BVI Economic Substance (Companies and Limited Partnership) Act, 2018
The BVI Economic Substance (Companies and Limited Partnership) Act, 2018 has been gazetted on 19 December 2018 and effective from 1 January 2019.
You are required to do the following under the new Act:
1.
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Identify whether your BVI company business activities are in the scope of relevant activities
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If your BVI company conduct the business activity in the scope of below relevant activities, your BVI company is required to comply with the economic substance requirements unless point 2 below is applied.
Relevant activities are:
-Banking business
-Insurance business
-Fund management business
-Finance and leasing business
-Headquarter business
-Shipping business
-Holding business
-Intellectual property business
-Distribution and service centre business
Please refer to the Annex 1 for the definition of relevant activities
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| 2. |
Identify whether your BVI company is a tax resident outside of the BVI |
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If your company is a tax resident outside of the BVI (except for jurisdictions included in the EU list of non-cooperative jurisdictions), the economic substance requirements do not apply to your company. To prove the non-resident status in BVI, the government of the BVI may require you to provide the satisfactory evidence such as Tax Identification Number, Tax Residence Certificate and assessment or payment of a tax liability, etc. |
3.
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Economic Substance Requirements
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Under the circumstances that your BVI company is not able to confirm its non-resident status outside of the BVI and is engaged with one or several of the relevant activities, the company is required and will be deemed to comply with the economic substance requirements if:- |
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a.
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The relevant activity is directed and managed in the BVI; |
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b. |
Having regard to the nature and scale of the relevant activity carried on and in BVI; |
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c. |
The legal entity conducts BVI core income-generating activity; and |
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d. |
In the case of income-generating activity carried out for the relevant legal entity by another entity:-
(i) no core income generating activity is carried on outside of the BVI;
(ii) only that part of the activities of that other entity which are attributable to generating income for the relevant legal entity shall be taken into account when considering if the relevant legal entity meets the economic substance requirements;
(iii) the relevant legal entity is able to monitor and control the carrying out of that activity by the other entity.
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| 4. |
Important Date for Annual Economic Substance Reporting |
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Existing companies are required to comply with the economic substance requirements under the Act by 1 October 2019 and to meet reporting obligations before 30 June 2020.
New companies formed on or after 1 January 2019 are required to comply with the economic substance requirements under the Act immediately and to meet reporting obligations within one year of formation.
From 1 October 2019, the BVI company which carry on any relevant activities should:
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a)
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Determine whether they are a tax resident in BVI or outside BVI |
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b)
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Classify which relevant activities is/are in the scope of business |
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c)
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Determine the starting and ending date of financial period |
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d)
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Start to collect the material of meeting the economic substance test and report the material to the BOSS system in BVI |
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Penalty will be imposed if BVI company cannot comply with the economic substance requirements. |
The Final version of the Rules on Economic Substance has published on 9 October 2019, you are required to identify and provide the relevant information and documents as soon as possible to comply with this new regulation.
Rules on Economic Substance in the Virgin Islands
BVI Economic Substance (Companies and Limited Partnerships) Act, 2017 (Consolidated)
Beneficial Ownership Secure Search System, Act 2017 (Consolidated)
If you are requiring further information or would like to discuss about the Economic substance and business solution, please get in touch with your contact persons in Kaizen.
If you wish to obtain more information or assistance, please visit the official website of Kaizen CPA Limited at www.kaizencpa.com or contact us through the following and talk to our professionals:
Email: info@kaizencpa.com, enquiries@kaizencpa.com
Tel: +852 2341 1444
Mobile : +852 5616 4140, +86 152 1943 4614
WhatsApp/ Line/ Wechat: +852 5616 4140
Skype: kaizencpa
DOWNLOAD： BVI Economic Substance (Companies and Limited Partnership) Act, 2018 [PDF] |
