BVI Government Approved Bill on the Issue of Economic Substance

BVI Premier and Minister of Finance Dr Orlando Smith announced that the BVI Government has taken measures to respond to the EU’s listing of non-cooperative jurisdictions, and will take reasonable steps to address EU economic concerns. The government approved the Bill , which is planned to be considered in the House of Assembly on December 13, and to come into effect by December 31, 2018, which is the EU deadline.

The new legislation will provide further assurance which was required from the BVI on the issue of ‘economic substance’. It is to introduce economic substance requirements for all business companies and LPs which are registered and tax resident in the British Virgin Islands.

Every corporate service provider will have to know where the company or limited partnership is tax resident and must be ready to provide that information to the BVI’s competent authorities. If tax resident in the BVI, they must show ‘economic substance’. Companies or LPs must, in relation to any relevant activity, carry out core income generating activities in BVI. Among them are: banking business, insurance business, fund management business, finance and leasing business, headquarters business, shipping business, holding business, intellectual property business, and distribution and service centre business.

For the last months, the BVI government had regular consultations with representatives of financial services industry, to address the concerns, and will continue dialogue for smooth implementation of the new requirements.