Insights

One wealth planning vehicle remains constant through the many developments and challenges taking place in the last few years - the British Virgin Islands company. There remain around 600,000 active BVI companies worldwide, and although some client groups diversify away, others from Latin America and Asia, for example, continue to incorporate new BVI companies in great numbers.

In the fourteenth instalment of Harneys’ Substance on Substance series, Philip Graham and Joshua Mangeot discuss timing for compliance and reporting and address the ongoing obligation on BVI companies and other legal entities to identify “relevant activities”. This obligation came into effect from 1 October 2019 but is distinct from the reporting obligations which will generally commence in 2020 (except in the case of previously “exempt persons”, who now need to be reporting beneficial ownership information if they carry on any relevant activities).

The British Virgin Islands (BVI) International Tax Authority (ITA) rules and explanatory notes on economic substance (the Rules) were published on 9 October 2019. Read on to find out what BVI companies and limited partnerships should be doing now in view of the BVI economic substance requirements and the key deadlines involved.

“This year we’ve seen more changes than ever before. The pace and ferocity with which new legislation is coming is unlikely to change any time soon,” comments Ian Gobin, joint global head of our Investment Funds and Regulatory group at Harneys. “It’s our job to digest these new laws and distil them so that we can advise of their impact to our clients in the most practical of ways. To do this we have a global regulatory team, built of senior partners, professional support lawyers, paralegals, law clerks, research specialists as well as IT support/coders.

Harneys contributed the British Virgin Islands chapter in the Chambers 2019 International Arbitration Global Practice Guide. Litigation is more favoured than arbitration in the BVI however, the BVI wishes to promote the growth of arbitration and thereto adopts a strongly pro-arbitration approach. It is hoped that the BVI’s legal framework and stable political environment, as well as its central and neutral location, will enable it to rapidly become a leading arbitration hub for disputes involving Latin-American counterparties.

The Economic Substance (Companies and Limited Partnerships) Act, 2018 was introduced in the BVI, effective 1 January 2019, to address the concerns of the EU Code of Conduct Group and the OECD Forum on Harmful Tax Practices regarding economic substance. Related amendments to the Beneficial Ownership Secure Search System Act, 2017 will implement an economic substance reporting regime. Harneys has issued this guide to assist directors and operators of BVI companies and limited partnerships.