HOW TO APPLY FOR AN APPROVED MANAGER LICENSE IN THE BVI

The British Virgin Islands (the “BVI”) is one of the most popular and established jurisdictions for the formation and operation of offshore investment managers and advisors. BVI investment fund structures are globally known for their flexibility allowing investment managers and advisors to tailor their offering to the needs of their investors.

 

The management of investment funds in, or from within the BVI (whether by way of providing discretionary, or non-discretionary investment advice), is a regulated activity, which requires regulatory approval from the BVI Financial Services Commission (the “Commission”).

 

The requisite regulatory approval by the Commission may be obtained under either the Securities and Investment Business Act, 2010 (“SIBA”) or the Investment Business (Approved Managers) Regulations, 2012 (the “Approved Manager Regulations”). Importantly, compliance with the Approved Manager Regulations is substantially simpler than compliance with SIBA.

 

The Approved Manager

 

The Approved Manager Regulations were implemented with a view to offering investment fund managers and advisors a simple and cost-efficient approval process in obtaining a licence for the provision of management or advisory services to BVI and certain foreign funds (including for example Jersey and Cayman Islands funds) or entities bearing similar characteristics to a fund.

 

The Approved Manager licence has become very popular in the industry since its introduction in 2012. It is widely perceived as being superior to the Cayman Exempt Manager, both on cost (formation and on-going) and also because it has the label of being a regulated product, which the Cayman equivalent does not have. In addition, the BVI model of Approved Manager offers greater flexibility, since the Cayman Exempted Manager is limited to only acting for investment funds whose investors fall within the definitions of a “sophisticated investor” or “high net worth person”, whilst the Approved Manager has no such limitation.

 

Type of Management Services

 

The Approved Manager may act as an investment manager by way of providing discretionary advice or as an investment advisor by way of providing non-discretionary advice to certain BVI and foreign funds, notably:

  • Incubator Funds;
  • Approved Funds;
  • Private Funds;
  • Professional Funds;
  • Foreign funds registered under the laws of a recognised jurisdiction (*) with the characteristics of a private or a professional fund;
  • Closed-ended funds, whether registered under the laws of the BVI or the laws of a recognised jurisdiction with the characteristics of a private or professional fund; and
  • Certain foreign funds registered in a non-recognised jurisdiction.

 

Managed Accounts

The Approved Manager may also be licenced to provide its clients with customised managed accounts services. The conditions under which a licence for such services is granted will be subject to the Commission’s discretion.

 

Vehicle

An Approved Manager may be set up as a company or as a limited partnership. Individuals cannot hold an Approved Manager licence.

 

Assets Under Management

The Approved Manager may not manage aggregate assets worth over USD400 million if managing an open-ended fund or USD1 billion if managing a closed-ended fund. The assets of feeder funds will be disregarded for the purposes of calculating the aggregate value of the assets.

 

If the Approved Manager exceeds, or is likely to exceed, the relevant asset threshold, he/she/it must notify the Commission of that fact within seven days. The Approved Manager may then apply for a licence under SIBA, which carries no restriction in relation to the value of assets under management.

 

Application

An applicant for an Approved Manager licence may commence management business seven days after the submission of a complete application to the Commission, unless the Commission agrees to a shorter period in writing.

 

Ongoing Requirements

An Approved Manager Company is subject to the following ongoing requirements:

  • To have two directors appointed at all times, one of whom must be an individual;
  • To have an authorised representative, who is certified by the Commission, appointed at all times;
  • To notify the Commission within 14 days of any change to the information submitted with the initial application form;
  • To notify the Commission of any matter which has, or is likely to have, a material impact or significant regulatory impact on the Approved Manager or its “relevant business”;
  • To submit financial statements, which need not be audited, to the Commission within six months after the end of the financial year; and
  • To submit the annual return in the approved form and the annual renewal fee each by 31 January of each year.

 

Application Procedure

 

To apply for an Approved Manager’s License in the BVI first up you will need to form a stand alone BVI Company which will apply for the Approved Manager License.

 

The Approved Manager company needs two directors and at least one director should be and individual with some investment business expertise. The directors of the approved manager can be the same individuals as directors or shareholder of any BVI Fund Company that you might want to form at the same time.

 

We would need to see the CVs of each director of the approved manager. If you have an investment management agreement, you would like to use then we would need to see a copy of it. Otherwise we would draft one.

 

Our fees and outlays for applying for an Investment manager license would be as follows:

 

  • Consulting fee re advising on options and procedures re applying for an Approved Fund Manager License $1,600
  • Legal costs $8,300
  • Incorporation of the Approved Manager Company (assuming max authorized share capital of $US50,000): $1,250
  • Supplying BVI based authorized representative for the Approved Manager Company (year 1): $2,000
  • Professional fees for application to FSC: $1,600
  • Supplying certificate of recognition: $250

 

TOTAL: $US15,000

 

Would you like to know more? Then please Contact Us:

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.

 

 

 

How To Renew or Shut Down a Panama Foundation

The annual operating license for all Foundations in Panama falls due for renewal on or by the 12 month anniversary of the Foundation’s registration date.

 

First up you will need to advise us as to whether you need to or want to renew your Foundation’s annual operating license.

 

If you advise that you DO want to renew we will tell you what docs/info we will need from you/your client and we will send you an invoice.

 

Once the renewal invoice is paid we will then attend to collating all the docs/info required, and we will attend to doing all that is needed, to renew the Foundation.  Usually we will require, as a minimum, fresh/updated certified copies of the KYC (ID) docs as regards the beneficial owner/s.

 

If you decide that you do NOT want to renew then be aware that dissolving a Panama Foundation involves specific legal steps as outlined in the Panama Foundation Law (Law 25 of 1995). Key aspects include determining if the Foundation is dissolved based on the Charter’s terms, fulfilling any outstanding obligations, and formally registering the dissolution with the Panama Public Registry.

 

The process to dissolve a Panama Foundation is as follows:

 

1. Review the Foundation Charter:

The Charter should specify any conditions under which the Foundation dissolves, such as a fixed duration or the achievement of its objectives.

 

2. Ensure Compliance with Law:

The Foundation must adhere to the provisions of Law 25 of 1995, which details circumstances leading to dissolution, such as insolvency, bankruptcy, or revocation.

 

3. Comply with Legal Obligations:

Before dissolution, all outstanding debts and obligations must be settled, including any fiscal responsibilities.

 

4. Decision by Council:

If the Charter doesn’t specify dissolution terms, the Foundation Council will make the decision to dissolve the Foundation.

 

5. Formal Notification:

The decision to dissolve must be officially registered with the Panama Public Registry.

 

6. Notification to Government:

The Foundation must notify the Panama Ministry of Commerce and Industries (MICI) of the cessation of operations, particularly if it had an operation notice.

 

7. Tax Clearance:

The Foundation must settle any outstanding tax obligations with the DGI (Panama Revenue Office) and request the closure of its account.

 

8. Public Announcement:

Once the dissolution is registered, it must be publicly announced in a local newspaper or government Gazette.

 

To summarize to dissolve a Panama Foundation requires careful adherence to the legal framework established by Law 25 of 1995 and the terms outlined in the Foundation’s charter. Moreover, it’s crucial to ensure all debts and obligations are settled and the dissolution is properly registered and notified to relevant authorities.

 

Practicalities

 

To summarize the initial steps are as follows:

 

  1. If you wish to renew the annual operating license of this Foundation for the oncoming year we must have the complete due diligence of the Foundation on file. Please find the annual form at this Link: https://www.dropbox.com/scl/fi/wnhcuojjl4r9x8se79qkh/ANNUAL-RETURN-DECLARATION.docx?rlkey=gncxmuu8omvbht2wqnx69t976&st=pxydkrpp&dl=0 You will be required to complete this form as part of the renewal requirements.  Therefore, we will need to confirm if there is any pending or outdated documentation with our compliance team. We will proceed to check with them and get back to you as soon as possible in a follow-up message with their comments.

 

  1. If you decide you no longer require your Foundation the applicable process would be to proceed with its dissolution. If you click on this link ( https://www.dropbox.com/scl/fi/uygqkqy0j5ct51kgjp9yl/DECLARATION-dis-fip-TYPICAL-FOUNDATION.docx?rlkey=p39j0dru2fennsu25v1nln9xo&st=fit6ybg5&dl=0 ) you will find the Beneficial Owner’s declaration, required to initiate the dissolution process. As established in the Foundation Charter, usually the dissolution must be carried out either by the Founder or unanimously by the Foundation Council. Therefore, we will need to prepare a resolution authorizing the dissolution, which must be signed by either the Founder or the Foundation Council, depending on how you wish to proceed. This resolution must be received duly signed and apostilled.

 

In order to proceed, we will also require the accounting records for the current fiscal year (and previous fiscal years ie if you have not provided them as yet) as per the requirements (which can be viewed at/via this Link: https://www.dropbox.com/scl/fi/moue9nhqnf68ciipsq3ix/Panama-Entities-Account-Keeping-Requirements.docx?rlkey=6vxcvzmsh7hy3uoe96pv4cjz7&st=znnroh59&dl=0 )

 

Please find the applicable prices below (ie current at 10.6.25 – please contact us for a current quote):

 

Dissolution (incl. certified translation + apostilled translation and apostilled public deed + apostilled certificate of dissolution + apostilled translation of certificate)

$US1,300

Dissolution (basic cost no apostille, no translations)

$1,200

 

Would you like to know more? Then please Contact Us:

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.

 

 

 

Offshore Company Jurisdictions With No Accounting Requirements

Are you wanting to set up a tax-free Offshore Company without having to meet onerous Account Keeping requirements?

 

Just about every Offshore jurisdiction these days has Account keeping requirements of some description. It’s been one of the biggest changes to the Offshore Incorporations world since I first stated working in this Industry almost 25 years ago.

 

Most jurisdictions require, as a minimum, that soft copies of each Company’s “Financial records” be stored at the Company’s registered office (and in most jurisdictions the definition of “Accounting records” includes, bank statements, suppliers bills, invoices sent to clients along with Books of Account). Indeed, many jurisdictions now require full financial reports to be prepared and or for annual returns to be filed!

 

The good news is there are still several jurisdictions that either have zero Accounting keeping or very minimal Account keeping requirements. They include:

 

The Marshall Islands: https://offshoreincorporate.com/marshall-islands-ibcs/

 

Samoa: https://offshoreincorporate.com/samoa-international-business-companies/ &

 

Nevis: https://offshoreincorporate.com/st-kitts-and-nevis-offshore-companies/

https://www.dropbox.com/scl/fi/pchjstic0zo8qtwx7z2ee/NEVIS-LLC-Fact-Sheet.pdf?rlkey=j20aarm4v70azy3qt0o0m8a1m&st=3za3drkz&dl=0

 

Let’s examine the features of each in terms of Account Keeping requirements…

 

 

THE MARSHALL ISLANDS

 

The relevant law in the Republic of the Marshall Islands (“RMI”) provides as follows:

 

Every domestic corporation shall keep reliable and complete accounting records, to include correct and complete books and records of account.

 

Accounting records must be sufficient to correctly explain all transactions, enable the financial position of the corporation to be determined with reasonable accuracy at any time, and allow financial statements to be prepared. Additionally, every domestic corporation shall keep underlying documentation for accounting records maintained pursuant to this sub- section, such as, but not limited to, invoices and contracts, which shall reflect all sums of money received and expended and the matters in respect of which the receipt and expenditure takes place; all sales, purchases, and other transactions; and the assets and liabilities of the corporation.

 

A resident domestic corporation shall keep all accounting records and underlying documentation as described in this subsection in the Republic. Upon demand of the registered agent for non-resident domestic entities in connection with the performance of its audit functions or pursuant to a valid governmental request made to the registered agent for non-resident domestic entities, every non-resident domestic corporation shall produce all accounting records and underlying documentation required to be maintained pursuant to this subsection to the registered agent for non-resident domestic entities in the Republic.

 

Simply put the latter provision of the legislation, ie as highlighted above, would appear to exempts Marshalls Islands IBCs from keeping to keep any financial/accounting records in the Marshall Islands!

 

 

NEVIS

 

Accounting requirements in Nevis are thankfully not as onerous as elsewhere.

 

Every Nevis entity is required to maintain sufficient and accurate records from which accounts might be prepared should the Directors or Shareholders choose to do so. In other words, there is no absolute requirement to do so.

 

Unlike places such as BVI, there is no requirement to file any accounting information with the Registered agent, and there is no public filing of accounts, schedules of assets/liabilities etc.

 

That being said, each Nevis entity is required to file a (simple one page) annual return in St. Kitts & Nevis. Where the management of the entity is conducted outside of St.  Kitts & Nevis, the required return is informational only, and need not include any financial or transactional information. A sample of the current return can be viewed here: https://offshoreincorporate.sharepoint.com/:b:/s/OffshoreCompaniesInternational/EY9qhVbBnDxPqIoqK7hclxgBGxN7pKymMzwgImGS_utnCg?e=PQhIqK

 

To summarize each Nevis Company is required by law to keep sufficient financial records such as would enable Books of Account to be drawn up. If you do keep Books of Account, you are not required to store copies in Nevis. That said the Nevis Regulator from time to time asks us to provide financial records for various entities. If this occurs we would relay this request to you and would ask that you provide the information as requested in a reasonable timeframe. You will also need to sign and submit to our office a Financial Declaration Form once yearly. You can view a copy of the form via this Link: https://www.dropbox.com/scl/fi/tfl8w0owzoyvy7sshynim/ATSL-Financial-Records-and-Documents-Declaration-Form.pdf?rlkey=q58kcurf7s5krc8fzim806otu&st=e9jhlbdc&dl=0

 

 

SAMOA

 

Every company incorporated in Samoa is required to keep and maintain accounting records:

(a) to disclose the current financial position of the Company;

(b) to enable the directors to check that any accounts prepared by the Company

comply with the laws of Samoa;

(c) to allow for the preparation of financial statements;

(d) to detail the following;

(i) all sums of money received and expended and the matters in respect of

which the receipt and expenditure takes place;

(ii) all sales and purchase and other transactions; and

(iii) the Company’s assets and liabilities, or other arrangements; and

(e) for a period of at least 7 years from the completing of the transactions or

operations to which they relate.

 

Additionally, the Company must inform OCI in writing of the location where the accounting records are to be kept.

 

Should there be any changes to the location, the Company must inform OCI in writing of the physical address of the new location of the records within 14 days of the change of the location.

 

Accounting records may required by the Samoa Financial Services Authority and upon request they must be made available to comply.

 

SUMMARY

 

So that’s a wrap then! It’s surely refreshing to know if you’re looking to set up a tax free Offshore Company but don’t want to have to deal with time consuming Account Keeping requirements that there are still some options available to you!

 

That said, there are lots of other factors that come into play when considering where’s the best place to set up your tax free Offshore Company. The good news is that, at OCI, we provide free guidance (from our expert In-House Lawyer!) on where to set up (and how to structure) your Offshore Company!

 

Would you like to know more? Then please Contact Us:

 

www.offshoreincorporate.com

 

info@offshorecompaniesinternational.com

 

ocil@protonmail.com

 

oci@tutanota.com

 

oci@safe-mail.net

 

ociceo@hushmail.com

 

DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.

 

 

 

 

 

 

 

Where To Set Up an Asset Holding Company Tax Free Offshore

Many Offshore nil tax jurisdictions now have prohibitive/extensive Economic Substance (“ES”) requirements in regards to Holding Companies and in particular IP Holding Companies requiring such Companies to show “Economic Substance” on the ground in that jurisdiction (eg staff and or an office and or income producing activities etc)

 

But what if you’re looking to set up a passive asset holding Company ie a Company that is being set up purely to hold your interests (eg as an investor) in another Company?

 

If you are looking to set up a pure equity Holding Company (ie to hold shares in another Company) where is the best nil tax “Offshore” jurisdiction in which to incorporate such a Company ie without having to meet prohibitive ES requirements.

 

This article considers the current options in that regard…

 

 

Panama for Holding Companies

 

Panama does not currently impose formal economic substance requirements on standard holding companies, nor does it tax foreign-sourced income.

 

Panama does not impose Economic Substance reqs.

 

All companies must maintain accounting records and supporting documentation, even if they do not earn Panama-source income.
By April 30 each year, the company must submit an annual accounting declaration through its Registered Agent. If the company has foreign-source income derived from operations conducted abroad, it must submit a copy of the accounting records as part of this declaration.
Failure to comply may result in fines and administrative penalties. I enclose a guide re accounting records.

 

To incorporate a Company in Panama with OCI usually costs $US1,500 and from 2nd year $890.For details of what’s included in the set-up price and annual fee from 2nd year, check these links:

 

https://www.dropbox.com/scl/fi/r43bsah70rebkudj3khpk/Incorp-Package-Standard-Inclusions.docx?rlkey=fhkty35sfxd00g7ox7jgk60fs&st=7fwasq7x&dl=0

https://www.dropbox.com/scl/fi/v0duexaw0pyz1qbkt8xlv/What-do-you-get-for-your-annual-renewal-fee-COMPANY.doc?rlkey=z36pru1r8my2trvmfdhycnrdj&st=jjba8jlq&dl=0

 

For details in regards to the features and benefits of a Panama Company check this Link: https://www.dropbox.com/scl/fi/6v1lcouehe3fiemrp5xv8/PANAMA-COMPANIES-DETAILED-FACT-SHEET.pdf?rlkey=ydh1ehbl31o6cw52dmb1olunw&st=gzdngyto&dl=0

 

 

Samoa for Holding Companies

 

Samoa remains a suitable offshore financial centre for holding and managing IP, offering a flexible and confidential framework under its International Companies Act 1988.

 

1. Setup Requirements – Samoa International Company (IC):
To incorporate an international company in Samoa, we would require:

  • Proposed company name (with a few alternatives in case of name conflict)
  • Details of directors and shareholders (corporate or individual permitted)
  • Beneficial ownership information (not publicly filed)
  • Registered office and licensed trustee/agent in Samoa (which we provide)
  • Standard or bespoke Constitution (we have a standard memo)

 

2. Ongoing Compliance Obligations:

  • Annual government renewal fee
  • Annual trustee/registered agent service fee
  • Maintenance of company records at the registered office
  • No requirement to file financial statements or returns with the Registrar
  • No local tax on foreign-sourced income (tax exempt)

 

There is no public register of directors, shareholders, or beneficial owners, maintaining confidentiality.

 

3. Economic Substance Requirements:

As of now, Samoa does not impose Economic Substance requirements on international companies that are passive IP holding entities (e.g., where the company merely holds IP without commercial exploitation from Samoa).

 

However, if the Samoa IC actively exploits the IP (e.g., licenses IP and earns royalties), this may attract scrutiny under OECD BEPS standards. While Samoa is currently a “nil-tax” jurisdiction, the global trend is toward substance-based regulation, so we recommend:

  • Ensuring operational activities (licensing, IP development, etc.) are conducted outside Samoa
  • Clearly documenting the passive holding function of the Samoa IC
  • Considering a trust structure if additional layers of protection or control are desired

 

To incorporate a Company in Samoa with OCI usually costs $US1,500 and from 2nd year $890.For details of what’s included in the set-up price and annual fee from 2nd year, check these links:

https://www.dropbox.com/scl/fi/r43bsah70rebkudj3khpk/Incorp-Package-Standard-Inclusions.docx?rlkey=fhkty35sfxd00g7ox7jgk60fs&st=7fwasq7x&dl=0

 

https://www.dropbox.com/scl/fi/v0duexaw0pyz1qbkt8xlv/What-do-you-get-for-your-annual-renewal-fee-COMPANY.doc?rlkey=z36pru1r8my2trvmfdhycnrdj&st=jjba8jlq&dl=0

 

For details in regards to the features and benefits of a Samoa Company check this Link: https://www.dropbox.com/scl/fi/v7tztj8a1lkr9bvn60anz/Samoan-Companies-Page.pdf?rlkey=quov4wimgr7uqopq4lomuymnm&st=qv1otboe&dl=0

 

 

Hong Kong For Holding Companies

 

There are no restrictions for a HK company to hold shares of other entities.

 

Are there are any special compliance or ES requirements a Holding Company in HK will need to meet???

 

In terms of registration and ongoing renewal, there’s nothing special.

 

However, in terms of profits tax, the company being a multi-national enterprise structure (MNE) should check whether receiving foreign-sourced passive income (ie dividend income & disposal gain) can be exempted from HK profits tax under the Foreign Source Income Exemption (FSIE) regime.

 

Only income received in Hong Kong is subject to the FSIE regime. “Received” includes:

 

  • Remittance into a Hong Kong bank account;
  • Used to settle a Hong Kong business debt;
  • Used to purchase movable property brought into Hong Kong.

 

Exemption Conditions for Dividend Income

 

To qualify for exemption from profits tax on foreign-sourced dividends, the Hong Kong company must meet one of the following:

 

1. Economic Substance Requirement (ESR)

 

  • Applicable to non-IP income (e.g., dividends, interest, disposal gains).

The Hong Kong company must:

    • Conduct substantial economic activities in Hong Kong.
    • Have adequate number of qualified employees.
    • Incur adequate operating expenditures in Hong Kong.
    • Outsourcing is allowed if properly monitored.

 

For pure equity-holding companies, the ESR is less stringent—mainly requiring compliance with corporate law obligations and adequate oversight.

 

2. Participation Exemption

 

  • Applies to dividends and share disposal gains.

Conditions:

    • The HK company must be a Hong Kong tax resident or have a permanent establishment in Hong Kong.
    • Must hold at least 5% equity in the investee company for at least 12 months.
    • The investee must be subject to at least 15% corporate tax in its jurisdiction.
    • Must pass anti-abuse rules:
    • Main purpose test (not for tax avoidance)

 

For more information about FSIE, please refer to IRD website at:  IRD : Foreign-sourced Income Exemption

 

To incorporate a Company in HK with OCI usually costs $US2,500 and from 2nd year $1,800.For details of what’s included in the set-up price and annual fee from 2nd year, check these links:

https://www.dropbox.com/scl/fi/y2a23l707hgrtli8v2mif/Hong-Kong-Company-Package-Inclusions.docx?rlkey=tjzqtxwckoyi32c5rblt20lhk&st=4v9hbqc4&dl=0

https://www.dropbox.com/scl/fi/j3h0dch2plgm5xmlic05g/What-do-you-get-for-your-annual-renewal-fee-HK-COMPANY.doc?rlkey=44ttqf86oy59jmy0tifchvgmx&st=9iopawnl&dl=0

 

For details in regards to the features and benefits of a Hong Kong Company check these Links: https://www.dropbox.com/scl/fi/lux40de53b7hdtxycetir/Why-Incorporate-in-Hong-Kong.docx?rlkey=fwn22c1h0mwb5l1zgo03i1rge&st=0lpfdycz&dl=0

 

 

BVI for Holding Companies

 

There are no special requirements for a passive asset holding company to be set up in the BVI.

 

The company will fall under ES as pure equity, if it will only be holding shares. Substance for pure equity will need to be set up – the fee is $1350 per annum ie on top of the usual incorporation/annual renewal fee.  If the company holds something else such as bonds it will not fall within scope as a pure equity.

 

Pure equity companies are only required to have a BVI Agent in the BVI if it is passive.  If it is an active pure equity company, eg. buying, selling, etc substance will be required.

 

To incorporate a Company in the BVI with OCI usually costs $US1,250 and from 2nd year $1050.For details of what’s included in the set-up price and annual fee from 2nd year, check these links:

https://www.dropbox.com/scl/fi/r43bsah70rebkudj3khpk/Incorp-Package-Standard-Inclusions.docx?rlkey=fhkty35sfxd00g7ox7jgk60fs&st=7fwasq7x&dl=0

 

https://www.dropbox.com/scl/fi/v0duexaw0pyz1qbkt8xlv/What-do-you-get-for-your-annual-renewal-fee-COMPANY.doc?rlkey=z36pru1r8my2trvmfdhycnrdj&st=jjba8jlq&dl=0

 

For details in regards to the features and benefits of a BVI Company check this Link: https://www.dropbox.com/scl/fi/6t1l4cefqfruzhij73kg8/BVI-IBC-FACT-SHEET-ECONOMIC-SUBSTANCE-GUIDANCE-NOTES-CURRENT.pdf?rlkey=jtwj4vxjs80q1ra2aab67z72l&st=pzi8u0ck&dl=0

 

 

Cayman Islands for Holding Companies

 

Along with its fellow Overseas Territories, Crown Dependencies and other international financial centres, the Cayman Islands has comprehensive legislation and regulations requiring legal entities domiciled or registered in the Islands and carrying on certain activities to have demonstrable substance in Cayman.
The International Tax Co-operation (Economic Substance) Act (Act) reflects Cayman’s commitment to its obligations as a member of the OECD / G20 global Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and corresponding EU requirements for no or nominal tax jurisdictions.
This briefing summarises the key elements of the Act, which has been subject to various updates since its introduction, and draws upon guidance (Guidance) and enforcement guidelines (Enforcement Guidelines) issued by the Cayman Islands Department for International Tax Co-Operation (DITC) which has responsibility for the supervision and implementation of the Act.

 

 

Overview

 

Before 31 January each year all entities must submit an Economic Substance Notification to the Cayman Islands Registrar

 

Within 12 months after financial year end all Relevant Entities that carried on one or more Relevant Activities must submit an Economic Substance Return to the DITC

 

Within 12 months after financial year end all entities that claimed to be tax resident outside of the Cayman Islands and that carried on one or more Relevant Activities must submit an Economic substance return – tax resident in another jurisdiction form (TRO Form) to the DITC

 

The Act requires that each legal entity domiciled or registered in the Cayman Islands must make an annual notification (referred to as an Economic Substance Notification or ESN) as to whether or not it was carrying on one or more of a defined list of activities (Relevant Activities) in the prior year and if it was, the date of its financial year end, whether it is tax resident in a jurisdiction outside of the Cayman Islands and certain identification and contact information. Entities which are in scope (Relevant Entities) and which were conducting any Relevant Activity are required to meet an economic substance test (ES Test) in respect of such Relevant Activity.
The requirements of the ES Test vary depending on the Relevant Activities conducted, and each Relevant Entity conducting one or more Relevant Activities must make an annual report (referred to as an Economic Substance Return) in order to enable their compliance with the requirements of the ES Test to be assessed or submit a TRO Form where the Relevant Entity is tax resident outside of Cayman. The DITC is responsible for determining whether a Relevant Entity has satisfied the ES Test.

 

 

Relevant Entities

 

 

Relevant Entities include all Cayman companies (including foundation companies), LLCs, LLPs, registered foreign companies and partnerships (including exempted limited partnerships, general partnerships, limited partnerships and foreign limited partnerships), except:

 

(a)   investment funds or entities through which investment funds directly or indirectly invest or operate

(b)   entities which are tax resident outside of the Cayman Islands (including, subject to certain conditions, entities which are disregarded entities for US income tax purposes)

(c)   entities which are authorised to carry on business locally in the Cayman Islands as a domestic company or local partnership

 

An entity which carried on a Relevant Activity in the reporting year and which claims tax residency outside the Cayman Islands must submit an annual return declaring the jurisdiction in which it is tax resident and providing documentary evidence of its tax residency outside the Islands. This return also includes information on the entity’s immediate parent, ultimate parent and ultimate beneficial owner. All information submitted by such an entity to the DITC will be shared with tax authorities in the jurisdiction in which they are claiming residence and the jurisdictions of their immediate parent, ultimate parent and ultimate beneficial owner.
An entity which meets the definition of an investment fund in the Act, which may be the investment fund itself or an entity through which an investment fund directly or indirectly invests or operates (which would also generally include the general partner of an investment fund), is not a Relevant Entity and is not subject to an ES Test. It is, however, required to file an annual Economic Substance Notification to notify the DITC of its classification as an investment fund and to provide fund registration details (where relevant).

 

 

Relevant Activities
The Relevant Activities are:

 

  • fund management business
  • banking business
  • insurance business
  • financing and leasing business
  • shipping business
  • distribution and service centre business
  • headquarters business
  • intellectual property business; and
  • holding company business.

 

The Guidance issued by the DITC provides detailed information and sector-specific examples regarding the scope of each of these Relevant Activities and, other than investment funds, all entities will need to consider their operational activities carefully in order to determine whether they may be conducting a Relevant Activity.

 

The ES Test

 

Relevant Entities that carry on a Relevant Activity must satisfy the ES Test and, where a Relevant Entity carries on more than one Relevant Activity, it must satisfy, and report on its compliance with, the ES Test in respect of each such Relevant Activity. To satisfy the ES Test in relation to a particular Relevant Activity, a Relevant Entity must:

 

  • carry on its “core income generating activities” in relation to that Relevant Activity in the Cayman Islands
  • be “directed and managed” in an appropriate manner in the Cayman Islands in relation to that Relevant Activity
  • having regard to the level of relevant income derived from the Relevant Activity carried out in Cayman:

(a)   have an adequate amount of operating expenditure incurred in Cayman

(b)   have adequate physical presence (which may include maintaining a place of business  or plant, property and equipment) in the Cayman Islands

(c)   have an adequate number of full-time employees or other personnel with appropriate qualifications in Cayman (note that these may include outsourced personnel provided they are located in Cayman)

 

A Relevant Entity may satisfy the requirement that its core income generating activities be carried out in Cayman if those activities are conducted by any person and the Relevant Entity is able to monitor and control the carrying out of the core income generating activities by that other person, meaning it is permissible for Relevant Entities to implement appropriate outsourcing arrangements with service providers in Cayman. Core income generating activities should not be outsourced to service providers outside Cayman. Wherever an entity outsources core income generating activities, the outsourced service provider will be required to verify certain information regarding the outsourcing arrangement to the DITC.
The concept of holding company business (which is one of the nine Relevant Activities) is limited to Relevant Entities that only hold equity participations in other entities and only earn dividends and capital gains (known as Pure Equity Holding Companies). A Pure Equity Holding Company is subject to a reduced ES Test which is satisfied if it confirms that it has complied with all applicable filing requirements under relevant Cayman Islands legislation and has adequate human resources and premises in Cayman for holding and managing equity participations in other entities. In practice a Pure Equity Holding Company will commonly be able to satisfy the reduced ES Test by appointing a reputable registered office in Cayman.
Relevant Entities conducting “high risk intellectual property business” are subject to a higher burden of proof in demonstrating that they maintain adequate economic substance in Cayman. High risk intellectual property business generally includes scenarios where an entity did not create the IP which it holds and now generates income from that IP either by licensing it to other group entities or as a consequence of the activities of other group entities.
In order to meet the ES Test, an entity conducting high risk IP business must provide the DITC with materials which demonstrate that there is, and historically has been, a high degree of control over the development, exploitation, maintenance, protection and enhancement of relevant IP assets, exercised by an adequate number of full-time employees with the necessary qualifications that permanently reside and / or perform their activities within Cayman.
The Guidance issued by the DITC provides further information as to the meaning of “adequate” and “appropriate” for the purposes of the ES Test. Notably, such Guidance accepts that what is adequate or appropriate for each Relevant Entity will be dependent on the particular facts of the Relevant Entity and its business activity and requires that the directors (or equivalent) of each Relevant Entity make a determination on these matters in good faith.

 

 

Core income generating activities
The Act defines “core income generating activities” (CIGA) as activities that are of central importance to a Relevant Entity in terms of generating relevant income (meaning income derived from the Relevant Activity) and requires that these be carried on in Cayman. The Act provides examples of core income generating activities for each Relevant Activity. For example, for financing and leasing business, CIGA include:

 

  • negotiating or agreeing funding terms
  • identifying and acquiring assets to be leased
  • setting the terms and duration of financing and leasing
  • monitoring and revising financing or leasing agreements and managing risks associated with such financing or leasing agreements

 

These lists of CIGA are not prescriptive and it is not the case that a Relevant Entity which conducts the Relevant Activity must conduct all of the listed CIGA. However, to the extent the Relevant entity does conduct the relevant CIGA, that CIGA must be conducted in the Cayman Islands. It should also be noted that where a Relevant Entity contracts to conduct a CIGA, it will be considered to be doing such an activity notwithstanding any delegation arrangement.

 

 

Directed and managed
To be considered to be “directed and managed” in an appropriate manner in Cayman generally requires that:

 

  • the Relevant Entity’s board of directors, as a whole, has the appropriate knowledge and expertise to discharge its duties as a board of directors in relation to the Relevant Activity
  • meetings of the board of directors are held in Cayman at adequate frequencies given the level of decision making required in relation to the Relevant Activity
  • there is a quorum of directors present in Cayman during the meetings described in the second bullet point above
  • the minutes of the board of directors record the making of strategic decisions of the Relevant Entity at the board meetings held in Cayman
  • the minutes of all meetings of the board of directors, together with other appropriate records of the Relevant Entity, are kept in Cayman

 

A meeting will be considered to be validly held in Cayman for these purposes only if:

 

  • the situation of that meeting would be deemed to be in Cayman under the constitutional documents of the Relevant Entity (this is commonly decided by the location of the chairman of the relevant meeting)
  • at least that number of directors of the Relevant Entity constituting a quorum are physically present in Cayman for the meeting

 

Key dates
The Act and accompanying regulations provide a timetable for compliance, notification and reporting.

 

 

Compliance
The ES Test must be satisfied from the date on which the Relevant Entity commences the Relevant Activity until the date that the Relevant Entity ceases carrying on the Relevant Activity (or ceases to be a Relevant Entity).

 

 

Notification
By 31 January in each calendar year, all legal entities domiciled or registered in the Cayman Islands must file an Economic Substance Notification to notify the DITC as to whether they conducted any Relevant Activities and whether they were a Relevant Entity during their financial year which commenced in the prior calendar year (that is the notification in 2025 would relate to financial years commenced in 2024, whether that be 1 January 2024 or 1 September 2024, for example).
This notification is made via the entity’s registered office to the Cayman Islands Registrar. Notwithstanding the 31 January deadline, no penalties accrue unless the notification has not been submitted by 31 March. Any legal entity which intends to terminate, migrate to another jurisdiction, deregister as a foreign company or be merged or consolidated with one or more other entities, is required to submit a notification for the current year before it becomes deactivated by the Cayman Islands Registrar.

 

 

Reporting for Relevant Entities

Each Relevant Entity conducting a Relevant Activity must submit an Economic Substance Return to the DITC within 12 months of the end of its financial year regarding its compliance with the ES Test during that financial year. This return includes various financial, ownership and other data and any Relevant Entity conducting a Relevant Activity must also provide its books of account or financial statements for the relevant financial year.

 

 

Reporting for entities claiming tax residency outside of the Cayman Islands

Each entity that carried on a Relevant Activity but which is not a Relevant Entity by reason of its tax residency in a jurisdiction other than the Cayman Islands must submit a TRO Form to the DITC within 12 months of the end of its financial year. As noted above, this includes providing documentary evidence of its tax residency outside Cayman and providing information on the entity’s immediate parent, ultimate parent and ultimate beneficial owner.

 

 

Record keeping
A Relevant Entity that is required to satisfy the ES Test in relation to a Relevant Activity must retain for six years after the end of its financial year records that relate to the information required to be provided to the DITC.

 

To incorporate a Company in the Caymans with OCI usually costs $US $US 3,271.50 and from 2nd year $$2,721.50. For details of what’s included in the set-up price and annual fee from 2nd year, check these links:

https://www.dropbox.com/scl/fi/r43bsah70rebkudj3khpk/Incorp-Package-Standard-Inclusions.docx?rlkey=fhkty35sfxd00g7ox7jgk60fs&st=7fwasq7x&dl=0

 

https://www.dropbox.com/scl/fi/v0duexaw0pyz1qbkt8xlv/What-do-you-get-for-your-annual-renewal-fee-COMPANY.doc?rlkey=z36pru1r8my2trvmfdhycnrdj&st=jjba8jlq&dl=0

 

For details in regards to the features and benefits of a Caymans Exempt Company check this Link: https://www.dropbox.com/scl/fi/unchix11ik987n9x3gl9y/Caymans-Exempt-Companies-Fact-Sheet.docx?rlkey=oezdaxq7s2gh4h5shx5z3y5hh&st=mekwvb8r&dl=0