The BVI has released guidance notes on the requirements of the Common Reporting Standards (CRS) as implemented in the British Virgin Islands. A copy of the guidance notes can be found here.
This is welcome news as until now, there has not been any BVI specific guidance and the interpretation of the CRS rules has been reliant on the general guidance provided in the CRS Implementation Handbook issued by the Organisation for Economic Co-Operative and Development which can be found here. The additional guidance has provided certainty on some key points, as well as a wealth of commentary and guidance on the specifics of interpretation of the CRS.
The CRS was brought into force in the BVI with the introduction of the Mutual Legal Assistance (Tax Matters)(Amendment)(No. 2) Act, 2015 (the Amendment Act), as subsidiary legislation to the Mutual Legal Assistance (Tax Matters) Act, 2003 (the MLAT). Under section 22(1) of the MLAT, the Financial Secretary (the FS) is the competent authority for CRS purposes. Under Statutory Instrument 6 of 2016, the FS designated the International Tax Authority (the ITA) to perform the functions conferred on the FS under section 22(1) of the Amendment Act.
Some key points that we are pleased to now have certainty on are:
- The initial notification to the ITA which must be made by all Reporting Financial Institutions by 30 April, 2017 and all annual reporting will be made via BVIFARS, the online portal that the ITA has been using to receive reporting in relation to UKCDOT and FATCA. We expect a further press release once BVIFARS is ready to accept registration and reporting.
- The list of Participating Jurisdictions published by ITA, which can be found here, is the list that Financial Institutions should use to determine whether an account is held by a person in a Reportable Jurisdiction and whether it needs to be reported to the ITA. There is no requirement for Financial Institutions to check whether the jurisdiction has entered into an automatic exchange relationship with the BVI. The list of Participating Jurisdictions is as broad as possible, comprising all committed jurisdictions, whether they will commence exchanging information 2017 or 2018. This should simplify the process for Financial Institutions as they will not need to repeat the due diligence process each time a country completes an exchange agreement with the BVI. The ITA will then pass relevant information on to only those Reportable Jurisdictions which have completed exchange agreements with the BVI.
- As we previously understood, the agreement that the BVI has signed with the UK for the automatic exchange of information (UK CDOT) will continue alongside CRS for 2017 but will be phased out in 2018. The guidance notes have confirmed that where there is overlap, there is no requirement for duplicate reporting. However for reporting in 2017, there are some accounts which will be reportable under UK CDOT but which will not yet need to be reported under CRS (for example lower value pre-existing individual accounts and pre-existing entity accounts unless already identified). Similarly, there are certain accounts which may be reportable under CRS but not under UK CDOT, for example, those that fall below certain thresholds. When determining what should be reported in 2017, this should be the maximum information required to be reported under UK CDOT or CRS. In 2018, all reporting will be in accordance with CRS.
- The guidance notes have confirmed that reporting requirements under the EU Savings Directive (EUSD) 2003/48/EC (EUSD), which has been repealed, will end on 31 December 2016 and will be replaced with CRS, except to the extent that any obligations in relation to reporting years until that date remain unsatisfied. The last reporting year under the EUSD is therefore the year ending 31 December 2016.
- The guidance notes have specified that although the filing of nil returns is not mandatory, any Reporting Financial Institutions with no reportable accounts must still complete the notification requirement via BVIFARS.