The British Virgin Islands adopted new legislation setting for tax-resident entities. The Economic Substance Act, 2018 came into force with retroactive revisions since the beginning of 2019.
It applies to companies and limited partnerships, excluding limited partnerships without legal personality, registered in the British Virgin Islands. It also applies to foreign companies and limited partnerships doing business in the territory of the BVI, other than the British Virgin Islands-registered companies or limited partnerships that are “non-resident” in the British Virgin Islands. The Act applies to all entities and new entities formed from 1 January 2019.
The Act enforces economic substance tests for registered limited partnerships and companies that are resident in the BVI and carry on relevant activities.
The Act defines relevant activities as:
- banking business;
- insurance business;
- fund management business;
- financing and leasing business;
- headquarters business;
- shipping business;
- holding company;
- intellectual property business; and
- distribution and service centre business.
The meaning of core income generating activities includes the following:
- banking business;
- distribution and service centre business;
- insurance business;
- fund management business;
- financing or leasing business;
- headquarters business;
- shipping business;
- intellectual property business.
In the case of non-compliance the Act provides for both criminal and financial sanctions.
You should be prepared for your registered agent to request additional information in due course and on an annual basis going forward.
If you like to discuss how the Act may impact your business, please contact Oracle Capital Group Corporate Services.
Ekaterina Bankova
Client Relationship Manager, Oracle Capital Group
