Exploring the implications of the BVI’s inclusion on the EU's list of non-cooperative jurisdictions
The recent inclusion of the British Virgin Islands on the EU’s blacklist has caused many to question the legal and regulatory implications. The primary principle to note is that, outside of the EU, EU law has minimal direct application and therefore this temporary inclusion will not bring about any immediate negative consequences for BVI funds or BVI managers.
Within the EU, however, it may be possible for certain payments between BVI entities and EU member states to trigger what are known as “defensive measures” under local tax laws. This only applies when there is an EU nexus present – such as a fund with a global investor base or investment activities occurring within the EU. It should be noted that these measures do not apply when there is no involvement with the EU.
In terms of subscriptions and redemptions, they can occur without issue so long as they are based outside of the EU. Likewise, fees paid to services providers in the EU should also not be subject to defensive measures as long as they come from non-EU sources. With regards to any underlying portfolio investments made by a BVI domiciled fund, professional advice should be taken before acquiring or disposing of these assets in order to ensure that all necessary compliance requirements are being met.
Finally, it is important to be aware of the possibility of triggering disclosure requirements under DAC6 if intermediaries dealing with BVI entities on the blacklist are located in an EU country. However, once again this will only be relevant if those companies have an existing connection with the European Union.
Overall then it becomes clear that while caution needs to be taken when dealing with a temporarily included entity such as the British Virgin Islands on an international blacklist like this one, so long as there is no direct impact on investments or activities within the European Union itself then there will likely only ever be minimal disruption in continuing business operations as usual.
For more on this subject, read our detailed article here.