Financial services projected to boom by year-end
The British Virgin Islands has been told to position itself for a significant boom in the financial services sector; the benefits of which is expected to be seen by year’s end.
Director of International Business Neil Smith told BVI News on Wednesday that this is as a result of the European Union (EU) insisting that the territory implement the Economic Substance (Companies and Limited Partnerships) Act which effectively makes it mandatory for offshore financial services companies to set up physical offices in the BVI.
The Act was implemented to keep the BVI off the EU’s blacklist of non-compliant tax haven
Smith explained that while the 400,000 plus registered companies in that sector will be reduced, the number of persons involved in the sector is likely to triple on the ground.
“That’s where we will benefit because you will have more people here buying clothes, food, payroll taxes …” he said.
“It is a tradeoff, so that’s why we are excited.”
Smith said all registered offshore companies must satisfy the new economic substance requirements “by the end of 2019”.
More efficiency now needed at Immigration, Labour
In the meantime, Smith said departments such as Labour and Immigration need to heighten
“If you are going to have a larger population of professionals in order for people to want to come to the BVI, the processes need to be fast,” he stated.
He also mentioned the need for improved air access, internet, telecommunication, and infrastructure.
BVI still greylisted
In the meantime, though the territory is now clear from being blacklisted, it has been placed on the EU’s Annex ІІ list; often referred to as the greylist.
However, Smith said being greylisted is no fault of the BVI.
“We are there because the EU had some issues that they cannot sort out,” he explained.
“They (the EU) don’t know how to deal with the collective investments vehicle which is an investment fund. T
He said the territory and other Overseas Territories who has a growing collective investment vehicle, now have to wait on the EU’s decision.
The EU’s definition of economic substance has to do with financial services companies setting up physical and appropriately-staffed office spaces in the territory.
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So by the end of 2019, how many of the 400,000 will be left and in compliance ?!
Not many, and those that are here will be kicked out by the FSC for not being compliant.
And this is the man in charge. He’s good at blowing smoke up your a***s. The end is near for the financial sector. Move on and focus on other areas of the economy.
Properly explain this to the layman because it not making sense.
way i see it. the fsc registry will shrink. but if companies do more here government will collect more taxes. FSC revenues will fall, but inland revenue taxes and other things will increase. BVI will need to up its game to look more “modern”. I dont see how this could happen by the end of 2019, but i could see the Govt making moves to making happen by then. Somehow i doubt he said boom by the end of the year.That is what i think.
Pls get your communication correct: BVI still greylisted In the meantime, though the territory is now clear from being blacklisted, it has been placed on the EU’s Annex ІІ list; often referred to as the greylist.
Having worked closely with clients for almost 2 decades in the Financial services sector I fail to any positives from being required to have physical offices and staff in the BVI. IMO less than 5% will even consider opening offices and hiring staff. Not everybody with a BCO is a multi-millionaire some just open companies for their property and vessels on advice of their lawyer. Dont forget these are the same people that complained when the GLF was increased from $350 to $450 now they have to pay at least a minimum of $20,000 annually in salary for one staff. We’ll just have to wait and see how it works but I’m not highly optimistic.
You hit the nail on the head.
This is ridiculous to put such false expectations out there when persons who actually liaise with clients are aware of their views on this matter, which is certainly not to set incur more expenses.
Is this where Neil Smith is now. Hard to keep track.
This whole financial services thing is just another form of slavery and we should not have fallen for it in the first place.
They can’t even find space to house government offices, they expect there to be a boom in offices being set up for external BVI Business Companies …that’s like putting a dentist to advise on internal surgery
Do we have the offices and housing to accommodate? How many people are we talking about?
@Anonymous what I am understanding the good gentleman and past Financial Secretary to say is; whereas the requirement for companies in the Finance sector to maintain offices and staff in the territory, even if a mere 5% of those 400,000 companies make the decision to comply with the “Economic Substance” requirement, there would still be some 20,000 + companies doing business on island. If those 20,000 companies require 2 or more persons to maintain a presence, that is still a significant number. Given the real possibility of even more companies deciding to take up residence; say 10% we could be overwhelmed.
Note: Since the devastation of hurricane Irma and the ongoing Recovery, BVIs population has grown to the extent that it is difficult supplying housing accommodation to keep up with demand. Also since the beginning of the rebuilding Ferry Services has more than doubled moving bodies between the islands. On Virgin Gorda, the VG main port of entry which has been doubling as a passenger and cargo dock, can hardly cope and the new district rep has just days ago indicated that it is imperative that the facility must now definitely be separated in order to cope with demand, safety and comfortably.
BVI days, in the words of the premier, Hon. Fahie, “are still ahead of us”. Its time to be Optimistic.
There is a difference with optimism and unrealistic expectations. Your picture sounds positive when you omit certain information. The 20,000 that you see as a positive will be at the cost of 500,000 companies. If 95% of the companies leave, financial services will not be a main source of revenue for the BVI and will double as unemployment will drastically increase as well. It is even hard to think that 20,000 “new” business places will be popping up all over the BVI in the near future, hopefully im wrong but like I said We’ll just have to wait and see.
“If those 20,000 companies require 2 or more persons to maintain a presence, that is still a significant number”
Yes, that would require 40,000 staff – and staff who are able to satisfy regulators that they are doing substantive work in the BVI. Most of our financial services companies do no more than print out pdfs, file the pdfs, scan the filed pdfs, and email them overseas. I am afraid that this is not substantive.
We don’t have the office space, housing or staff to provide 500 companies with the necessary requirements. 500 x $450 per annum is not much revenue for the FSC – $225,000 – enough for two employees (them pay good at the FSC), a shared office space and two sport utility cars (FSC employees obviously need sport utility cars as part of the job). its a bit less that the $180,000,000 the FSC currently receives for 400,000 companies annual fees.
400,000 active BC companies at the lower licence fee amount of $350 will generate an annual revenue of $140 million. Note that I have not accounted for those of the 400k that are at $1,100 licence fee rate which will be an additional revenue of no. of BC at this rate times $750 ($1,100 less $350 accounted for). The questions that need to be answered are what gross revenues are going to be generated from the 20,000 companies and how are we comparing what we have with what we expect to get? We need real answers. No more fluffs. Mr. Minister of Finance?
In addition there are companies that pay 1250 and 2500 in annual fees. Also there are fees in excess of $10k for those companies with trust license, various other application fees, fees for requesting docs and so on. We generate annual revenue far beyond $140M
is he smoking? After decades of chasing out firms trying to establish headquarters in the territory (several in the Fund industry sprint to mind ) we are now going to start handing out work permits? Cloud Cuckoo land. Companies will go. period. Prepare for recession and alternative forms of industry
Y’all assuming these companies are big companies avoiding tax who will rush to BVI. In my experience most are private equity for which there will be little change and the ‘headquarters’ companies are already redomiciling.
Sure there will be a boom in the economy as at the rate of which clients will be forced to redomicile their companies to avoid incurring fees in becoming compliant, registered agents and the financial services will need to increase their staff to handle this exodus of companies. Thus, the unemployment rate of the current BVI population should be decreased if immigration dept amongst others handle this correctly. This will also result in more disposable income in the job market resulting in increase spending and payroll taxes being paid.
So although this law is unfortunately a deterent, the response to its enactment will boost the economy even if for a limited time.
In order to benefit, Registered agents and FSC just need to increase their dissolution, transfer/redomicilation fees, might as well without fear of losing the customer since it is inevitable that most companies will be leaving. I am pretty sure the FSC don’t need no one to tell them how to deter non-compliance by implementation of their high penalties. This way stay or leave we are bound to benefit from this law albeit shortlived. Hopefully long enough to get all other ducks in a row.
All this talk of 20,000 new staffed offices popping up in the territory is pure delusion.
Firstly we don’t have the infrastructure to support it. Not now, not even in 5 years.
Secondly you don’t these crafty financial industry lawyers have every loophole in this new arrangement already worked out.
Wouldn’t surprise me if a priveledged few law firms will somehow create all the necessary office space (aka a PO Box Number and a cubicle in their offices) and pool themselves as the supposedly salaried staff of these offshore companies. They’re not going to be going out and recruiting tens of thousands of new employees and renting apartments for them. Let’s not kid ourselves.
Short memories BVI . After Irma the chatter wasBVI. danced to the financial industry tune had destroyed BVI culture and as an effect destroyed its ability to be sustainable . Sham jobs doing sham work in an office where sham work goes on so criminals can avoid tax and launder money . Now your all getting excited at the prospect of creating more sham jobs with pretent offices . Shame on you
I want some of what you are smoking Smith! Maybe it is time for to change career field. The boom will be artificial.
https://www.fuqua.duke.edu/duke-fuqua-insights/cfo-survey-december-2018
Can anyone believe anything that Neil Smith says? Please remember his history of —- financial reporting under the NDP. Get him out.
what i see here is someone who has looked forward into what is possible and realizes that the BVI has a bright future if we play our cards right. Glad to see someone has thought about it and figured it out some possibilities