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BVI implements changes to the Beneficial Ownership Secure Search System Act

14 Jan 2022

Changes to the BVI’s Beneficial Ownership Secure Search System Act 2017 (BOSS Act) came into force as of 1 January 2022 which stakeholders should be aware of. We round up the key amendments and what they mean in practice below.

Background to the BOSS Act

As befits one of the world’s leading incorporation jurisdictions, the BVI is consistently regarded by regulators internationally as having a “best-in-class” regime for confidential reporting of beneficial ownership (BO) information to regulators. The BOSS Act is the jurisdiction’s cornerstone legislation in this regard.

Since 2019, it has evolved to provide for economic substance (ES) information reporting in connection with the Economic Substance (Companies and Limited Partnerships) Act 2018 (the ESA). The BOSS Act now also sets out the circumstances in which BO and ES information may be spontaneously exchanged with overseas competent authorities under the OECD substantial activities standard and related guidance (the OECD Guidance).

Amendments to the BOSS Act in 2021

The BOSS Act was amended twice in 2021 by two amendment Acts. The key changes made by the first amendment, which was effective from 1 July 2021, were discussed in our client update of 19 July 2021.

The second amendment in 2021 entered into force on 1 January 2022 and, from an ES perspective, applies to ES “financial periods” (FPs) commencing on or after that date.

Implementation of the changes in 2022

Broadly, the key points of which to be aware at this stage in consequence of the 2021 amendments are as follows:

  • BO reporting for limited partnerships without legal personality. All limited partnerships without legal personality registered in the BVI (Relevant LPs) are now within the definition of a “corporate and legal entity” (an Entity) and must report prescribed BO information to their registered agent within 15 days of identifying those matters following 1 January 2022. Limited partnerships with legal personality were already within the BO reporting regime but are relatively few in number.
  • Exemption for investment funds and “exempt persons”. However, that requirement does not apply where the Relevant LP is an “exempt person” (for the purposes of the BOSS Act) that does not carry on any “relevant activity” under the ESA – and it is important to note that the majority of Relevant LPs are investment funds regulated by the Securities and Investment Business Act 2010 and therefore should continue to fall within this exemption, as there is an express carve-out in the ESA for “investment fund business”.
  • ES reporting for FPs commencing on or after 1 January 2022. The potential scope of the ES reporting information for FPs beginning on or after 1 January 2022 has expanded significantly. There is also an obligation for Entities to identify and report certain prescribed information in respect of any “immediate parent” and “ultimate parent” of the Entity, as part of their ES reporting (which must broadly be completed within six months of the end of the relevant FP).[1] Potentially, spontaneous information exchange under the mechanisms set out in the OECD Guidance may occur with the jurisdiction(s) in which an immediate or ultimate parent is registered, in the circumstances set out in Schedule 4 of the BOSS Act and related Regulations.
  • ES Rules v3. We expect the International Tax Authority will publish version 3 of its ES Rules and Explanatory Notes in Q1 2022 reflecting these changes. We will publish further detailed client updates as soon as the revised Rules are available.

The BOSS Act is very technical and the precise interaction of the BO and ES regimes can be complex. If you need any advice regarding how the ESA or the BOSS Act apply to your BVI entity, please get in touch with your usual Harneys contact or alternatively contact the authors.

[1]Immediate parent” means any entity(ies) that own(s) directly 25 per cent or more of the ownership or voting interests in the Entity and the immediate parent may be a corporate or a non-corporate entity, for example a partnership.

Ultimate parent” means an entity that meets the following criteria: it owns directly or indirectly a sufficient interest in the Entity such that it is required to prepare consolidated financial statements under accounting principles generally applied in its jurisdiction of residence, or would be so required if its equity interest were traded on a public securities exchange in its jurisdiction of residence; and there is no other entity that owns directly or indirectly an interest described in paragraph (a) above in the first mentioned entity.

Authors

Joshua Mangeot Harneys front portrait image on a grey background
Philip Graham Harneys front portrait image on a grey background
Aki Corsoni Husain Harneys front portrait image on a grey background