Economic Substance Requirements in the British Virgin Islands
On January 1, 2019, the Economic Substance (Companies and Limited Partnerships) Act, 2018 came into force and applies to all resident BVI companies and Limited Partnerships. Companies that are within the scope of the legislation and are not tax resident outside the BVI will need to demonstrate that they have economic substance in the British Virgin Islands. There is a relatively short list of defined activities that fall within the scope of the legislation and these are listed below:
- Banking Business
- Insurance Business
- Fund Management Business
- Financing and Leasing Business
- Headquarters Business
- Shipping Business
- Intellectual Property Business
- Distribution and Service Centre Business
- Pure Equity Holding Company
An entity which carries out one or more of the defined activities above must comply with the economic substance requirements in relation to each activity. If an entity does not carry out any of the defined activities above, then the company does not fall within the scope of the legislation.
Your Reporting Obligation
Entities formed after January 1, 2019 will have their first financial period for Economic Substance (ES) purposes one year after their respective date of formation, unless notice has been given to the BVI International Tax Authority (ITA), within the prescribed period pursuant to the ESA, to change their first financial period.
Entities are required to file their first ES report within six (6) months after the end of their respective financial period. In view of this, entities formed on January 1, 2019 will need to file their first ES report by June 30, 2020, entities formed on January 2, 2019 will need to file their first ES report by July 1, 2020 and so forth. Entities formed before January 1, 2019 will be required to file their first ES report within a period of six (6) months after June 29, 2020.
All ES reports will be filed on the BVI Beneficial Ownership Secure System (BOSS) by your registered agent in the BVI. To enable your agent to ensure your entity’s compliance with ES obligations, you must complete and execute the relevant forms, which we have linked below: