By Bria Smith
ROAD TOWN, BVI — Premier and minister of finance, Dr Orlando Smith, has announced that the British Virgin Islands has passed important legislation that addresses the European Union’s (EU) concerns over “economic substance” and which came into force on January 1, 2019.
The Economic Substance (Companies and Limited Partnerships) Act, 2018, concluded its passage through the House of Assembly on December 19. This was ahead of the December 31 deadline set by the EU for the BVI and other financial centres.
The EU is compiling a list of non-cooperative jurisdictions on the basis of certain criteria it has set covering tax transparency, fair taxation and compliance with the OECD’s Base Erosion and Profit Shifting (BEPS) requirements. As part of this process the EU screened 92 countries in 2017, including large nations such as the US and China.
The BVI has already and continues to respond constructively to the EU’s listing exercise. It is expected that the formal response of the EU will not be known for a few months.
Smith said, “The international business and financial services sector makes a vital contribution to the economy of the British Virgin Islands and facilitates cross-border investment and trade to the benefit of the global economy.
“The government has engaged closely with EU officials over the last 18 months to understand and address the concerns that have been raised and has consulted on a regular basis with representatives of the financial services industry. Dialogue with the industry will continue to ensure smooth implementation of the new requirements and the International Tax Authority is issuing a guidance note to accompany the new Act.”
The premier added, “The government recognises that the legislation will create challenges for some companies and limited partnerships, especially given the compressed timeline in which we had to pass this legislation. The BVI is not alone in facing these challenges. But in every challenge there is an opportunity and the Government will engage closely with the BVI’s international business and financial services sector to ensure that the jurisdiction continues to provide services that benefit the global economy.”