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Economic
Substance
Requirements

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Economic Substance Requirements

Ensuring Sustainable and Impactful Economic Activity

Economic substance requirements are a key component of the Special Economic Zones (SEZ) framework, ensuring that businesses operating within SEZs contribute meaningfully to economic growth, employment creation, and industrial development. The Trinidad and Tobago Special Economic Zones Authority (SEZA) mandates compliance with economic substance regulations to maintain the integrity of SEZ incentives while aligning with international investment and tax standards.

Overview of Economic Substance Requirements

Economic substance refers to the level of real business activity that an enterprise must demonstrate to qualify for SEZ benefits. It ensures that SEZ enterprises are engaged in genuine economic operations within Trinidad and Tobago, rather than existing solely to access tax or investment incentives.

To meet economic substance requirements, enterprises must:

  • Conduct core income-generating activities in their designated SEZ.
  • Maintain an appropriate level of physical presence, including premises and personnel, in the SEZ.
  • Within a stable regulatory framework.
  • Demonstrate operational expenditure within the jurisdiction proportional to business activities.

Economic substance regulations are essential to protect the integrity of SEZ incentives, promote fair business practices, and comply with international tax and investment frameworks.

Compliance with Economic Substance Requirements

SEZ enterprises must adhere to specific compliance criteria, ensuring that their operations meet SEZA’s regulatory expectations.

Key Compliance Criteria

Physical Presence

  • SEZ enterprises must have a registered office and operational premises within the designated SEZ.
  • The business must demonstrate an active presence through facilities, staff, and equipment.

Management and Control

  • Decision-making must be conducted from within Trinidad and Tobago, with key managerial roles physically present.
  • Meetings of the board of directors must be held in the jurisdiction, with a quorum physically present.

Core Business Activities

  • The enterprise must engage in approved economic activities within an SEZ.
  • Operations must align with SEZA’s permitted industries and business models.

Employment and Expenditure

  • SEZ enterprises must employ adequate personnel with relevant qualifications and skills.
  • Businesses must maintain a level of operating expenditure proportional to their revenue.

Reporting and Compliance Monitoring

  • Enterprises must submit annual reports demonstrating compliance with economic substance requirements.
  • SEZA may conduct audits and inspections to verify compliance.
  • Non-compliance may result in penalties, suspension of incentives, or revocation of SEZ status.

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