On 23 April 2019, the BVI International Tax Authority (ITA) published a draft Economic Substance Code (the Code). The Code is supplementary to the Act and contains details on how the economic substance requirements may be met and guidance on the interpretation of the legislation and the manner in which the ITA will carry out its obligations.
It is expected that the final Code will be issued at end September 2019. We only expect minor changes to the draft Code.
Recently, the BVI authorities have emphasised their expectation that all BVI entities in-scope of the EU Substance legislation should be able to demonstrate their basis for classification, as well as to keep any relevant documentation in the event that authorities request such information in the future.
Any company and/or individual failing to classify may be subject to significant fines and other penalties, such as the possibility of being struck off, or in extreme cases, the imprisonment of non-compliant individuals.
Hence, we would like to once again highlight the importance of classifying your entity as soon as possible. If you have yet to do so, we strongly urge that you take immediate action to ensure the continuity and compliance of your business.
Formed after/on 1.1.2019
– it is subject to Economic Substance immediately for relevant activity only
Date of incorporation: 4 Feb 2019
Reporting period: 4 Feb 2019 to 3 Feb 2020 (not more than 12 months)
Registration to BOSS: 3 Aug 2020 (complete substance information entered in RA database no later than 6 months after end of Report period)
Formed before 1.1.2019
– not obliged to comply to Economic Substance until 30 June 2019 for relevant activity only
Date of incorporation: before 1.1.2019
Reporting period: 30 June 2019 to 29 June 2020 (not more than 12 months)
Registration to BOSS: 29 Dec 2020 (complete substance information entered in RA database no later than 6 months after end of Report period)
Now you can use the Flow Chart and the Schedule of “Relevant Business” to help you determine if the company comes within scope of Economic Substance legislation.
We cannot be responsible for any determination as to whether the Company is within scope of the ES legislation without being formally engaged to conduct a comprehensive review of the Company’s activities.
Please let us know if you require a formal assessment of your Company or an opinion from a BVI lawyer in which case separate charges will apply.
Services to meet ES Requirements
We are also able to provide services to assist with compliance of substance requirements in the BVI through its BVI office. Please do not hesitate to contact us for further information.
We will continue to provide updates and guidance on any changes to the economic substance legislation as they become available.
Companies that come within scope of the ES legislation will be required to submit an annual return (“ES Return”) comprising information on the income generated by each relevant activity.
Financial accounts will therefore need to be maintained and may need to be provided upon formal request by the ITA. We advise that proper accounting records should be maintained by the Company.