economic substance

Economic substance refers to the real, underlying value and purpose of a financial transaction or business arrangement, beyond just its legal form. It focuses on whether the activities have genuine economic benefit and are not merely designed to achieve tax advantages or regulatory benefits. For example, if a company creates a complex structure to minimize taxes but does not actually conduct business in a meaningful way, it may lack economic substance. Authorities often scrutinize such arrangements to ensure they reflect true economic activity and not just technical maneuvers.