Economic substance laws

Economic substance laws are regulations that require companies to have genuine business activities and presence in a jurisdiction to benefit from its tax rules. They are designed to prevent entities from artificially locating their operations or profits in places solely for tax advantages. Under these laws, companies must demonstrate real economic activity—like employees, offices, and decision-making—in the jurisdiction to qualify for certain tax benefits. The goal is to ensure fair taxation and reduce tax avoidance by aligning a company’s tax status with its actual business operations.