Posted by The BVI International Tax Authority (“BVI ITA”) recently updated the Rules on Economic Substance (“ES”). In this communication, we will highlight the key changes and how we can assist you to fulfil the latest requirements.
The new rules are applicable for financial periods commencing on or after 1 January 2022.
(A) Key changes to the ES Rules
- Major additional disclosures in the ES reporting
The ES reporting now requires additional disclosures, as follows:
- For all entities (including reporting as “None”): Tax Payer Identification Number, gross total annual income, business address, Multinational Enterprises Group name and information about parent entities are now required.
- For entities reporting Holding Business as relevant activity: Gross income and expenditure are now required.
- For entities reporting relevant activities (excluding Holding Business): Gross income, assets held, and quorum of board meetings and directors are now required.
- For entities reporting Intellectual Property Business as relevant activity: in addition to the information in (iii) above, details of the relevant tangible and IP asset, decision-making and operations, and business plans are also required.
- Refined documentary evidence requirement for tax residency outside BVI claim
The ES Rules refine the guidance on claiming tax residence outside the BVI and the acceptable evidence to support the claim. The Rules further detail the restricted jurisdictions in which the entity cannot be regarded as resident for tax purposes, and provide additional requirements for claiming tax residency in Guernsey, Isle of Man or Jersey.
- Definitions and examples
The ES Rules now provide definitions and examples to help entities better evaluate their ES requirements. The Rules clarify that investment fund business that meets the requirements set in the ES Rules would not be considered as conducting a relevant activity; and also offer explicit guidance for limited partnerships to meet their ES requirements.