BVI News

‘Economic substance’ law in effect: BVI to hit noncompliant companies with varying fines

By Davion Smith, BVI News Staff

Penalties to be hurled at financial services providers who do not comply with requirements of the BVI’s new Economic Substance Act will come in the form of fines which, in the most extreme of circumstances, could near a quarter million dollars.

The Act effectively requires offshore financial services companies registered in the British Virgin Islands to physically set up office spaces in the territory, if they are to continue doing business with/through the BVI.

Preliminary fines for non-compliance range from a minimum of $5,000 United States currency to $50,000. These amounts will be determined and administered by the International Tax Authority (ITA), which is a unit established under the Ministry of Finance.

According to the new economic substance law, which came into force on January 1, noncompliant companies will have not fewer than 28 days after receiving a ‘notice’ to pay their fines.

Coupled with any penalties a company might be slapped with, the ITA will also outline what action should be taken by the company to “meet the economic substance requirements and the date by which such action needs to be taken.

Additional penalties nearing quarter million for not paying

The Act further outlined that considerably higher, additional penalties will be thrown at companies who do not pay their fines, if penalised.

Section 12 of the Act said these additional fines start from $10,000 to as much as $200,000.

Notably, Section 13 of the said Act grants financial services providers the right to appeal the amount in penalties imposed or even appeal the determination that they were ‘noncompliant’ in the first place.


The economic substance law also states that a company shall provide any information “reasonably required” by the ITA in order to assist them (the ITA) in making a determination as to whether the company has been abiding by the stipulations of the Act.

“A person who fails to provide information without reasonable excuse, or who intentionally provides false information in response to a request under this section commits an offence and is liable on summary conviction (at magistrate level), to a fine not exceeding $40,000 or to imprisonment for a term not exceeding two years or both,” Section 11 of Act states.

If convicted on indictment (at the higher court), an offender can be slapped with a fine not exceeding $75,000 or imprisoned for a term not exceeding five years or both.

Meanwhile, local legislators have described this new economic substance legislation as one that will hurt the BVI’s financial services sector. They, however, moved to implement the Act at the behest of the European Union (EU) who threatened to put the BVI and other jurisdictions on a ‘blacklist’ of tax haven jurisdictions if they did not comply.

Making the blacklist could mean the BVI getting subjected to diplomatic sanctions from EU countries.

Economic Substance (Companies and Limited Partnerships) Act

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  1. Anonymous says:

    The end has begun. Happy New Year

    Like 19
    Dislike 4
    • Howdy doody says:

      The problem is that for years we have made it so difficult for financial services businesses in the BVI to employ competent staff and therefore to provide to add on services to their clients. Most of the financial services businesses in the BVI have foreign offices, and they simply provide those add on services from the foreign offices. This means that the BVI office is typically merely printing out documents prepared elsewhere, filing them at the appropriate Registry, scanning the filed documents, and sending them back to the foreign office. The BVI provides basic routine secretarial level administration, and not proper substantive financial services.
      There is no infrastructure in the BVI for businesses that are incorporated here to open offices, and the BVI work pool is a desperately short of skilled potential employees with the necessary skills (to do anything but printing, filing and scanning). Business already here are struggling for space, and now the law requires most of the 430,000 offshore companies to open a substantive office within a year. Let’s get real!!!
      The majority of the other offshore financial jurisdictions (Cayman, Bermuda, Bahamas, Jersey, Guernsey and IoM) have made it their business to ensure that companies incorporating in those jurisdiction are incentivised to put down substantial roots – they have encouraged foreign investment in real estate and built modern offices that can be rented (Cayman is full of buildings like Ritter House) – we did exactly the opposite and there is a dire shortage of good office space in Road Town – lots of second and third rate premises but very little good stuff.
      This means that our financial service sector is the most portable and the most at risk of redomiciling to another more friendly jurisdiction.
      Even Harneys does significant business elsewhere.
      Suggestions about fishing or farming being our salvation are pipe dreams – we don’t have enough farming land to feed ourselves never mind export, and fishing is dying everywhere it is practised. We need foreign revenue to pay the huge costs of our civil service and other Govt expenditure.
      The only realistic solution is to smarten up our tourism product, accept that we may have to work in tourism (being pleasant and somewhat subservient to tourists). However, this morning numerous cruise ship passengers were left disappointed because of some silly administrative issue at the cruise ship dock meant that they could see the day charter boats that had come to collect them but were not allowed to board those boats. Do we think that they are reporting a positive experience of their trip to the BVI?
      Customs/Immigration are also being difficult about ferries landing with tourists when the flights to STT are a little late!!! WTF?
      Will we never learn?

      Like 25
      Dislike 3
      • REM says:

        Well said!

        “It’s the end of the world as we know it.”

        Our Premier and his flock have destroyed our country. Everything is broken and they are walking away with a smile on their faces.

        Like 7
        Dislike 3
    • Watchtower says:

      We need a whistleblower law to reward those that can provide evidence against government officials that have take our money!
      Every candidate should agree to vote for this. Our media should hold them responsible for honoring their commitments.

  2. Hmmmm says:

    “Meanwhile, local legislators have described this new economic substance legislation as one that will hurt the BVI’s financial services sector. They, however, moved to implement the Act at the behest of the European Union (EU) who threatened to put the BVI and other jurisdictions on a ‘blacklist’ of tax haven jurisdictions if they did not comply.”

    Which one of our local Legislators understands financial services?

    Like 14
    Dislike 1
  3. Reply says:

    I was of the opinion that when pressure was being brought to bear on the government relative to transparency in the financial services industry from external forces, that the BVI was between a rock and hard place.

    I saw the situation as one where the country had few options to avoid being black listed among by the major players. Nevertheless, no matter the tightness of the squeeze, I do not believe the government had no cards to play.

    What I did not realize and could never had imagined then was that our own government would provide the tools necessary to dismantle the financial services industry as we once know it essentially setting in motion the destruction of a major pillar of the country’s economy.

    In my view, not because external pressure was being brought to bear on the financial services industry meant the government had to cave in completely to all those demands. All the talk about not providing a register of beneficial ownership, and all the trips to London were all for naught.

    This new law is a sad day for the financial industry and the country in my opinion. The effects of this new law will have wide ranging consequences on the overall economy for some time to come as the exodus of companies begins, the job losses mounts, and the revenues from this vital economic sector begin to dry up.

    Making matters worse, I do not see anything that the government has done or is proposing that will make up the anticipated financial losses.

    Whom ever wins the next election needs to have a plan in place to address this issue facing the country. The current government, imo, completely capitulated.

    There is a need for some strong and bold initiatives to counter this law and salvage as much of the financial industry as possible or re-brand it into something that can still be an attractive financial vehicle that does not shed jobs and revenues nor encourage mass exodus of potential businesses from operating in the BVI.

    IMO, the government completely capitulated to external forces with no plan in place to recoup the all but certain financial losses. A sad day.

    May the financial services rest in peace, or may it be resurrected. Who will lead the charge?

    Like 21
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  4. Anonymous says:

    It is brutally sad and unfair that institutions can exist all the way in Europe, and can have such devastating effects on the lives of hundreds of thousands of people across the globe and in the British Virgins.

    Why should we lose income, jobs, our financial institution and our livelihood because they think we should? That is flat out wrong!

    It is devastating that they have the power and control to determine if governments, financial institutions, the employed and the families with children to clothe and feed whether all of them should survive or perish.

    That to many is simply wrong! Some things must change. We must do what is necessary to take back control of our financial destiny. Only we should be in charge of that!

    No man or country was created to rule over or determine another man’s destiny, especially his economics. We must change this!

    Like 10
    Dislike 1
    • Anonymous says:

      No man or country was created to rule over or determine another man’s destiny, especially his economics.

      If it is their intention to destroy our financial well being and economic pillar, then we should seek and or take our independence, period!!

      Like 4
      Dislike 8
      • Ganga says:

        That is irrational. Read the article again. It’s not Britain that is responsible for this.. It is the EU. Britain is not perfect but compared to the EU they have our back and the have a vested interest in our wellbeing since they would be responsible for cleaning up the mess if we fail. Independence would be like feeding us to the lions. Except Daniel didn’t have intellectual giants like Mark Vanterpool to make things worse for him.

        Like 6
        Dislike 2
        • @Ganga says:

          No where in any of those pieces did the term UK appear.

          Indeed, the word Europe was mentioned to encompass the whole of Europe. So your haste to make some one out an irrational has exposed your own irrationality and incompetent incomprehensibility.

          Lastly, what is the difference between a black mamba and a cobra’s venom? Eurpoe, EU, UK, all have been proven deadly for the Black man and people of color throughout history and up to this very moment in time.

          So, take your uncle tomming none sense else where, as some are in no mood for it at this point in time.

          Like 1
          Dislike 3
          • Ganga says:

            You referred to European institutions. If not Britain and the EU, who did you mean by that? The Albanian Bakers’ Union? The difference between a Black Mamba and a cobra’s venom is that the first is a snake and the second the venom of a snake. Obviously.
            Neither snake cares what race you or I are. And neither do I.

  5. THE TRUTH says:

    @ ANONYMOUS same S**t different day.

  6. Anonymous says:

    Most backwards place laws are made to oppress black ppl while these whites come on ships and plans for we to serve them while they have no respect for us all the political BS to keep us enslaved

    Like 4
    Dislike 20
    • Cracker says:

      The simple solution is to make it’s illegal for white people to come here then. Problem solved, you won’t have to serve anyone then, all alone and happy. I am sure that our 100% locally controlled HOA would be happy to pass that kind of law to pacify you as well, thereby ensuring the final nail in your insane racist coffin.

      Like 25
      Dislike 2
      • @Cracker says:

        you really have the nerve to refer to us as insane racist?

        Dear Cracker, please go back to your own home, SA, USA, UK and all other parts of EU from whence you come. There you will be among the inventors and practitioners of racism.

        We know racism and it is not practised by us. Yet, many of us have experienced the overt kind first hand. So please go back where you come from with your racist filth instead of writing piddle.

        Like 4
        Dislike 17
        • SMH says:

          Hmmmm “Us” nah buddy, speaking for yourself…not all of “Us” share your views!

          Like 6
          Dislike 1
        • Long swamp says:

          The weird thing about racism is that it is occurs in all races equally. The application of it occurs only though opportunity. If one race can have an advantage over another they will use it. It’s a mistake to fixate on one part of history and and think of it as the definition of racism since it has always existed and always will. I wish it were not the case but let’s not pretend one race is more racist than another. We’ve all done it and we should all stop it.

        • Call a racist a racist says:

          @craker you are a racist

          Like 1
          Dislike 2
    • smh says:

      Anonymous – do you actually have any idea whats going on? Or you just running your mouth about racism because its the only thing you know how to do when youre upset about something you dont understand?

      See how the economy fares without “whites” or any other race of people who contribute to our sectors both financial and tourism. We do not share your views… Go read a book

  7. Cromwell says:

    Correct me if I am wrong, but, I was under the impression that the EU had yet to accept the validity of the new legislation.

  8. Problems says:

    One MAJOR problem here is the misguided cra p about colonial masters etc. So many other former colonies are much more confident in their own abilities, ediucation, culture, identity and are forging a successful future with planning and with input from the best people they have in the land and have attracted to their lands. Every time something difficult comes up. The U.K. wants this place to succeed if only because it is then not a liability like many other OTs. Also, because we are a part of the English legal system, seen by clients all over the world as the most desirable system. This is a major part of what we have always been selling and if you don’t get that, you will if financial services dies or BVI goes independent.

    This law came about by the EU and US spotting a weaknesses in Britain and an opportunity to Take U.K. and BOTs business. The EU and OECD are not forcing these requirements on themselves in the same way or the US, notably. The U.K. has not fought clever enough and our leaders don’t have a clue either. Interestingly Cayman of all the OTs seems more resilient as they have not had a regulator that tries to kill off everything but incorporation business and their sense of valuing the people who build and maintain their industries is more advanced than our own.

    With economic substance, senior executives could be in demand here and they would want support staff. That would provide the platform for a whole new industry with development opportunities for locals. BUT we don’t have many kids coming out of school with the right attitude to getting the requisite experience or with the right university degrees. Also, we don’t have decent schools and amenities, or even basics like reliable water, sewage, internet, roads to attract those people here. The danger is, they say they will live in Cayman, Bermuda, Singapore and then the companies redomicle there and our clients are gone. The opportunity, should we wish to accept, is to provide these amenities and infrastructure now while we have money and opportunities to rebuild, we get people in and give permanent residency when people spend vast chunks of their lives here, we allow them to invest in homes here at a rate between belonger and non resident, they will boost the economy, their presence will help make things work better econ9mically like direct airlift in time, more facilities and better restaurants and bars and recreational amenities, NHI, every industry we use in every day life and some we don’t even have here yet. Will we be overrun or priced out of our own lands? Not at all. Would the place look like a much better version of itself with better career opportunities for Belongers? Of course. With elections looming, which parties are brave enough to deliver a coherent vision for our economic growth and which will just snipe at other, give out bribes and play the race card killing off, ironically, future prospects for our own people?

    Like 7
    Dislike 1
  9. Reality says:

    Globalism at its finest,

  10. Reality says:

    Globalism at its finest, you never know how heavy an elephant is until it steps on your toe. Most of you wise men/Women in the Caribbean hate the only World leader to openly oppose globalism. yes continue cutting off your noses.

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