Substance Over Form
/ˈsʌbstəns oʊvər fɔːrm/
Definitions
- (n.) A legal and accounting principle prioritizing the economic reality and underlying substance of a transaction or arrangement over its formal or legalistic appearance.
The court applied substance over form to prevent the parties from avoiding liability through artificial structuring.
- (n.) A doctrine used in contract and tax law to interpret agreements or financial transactions based on their genuine intent and effect rather than their literal wording or formality.
For tax purposes, substance over form ensures that transactions are taxed according to their true nature, not merely their documentation.
Related terms
Commentary
Essential for drafting clear agreements and tax texts, this principle guards against attempts to disguise the true nature of transactions through formalistic or superficial labels.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.