8em;\n}\n}\n<\/style>\n<div  class='av-special-heading av-lybqpj0i-8656cc3b6aad3b81dd38c0d718e3b133 av-special-heading-h1 custom-color-heading blockquote modern-quote  avia-builder-el-9  el_before_av_textblock  avia-builder-el-first  av-inherit-size'><h1 class='av-special-heading-tag'  itemprop=\"headline\"  >Commercial Entities (Substance Requirements) Act, 2018<\/h1><div class=\"special-heading-border\"><div class=\"special-heading-inner-border\"><\/div><\/div><\/div><br \/>\n<section  class='av_textblock_section av-lybqqqcy-8f43d613b857f2663d3a985c7cc04876 '   itemscope=\"itemscope\" itemtype=\"https:\/\/schema.org\/BlogPosting\" itemprop=\"blogPost\" ><div class='avia_textblock'  itemprop=\"text\" ><p><strong>Introduction<\/strong><br \/>\nThe Commercial Entities (Substance Requirements) Act, 2018 (the \u201c<strong>Act<\/strong>\u201d) came into\u00a0force on 31 December, 2018, to ensure compliance with international standards on tax governance and transparency. In particular, the Act was enacted in response to guidance from the European Union\u2019s Code of Conduct Group and the Inclusive Framework on Base Erosion and Profit Shifting (\u201c<strong>BEPS<\/strong>\u201d) of the Organization for Economic Co-operation and Development (\u201c<strong>OECD<\/strong>\u201d). BEPS refers to tax planning strategies which exploit gaps and mismatches in tax rules to artificially shift profits to low or non-tax locations where there is little or no economic activity. The Act provides for substantial economic presence and annual reporting of a commercial entity carrying on relevant activities in The Bahamas.<\/p>\n<p><strong>Entities subject to the Act<\/strong><br \/>\nThe Act stipulates special requirements for two types of commercial entities: \u201cIncluded Entities\u201d and \u201cNon-Included Entities\u201d.A \u201cCommercial Entity\u201d is defined as an entity which is incorporated, registered or continued under the following Acts (the \u201c<strong>Relevant Acts<\/strong>\u201d):<\/p>\n<p>a) Companies Act (Ch. 308);<br \/>\nb) International Business Companies Act (Ch. 309);<br \/>\nc) Partnership Act (Ch. 310);<br \/>\nd) Partnership Limited Liability Act (Ch. 311); or<br \/>\ne) Exempted Limited Partnership Act (Ch. 312).<\/p>\n<p>A Commercial Entity does not include an entity incorporated, registered or continued under the Relevant Acts:<\/p>\n<p>(i) which is resident owned in The Bahamas, i.e. one hundred percent beneficially owned (either directly or indirectly) by one or more natural persons who are ordinarily resident and domiciled in The Bahamas, or who have been issued a certificate of annual or permanent residence and physically reside in The Bahamas for a cumulative period of at least three months per year, and<\/p>\n<p>(ii) conducts its core income generating activities in The Bahamas; or<\/p>\n<p>(iii) which is centrally managed and controlled outside The Bahamas and tax resident in a jurisdiction other than The Bahamas.<\/p>\n<p>Included Entities are Commercial Entities engaged in \u201cRelevant Activities\u201d, which are listed in the Act as:<\/p>\n<p>a) banking business;<br \/>\nb) insurance business;<br \/>\nc) fund management business;<br \/>\nd) financing and leasing business;<br \/>\ne) headquarters business;<br \/>\nf) distribution and service centres business;<br \/>\ng) shipping business; or<br \/>\nh) commercial use of intellectual property.<\/p>\n<p>An Included Entity is also engaged in a Relevant Activity if that entity carries out any of the above activities as a holding company, or where one or more of its subsidiaries is engaged in one of those activities.<\/p>\n<p>Non-Included Entities are entities which are not Included Entities and which are incorporated, registered or continued under any of the Relevant Acts.<\/p>\n<p><strong>Substance requirements<\/strong><br \/>\nIncluded Entities must have substantial economic presence in The Bahamas, by satisfying\u00a0the following requirements:<\/p>\n<p>1) Core Income Generating Activities (\u201c<strong>CIGA<\/strong>\u201d) in The Bahamas, which<br \/>\npresupposes adequate amounts of annual operating expenditure, adequate levels of qualified full-time employees, adequate physical offices and adequate levels of board management and control within The Bahamas.<\/p>\n<p>2) Direction and management in The Bahamas, by ensuring that:<\/p>\n<p>a) an adequate number of meetings of the Board of Directors are conducted in The Bahamas;<\/p>\n<p>b) there is a quorum of the Board of Directors physically present within The Bahamas during board meetings held here;<\/p>\n<p>c) strategic decisions of the Included Entity made at Board meetings in The Bahamas must be recorded in the minutes of the meetings;<\/p>\n<p>d) all records and minutes of the Included Entity are kept in The Bahamas; and<\/p>\n<p>e) the Board of Directors, as a whole, must have the necessary knowledge and expertise to discharge its duties.<\/p>\n<p>Included Entities may only outsource their CIGA to an outsourcing service provider in The Bahamas, provided that the Included Entity is able to demonstrate supervision and control of the outsourcing service provider in respect of such outsourced CIGA.<\/p>\n<p>It should be noted that an Included Entity which only engages in business as a pure equity holding company (meaning that it only holds equity participations and only earns dividends and capital gains or incidental income) is subject to certain reduced substance requirements. However, where a holding company engages in any Relevant Activity, that company will be required to satisfy all of the substance requirements set out above. Further, a Non-Included Entity which is a passive holding entity (meaning that it does not by itself, or by any of its subsidiaries, conduct any Relevant Activity) is subject to the reduced substance requirements of only complying with all applicable laws and regulations of The Bahamas.<\/p>\n<p><strong>Reporting obligations and penalties<\/strong><br \/>\nAll Included Entities, Non-Included Entities and holding companies\/entities must report their status to the Minister of Finance, in the prescribed form under the Act, within nine months of the fiscal year end. Any entity which fails to report to the Minister of Finance will be subject to an administrative penalty of one hundred and fifty thousand dollars (B$150,000.00) or the removal from the applicable register of incorporation.<\/p>\n<\/div><\/section><\/p><\/div><div class='av-flex-placeholder'><\/div>\n<style type=\"text\/css\" data-created_by=\"avia_inline_auto\" id=\"style-css-av-av_one_fourth-b9b2a0bc9aa2512cefc5e0e7e7441cc9\">\n.flex_column.av-av_one_fourth-b9b2a0bc9aa2512cefc5e0e7e7441cc9{\nbackground-color:#ffffff;\n}\n<\/style>\n<div  class='flex_column av-av_one_fourth-b9b2a0bc9aa2512cefc5e0e7e7441cc9 av_one_fourth  avia-builder-el-11  el_after_av_three_fourth  avia-builder-el-last  flex_column_table_cell av-equal-height-column av-align-bottom  '     ><\/div><\/div><!--close column table wrapper. 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