In March 2018, the BVI was included on the EU’s ‘grey list’ of cooperative tax jurisdictions, signifying that, whilst the BVI was proactively engaging with the EU, the EU required further progress to address its concerns. Since that date, the BVI has proven its commitment to good tax governance by passing the Economic Substance (Companies and Limited Partnerships) Act, 2018, which requires certain entities to demonstrate economic substance in the BVI. To complement this primary legislation, the BVI International Tax Authority has issued rules of interpretation, an updated version of which was published on 10 February 2020 and now includes a number of worked examples to better assist the classification of entities.
In addition, the BVI has passed amendments to the BVI Securities and Investment Business Act to increase the regulatory oversight of closed-ended investment funds, in response to concerns from the EU.
Each of these steps further establishes the BVI’s position as an internationally respected financial centre, committed to good corporate and tax governance, effective regulation and enforcement measures to combat money laundering and other financial crime.
Further details on the economic substance regime can be found here.
Appleby also provides a free online tool to assist in analysing whether an entity falls within the scope of the economic substance requirements. This tool can be found here.
An overview of the legislation on closed-ended funds can be found here.
If you have any queries on how these latest developments may impact any of your existing or proposed entities in the BVI, please reach out to your usual Appleby contact or a member of the team below.