BVI Ecomonic Substance Act
The Economic Substance (Companies and Limited Partnerships) Act, 2018 (the “ES Act”) came into force on 1 January 2019 in the British Virgin Islands (“BVI”). The ES Act imposes economic substance requirements on all BVI companies and limited partnerships (“LPs”) which are carrying on “relevant activities” unless they are resident for tax purposes in a jurisdiction outside the BVI.
A BVI business company or limited partnership which is not carrying on any relevant activity will need to file an annual return stating that it does not carry on a relevant activity. There are 9 specified business natures are being regarded as the “Relevant Activities”, which are (1) banking business, (2) insurance business, (3) fund management business, (4) finance and leasing business, (5) headquarters business, (6) shipping business, (7) holding business, (8) intellectual property business and (9) distribution and service centre business.
A BVI business company or limited partnership which does not satisfy the definition of “legal entity” because it is resident for tax purposes in a jurisdiction outside the BVI will need to demonstrate to the BVI authorities that it is resident for tax purposes outside of the BVI.
A legal entity carrying on a relevant entity must provide the following information to its’ BVI registered agent for uploading onto the BVI Beneficial Ownership Secure Search (“BOSS”) system:
- (1) the total turnover generated by the relevant activity;
- (2) the amount of expenditure incurred on the relevant activity within the BVI;
- (3) the total number of employees engaged in the relevant activity;
- (4) the number of employees engaged in the relevant activity within the BVI;
- (5) the address of any premises within the BVI ;
- (6) the nature of any equipment located within the BVI connected with the relevant activity; and
- (7) the names of the persons responsible for the direction and management of the relevant activity.
The Authority may also require a relevant entity to provide additional information (including copies of books, documents or other records, or of electronically stored information) and failure to provide requested information without lawful excuse or within the time specified by the Authority is an offence.