In early 2019 the BVI passed a raft of new legislative changes introducing economic substance requirements for all companies which are incorporated in and tax resident in the BVI.
The new Law (The Economic Substance Act) requires that each such Company must provide proof to its BVI Registered Agent of where the entity is tax resident and must be ready to relay that information to the BVI’s competent authorities. The new Legislation also provides that in the even that is tax resident in the BVI, it must demonstrate economic substance.
The new law however only applies to Companies carrying on a “relevant activity”. Relevant activity as defined includes:
- Banking business
- Insurance business
- Shipping business
- Fund management business
- Finance and leasing business
- Headquarters business
- Holding business
- Intellectual property business (IP legal entities will be facing more onerous requirements and are encouraged to seek legal advice).
- Distribution and service centre business
In so far as applicability of the new law to British Virgin Islands IBCs (International Business Companies) is concerned here’s what you need to know:
- If the Company has no BVI sourced income will the Company be liable to pay tax in BVI (and if so at what rate) – With respect to the new Economic Substance Act, the company should only be deeply concerned about BVI taxes if it is conducting one of the relevant activities outlined in the ES Act. If the company does carry on a relevant activity taxes will only be payable on the employees the company is required to have in the BVI in order to show “substance with respect to its activities. The BVI does not have an income tax system, therefore the company’s income is not in question in relation to BVI tax rates.
- What documents/records must a BVI IBC keep? And how must those records be kept (ie can they be kept in soft format?) and where must those records be kept If the company is conducting a relevant activity and it decides to comply with the ES Act and prove substance in the BVI, then the necessary documents that a BVI company operating in the BVI is required to keep would be expected, eg. Financial audits, tax documents, etc.
- Must a BVI IBC keep books of account (& if so what kind of Accounts must be kept)? If the company is conducting a relevant activity and it decides to comply with the ES Act and prove substance in the BVI, then the necessary documents that a BVI company operating in the BVI is required to keep would be expected, eg. Financial audits, tax documents, etc.
- Must a BVI Company’s Accounts be audited (& if so by whom eg a BVI Licensed Auditor? Or?) It is a standard expectation that BVI companies should audit their books for good record keeping. The BVI tax office requires that a copy of the audited financials be submitted to them annually
- Does a BVI IBC have to file a tax/annual return? Annual tax filings are to be filed with the local tax office for BVI companies
- If a BVI IBC must now file an annual return or tax return what info must be included in the return? The BVI tax office provides standard forms to be completed, which mainly relates to total payroll paid per year and taxes deducted and submitted. If there is any difference in the taxes submitted and the taxes that were to be submitted the company would be expect to submit a check to the tax office upon filing of the returns.
- What physical presence must a BVI have in the BVI? If there is a physical presence requirement moving forward does it only apply to newly formed Companies or old Companies (if the latter when does the new regulation begin to apply to previously incorporated BVI IBCs(?) Once a company is conducting relevant activities it must show substance in the BVI by conducting the core income generating activity in the BVI, having management and directors in the BVI, employees in the BVI and office space in the BVI. The ES Act applies to new company as of January, 2019 and for old companies as of June 2019. The companies are required to file with the BVI Government within 18 months of the above dates indicating their tax status, (i.e whether they are tax resident in the BVI or outside the BVI. If they are tax resident in the BVI they are required to show substance by the deadline. If they are not tax resident in the BVI they are required to submit a form indicating such.) Please bearing in mind that the Government’s filing platform and forms for submission are not yet ready.
- Is there a publicly accessible register of Directors in the BVI? If not do you have to (privately) file Directors details with the Registry (and when, in what instance/s could this info be shared?) There is no publicly accessible register of directors in the BVI. However, the BVI Government does keep a private Register of Directors but only the regulators are able to view the information that has been filed. The information will only be shared in the case of a criminal investigation.
- Is there a publicly accessible register of Shareholders in the BVI? If not do you have to (privately) file Shareholders details with the Registry (and when, in what instance/s could this info be shared?) There is no publicly accessible register of shareholders in the BVI
10. Is there a publicly accessible register of Beneficial owners in the BVI? If not do you have to (privately) file UBO’s details with the Registry (and when, in what instance/s could this info be shared?) There is no publicly accessible register of beneficial owners in the BVI. However, there is a requirement to file the beneficial owner with the Government but it is privately held. Again the information is only shared in cases of a criminal investigation.
Note the above information is current as of 5 July 2019.
If you have/own a BVI IBC and are concerned about the Legislative changes you have the option of redomiciling the Company to a comparable jurisdiction (eg Seychelles, Belize, Nevis, Anguilla etc). OCI can assist you to redomicile your BVI IBC (and we can provide guidance on which jurisdiction/s you could/should be considering moving to).
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