BVI Appears on EU “White List” of Jurisdictions

The British Virgin Islands became one of 16 countries placed on EU white list, which was revealed in the last weeks of February. The jurisdiction was whitelisted partially due to economic substance legislation enacted at the end of 2018, which allowed the BVI to be placed on the EU’s “Annex II” of jurisdictions with “pending commitments.” The deadline extensions were granted to give time to the British Virgin Islands to pass the needed reforms to fully comply with co-operation standards. Thus, the country avoided being placed on “Annex I” (the blacklist).

BVI Premier Andrew Fahie welcomed the decision of the European Union, having said in his statement: “This is as a result of close cooperation and positive dialogue with the EU and demonstrates the BVI’s commitment to meeting and surpassing international standards.” He also added that he and his government “remain completely focused on ensuring the continued success of our international business and finance centre and its role in the global economy. We believe there will be significant opportunity for our territory and our people as we enhance our economic substance yet further.”

The 16 new whitelisted jurisdictions, along with the Virgin Islands, are Antigua and Barbuda, Armenia, the Bahamas, Barbados, Belize, Bermuda, Cabo Verde, Cook Islands, Curaçao, Marshall Islands, Montenegro, Nauru, Niue, St. Kitts and Nevis and Vietnam.

BVI Premier Announces Revenue from Financial Services to Drop off

When addressing the House of Assembly during the budget debate, BVI Premier and Minister for Finance Andrew Fahie has said the British Virgin Islands’ revenues from the financial services sector dropped off by roughly US$30 million. He also said he had to put several projects on hold, including those in the health services, because he knew that this drop off would happen.

Meanwhile, the financial services sector was expected to see boom this year, which could be the result of the EU insisting that the territory implement the Economic Substance (Companies and Limited Partnerships) Act which makes it mandatory for offshore financial services companies to be physically present in the BVI territory. This Act was passed to remove the BVI from the EU blacklist on non-compliant jurisdictions. By words of the Director of International Business Neil Smith, due to opening physical offices the number of companies in the jurisdiction would have been reduced, but the number of persons involved in the industry was likely to triple.

UK Government Extending Deadline for Public Registers in BVI

The UK government has given its Overseas Territories including the British Virgin Islands an allowance to continue without implementing the public registers of company beneficial ownership until the year 2023. In fact this is a 3 year extension to the initial deadline set by the United Kingdom in its Sanctions and Anti-Money Laundering Act, which was forcing to implement public registers by the year 2020.

UK Minister responsible for OTs, Lord Tariq Ahmad, gave his comments about the deadline extension: “It is our intention that if by 2020 there is no public register, for whatever territory, we will then issue an Order in Council, which will then have a requirement for an operational public register by 2023.” By his words, the 2023 deadline will give the UK time to advance its mission of making public registers become a global standard. 

The public registers mean that the BVI along with other Overseas Territories will be required to disclose the names of beneficial owners of offshore companies registered in the jurisdictions. The BVI is objecting the implementation of public registers before they become a global standard, as it would place the territory in a disadvantageous position to other countries providing financial services.

BVI Gets New Status on EU Tax list

On March 13, 2018, the European Union has made changes to the list of non-cooperative tax jurisdictions: three countries were removed and further three were added to it. Bahrain, the Marshall Islands and Saint Lucia were said by the EU Council to have made commitments to answer the EU’s concerns about them, and the Bahamas, Saint Kitts and Nevis, and the US Virgin Islands were, in their turn, included in the list.

The British Virgin Islands, along with Anguilla, Antigua and Barbuda, and Dominica were added to annex II of the list, which includes territories that have made commitments to reform their tax policies. These jurisdictions are subject to close monitoring. The original list comprised 17 jurisdictions and was announced on December 5, 2017.

BVI Among Major FDI Sources for New Zealand

According to the information of New Zealand’s lobby group, foreign direct investment (ownership of companies) in the country increased by 653% from $15.7 billion in 1989 to $113 billion in 2017. Most assets are owned by businesses from Australia, and the British Virgin Islands also are among the major investors along with the US, Hong Kong, the UK, Japan, Singapore, Netherlands, Canada, Cayman Islands, and a number of other countries.

By words of Bill Rosenberg of the Campaign Against Foreign Control of Aotearoa (CAFCA), "All had over $100m in foreign direct investment in New Zealand. These accounted for 95 per cent of foreign direct investment in New Zealand and Australia alone accounts for 51 per cent. Luxembourg, British Virgin Islands and Cayman Islands are tax havens, and the Netherlands has been used to avoid tax." 

He also said that foreign owned entities keep control of 38% of the share market of New Zealand in 2017, while in 1989 it was 19%. Last year, the Overseas Investment Office approved foreign investments in the country in the amount of $5.3 billion.

British House of Lords Voting Against Public Beneficial Owners Register

The amendment proposal for the Cayman Islands, British Virgin Islands and four other British Overseas Territories to implement public register of beneficial owners behind offshore companies registered in these jurisdiction was rejected in British House of Lords, by 211 to 201. The peers voted during the debate on the proposed Sanctions and Anti-Money Laundering Bill; the public register requirement was for the purposes of “preventing money-laundering”.

The amendment, if accepted, would allow the UK government to demand the offshore countries to provide details of companies’ owners. It was already the fourth time when the idea of public registers was discussed in the House of Lords.

In the opinion of the Conservative member of the Lords who argued against the proposal the law enforcement agencies do not support public registers as they actually don’t help law enforcement. He also noted that the UK overseas countries already shown themselves“extremely efficient in responding to the requests of policing and other agencies”.

Other concerns expressed included the potential identity theft that can be facilitated by the public register of beneficial ownership, as well as possible loss of business in favour of competitors. There were also warnings against legislating for self-governing overseas territories.

British Virgin Islands Among Top Destinations for Offshore Investments

The research was conducted in Netherlands looking at how particular countries and jurisdictions are used by corporations to minimize their tax liabilities. It was found that the Netherlands, the UK, Ireland, Singapore and Switzerland are the five large countries most popular as intermediate destinations for corporations to access low-tax financial centres. The British Virgin Islands, Hong Kong and Jersey are the largest offshore financial centres in terms of investment volume.

The report says: "Our results show that offshore finance is not the exclusive business of exotic small islands far away... Countries such as the Netherlands and the United Kingdom play a crucial yet previously hidden role as conduits of offshore finance on its way to 'tax havens.'"

New Vistra Report: BVI Ranked as Top Offshore Jurisdiction

The 2017 edition of Vistra 2020 report was launched in Hong Kong and Singapore, which ranked the British Virgin Islands as the top offshore jurisdiction in the world. The United Kingdom was ranked first as the onshore jurisdiction, followed by Hong Kong as midshore; the BVI is in the third place, followed by the United States in the onshore category.

The report named "Vistra 2020: The Uncertainty Principle: The State of the Trust, Fund and Corporate Services Industry 2017" examines trends and factors affecting global financial services industry, in the period since the last report published in 2015. 

The Asian growth drivers of the financial industry listed in the report are supporting the BVI position as Asia's number one international finance jurisdiction. Investors from China and other Asian countries make use of the trust-related offerings of the jurisdiction to develop succession planning and secure asset protection under Virgin Islands Special Trust Act (VISTA) trusts and Private Trust Companies (PTCs). BVI trusts and wealth-planning services provide privacy, since assets are held in the trustee’s name.

Elise Donovan, director, BVI House Asia, said: “The newly licensed Bank of Asia, the first online, cloud-based bank, will launch later this year. It is poised to drive banking costs lower while increasing the level of convenience and efficiency afforded to customers opening BVI accounts.”

UK Tax Policy to Become Closer to its Overseas Territories

European finance ministers and experts expressed concern that Brexit could cause the UK to become another tax haven, the same as its Caribbean territories. By words of George Osborne, the country would cut its corporate tax rates to one of the lowest of any major economy, from 20 percent to less than 15 percent by 2020, trying to avoid the recession after Brexit and attract international investment.

Even before the referendum, UK was in the process of lowering corporate tax rate from 20 percent to 17 percent, to become more attractive destination for multinational corporations; after exit from the EU, the country will double its attempts to maintain London's status as premier financial centre. 

The British overseas territories including the British Virgin Islands are often used to shield the assets and identities of their clients. However, the UK and its Caribbean territories adopted the OECD new Common Reporting Standard, which makes disclosure of tax residency information compulsory starting from 2016. This was connected very much with anti-tax avoidance initiatives caused by Panama Papers leak as an important source of information and moving force for these changes.

BVI Meets International Standards on Beneficial Ownership

On 11 April, British Prime Minister David Cameron made the statement in the House of Commons, having commended the BVI and other Overseas Crown Dependencies for enhancing co-operation with the United Kingdom, especially in the areas related to beneficial ownership and international exchange of tax information. The statement was welcomed by BVI Premier and Minister of Finance Dr Orlando Smith as reinforcing the BVI’s long-standing commitment to international standards on tax and transparency and to maintaining its robust regulatory regime.

A week earlier, the UK and the jurisdiction agreed to sign an exchange of notes on beneficial ownership between the countries, setting their mutual commitment to exchange beneficial ownership information between law enforcement agencies for the detection and prevention of criminal matters. This agreement may be considered as complementary to BVI’s good standing in meeting international commitments on tax, transparency and anti-corruption under Foreign Account Tax Compliance Act (FATCA), Organisation for Economic Co-operation and Development (OECD), The Financial Action Task Force (FATF) and the United Nations (UN).

BVI Faces Consequences of ‘Panama Papers’ Leak

BVI authorities said that the leak of confidential data from the Panama law firm Mossack Fonseca specializing in offshore financial services, which included about 11 million documents, prompted them to look for any breaches of financial regulations in the Caribbean territory. BVI-registered companies play the most important role in the leaked records, the same way as BVI takes its prominent place in the global offshore financial industry.

BVI financial regulating services have issued a statement where they say that they will ‘pursue a thorough investigation through the BVI's competent authorities, and further action will be taken, where necessary’.

Last year, there were 9,388 company incorporations in the BVI, down from 11,436 the previous year. The BVI is said to have ‘rigorous’ regulatory oversight of its financial sector and adhere to international standards.

BVI Government Representatives Meeting EU Officials

According to the statement issued by the BVI Government, its London Office Director and EU representative recently co-chaired an EU/OCT Financial Services Partnership Working Party meeting in Brussels, Belgium, having discussed the issue why earlier this year BVI was placed on the list of non-cooperative tax jurisdictions.

The Director of Policy, Research and Statistics at the BVI FSC Cherno Jallow and other OCT technical experts had the meeting on the issue with European Commission officials from the Directorate General for Taxation and Customs Union, talking about the European Union position on blacklisting of Overseas Territories. By words of Jallow, the sides agreed that the inclusion of countries on the list had to be further considered in connection with co-operation between the EU and OCTs in the sphere of financial services.

Other issued discussed during the meeting were operation of the platform for tax good governance, re-launching of the common consolidated corporate tax base (CCCTB), Country-by-Country reporting and other EU initiatives.

The BVI FSC representative also had a meeting with the UK person on the European Parliament, Daniel Dalton, to brief him on the “high international standards met by the BVI on tax and transparency during the meeting”.

BVI Presented as Top Financial Centre at China Offshore Summit

British Virgin Islands was named the most important and most preferred offshore jurisdiction in the Asia Pacific, already for the sixth year. The survey was conducted inside and outside the region, and in respondents’ opinion BVI remains the undisputed market leader in the financial services industry.

At the 2015 China Offshore Summit, which was held in Shanghai on November 4-5, CEO of Vistra Group Martin Crawford made a presentation on behalf of BVI Finance. He said that the BVI territory held about 50 percent of the market share of new offshore companies formed globally and, of the active companies on the BVI’s registry, about 60 percent were from Asian clients. He stated that in the Global Financial Centres Index the BVI is ranked at the top of the most competitive offshore financial centres, and named some factors that help BVI remain the leader, among them legal and commercial certainty, and robust regulatory standards, being focused on “value-added” rather than pure volume.

Additionally, Crawford said that the top ten listed companies on the Hong Kong Stock Exchange and the Shanghai Stock Exchange had BVI subsidiaries.

Presentations were also made for the BVI at the Summit by group legal counsel at AMS Financial Group, Barry Mitchell, director of BVI House Asia, Elise Donovan, and managing partner in China of Harney, Westwood and Riegels, Kristy Calvert. China Offshore Summit was attended by more than 500 Chinese business leaders.

Caribbean Community Issues Statement on Tax Haven Blacklisting

Following the European Commission’s decision to put some Caribbean jurisdictions – members of the Caribbean Community – on the “black list” as non-willing to co-operate with EU countries in the area of tax law enforcement, CARICOM issued a statement strongly objecting this, and emphasizing efforts of CARICOM member states to comply with regulatory measures.

BVI is among the “blacklisted” countries, along with Anguilla, Antigua and Barbuda, The Bahamas, Barbados, Belize, Bermuda, Cayman Islands, Grenada, Montserrat, St Kitts and Nevis, St Vincent and the Grenadines and the Turks and Caicos Islands. The criteria for considering the countries as non-cooperative included governance (transparency and exchange of information) and fair tax competition.

It is remarkable that in a formal statement issued by the OECD Global Forum this month, it has disassociated itself with the decision of the European Commission, although their own assessment was relevant for the purposes of determining country’s cooperation in tax matters. From the Global Forum statement, it became clear that the EU point of view does not correspond with that of the Global Forum, which, in its turn, is planning to extend support to its member countries put on the black list.

GFCI Ranks BVI First among Offshore Jurisdictions

According to the recently published Global Financial Centres Index (GFCI), BVI offshore jurisdiction is on the 34th position – 13 positions higher than in the previous list. British Virgin Islands has the highest rank among its competitors, including Cayman Islands, Channel Islands, the Bahamas and Bermuda.

Executive director of BVI Finance, Kedrick Malone, commented on the GFCI results, saying: "… The result of the index clearly shows that the BVI is an internationally respected, established and pioneering financial centre…The BVI's position as the leading offshore financial centre is testament to the strength and high standards of our multi-faceted financial services sector, the professional in its rank and the regulatory regime that it operates within."

The Index is based on the existing information and online survey results taking into account more than hundred different factors, including regulations, workforce, and companies operating in the financial centre and providing financial services.

UK Opposition Leader Issued Letter to UK Overseas Territories

The leader of the UK Opposition Ed Miliband issued a letter to the leaders of British overseas territories, including the British Virgin Islands, Anguilla, Bermuda, the Cayman Islands, and others, where he said they would have six months to make a public register of offshore companies, in order not to be put on an international blacklist of countries that refused to take measures against tax avoidance.

Mr. Miliband said: "If any Overseas Territory or Crown Dependency does not meet this deadline, we will ask the Organisation for Economic Co-operation and Development to put them on the OECD's tax haven blacklist."

The plan of the leader of the Labour Party was criticised by Conservative Treasury minister David Gauke who said: "the UK is the only country in the OECD committed to a public central register. He wants the OECD to blacklist countries if they don't do the same as us. But that would mean blacklisting every single country in the OECD apart from the UK – countries like the US, France and Germany.”

BVI recognized as Major Offshore Centre in International Reports

The British Virgin Islands jurisdiction has been named the top offshore centre in the Global Financial Centres Index – the 16th survey of more than 3,500 international financial services professionals. Also, already for the fifth year, BVI became the most important offshore jurisdiction according to the Offshore 2020 report, which is a survey of 300 senior financial industry stakeholders from many countries. The BVI was ranked in the 47th place – the highest among offshore centres. Gibraltar is in the 53rd place, Cayman Islands and Bermuda are 54th and 58th, respectively.

The fifth Offshore 2020 report stated that offshore industry has emerged during this year, featuring better regulation, more transparency and higher degree of professionalism. It was noted in the report also that offshore centres continue to struggle with reputation and regulation, and for all of them, ratings lowered since the last Global Financial Centre Index 15. The report also highlights recognition of the offshore industry role in the global financial supply chain, including international trade, capital efficiency and asset management.

BVI Premier Signed FATCA-related Agreement

The Model 1B intergovernmental agreement (IGA) was signed by the government of the BVI at the Department of Treasury in Washington, DC. According to BVI Premier Dr Orlando Smith who signed the IGA, this is the final step in the current phase of Foreign Account Tax Compliance Act (FATCA) implementation in the British Virgin Islands. Next phase will be creation and issuance of guidance notes that assist financial institutions and other parties in the jurisdiction to determine their requirements under the agreement.

BVI Financial Secretary Neil Smith stated among the key benefits of the IGA that BVI financial institutions have until the end of 2014 to obtain a global intermediary identification number (GIIN). 

The BVI government will issue a draft of the territory’s guidance notes to receive comments from members of the financial services industry. It will be possible to give feedback on the guidance notes also through participating in workshops that will be provided for the industry specialists by KPMG (BVI) Limited. After making sure that the guidance notes will adequately address any BVI-specific situations, they will be updated and amended.

FATCA was enacted in 2010 by the US Government, with the main purpose to combat tax evasion by some US citizens holding their investments in accounts outside of the United States, and requires foreign financial institutions to report to the IRS information on assets of US$50,000 or more held by US taxpayers.

BVI and CI as Main Offshore Jurisdictions for Chinese Capital

In the South China Morning Post publication, BVI and Cayman Islands were named the main offshore hubs for China, which get the largest part of Chinese investments in the Caribbean region. The US government body informs that of US$62.1 billion in outward direct investment flows by 2012, all but US$282 million went to these two jurisdictions, while all the other Caribbean countries received only US$31 million.

By the scale of the fund flows, the British Virgin Islands has become the second-largest destination for mainland Chinese overseas direct investment after Hong Kong, being the preferred offshore tool for structuring investments into and out of Asia. 

According to the report published by the US-China Economic and Security Review Commission, in 2010, British Virgin Islands companies were responsible for US$111 billion, or 10 per cent, of foreign direct investment in China. Chinese companies invested US$69 billion overseas, of which 75% was handled by companies domiciled in the British Virgin Islands, Cayman Islands and Hong Kong. In 2012, FDI flows to the British Virgin Islands reached US$2.24 billion, while the stock of these investments amounted to US$30.85 billion.

Last year’s opening of BVI House Asia in Hong Kong facilitated the increase in fund flows. The review commission stated that China's ties with the Caribbean had strengthened over the decade, and are likely to continue expansion.

New Cybercrime Legislation Act Introduced in BVI

Last week, a bill was introduced in the British Virgin Islands House of Assembly named The Computer Misuse and Cybercrime Act. This legislation document provides for fines of up to US$1 million or prison sentences of up to 20 years for individuals that illegally leak confidential information, and sentences of up to 15 years and/or fines of US$500,000 for anyone publishing such data, and applies to any person of any nationality. Actually, the law followed the global leak of information in the last year, published by the International Consortium of Investigative Journalists (ICIJ), and revealing private information on BVI companies contained in the secret files.

According to the survey of the industry, conducted by Offshore Incorporations Limited, the ICIJ’s reports had caused a “crisis of confidence” in the offshore industry and decline in offshore company incorporations, and particularly in the British Virgin Islands jurisdiction. Most offshore professionals stated that the disclosures have reduced demand for offshore financial vehicles or, in other cases, prompted clients to move their business from one financial centre to another. 

Press freedom manager of the International Press Institute (IPI) Barbara Trionfi said that "It is vital that the House of Assembly amend the Computer Misuse and Cybercrime Bill to include a clear exception for information in the public interest, as journalists must be free to report on issues that affect democratic accountability." She added: "We are also concerned that the disproportionately harsh punishments foreseen by this bill, as well as a lack of specificity as to which information is protected, will contribute to a dangerous chilling effect on the media."