New economic substance law will challenge financial services providers, Premier warns
Premier and Minister of Finance Dr D Orlando Smith
The new legislation that government is now rushing to pass by the end of December in order to keep off the European Union’s (EU) blacklist of tax haven jurisdictions will create challenges for some local financial services providers, Premier and Minister of Finance Dr D Orlando Smith has warned.
Under this proposed legislation, companies and limited partnerships who are registered ‘tax residents’ of the BVI will be introduced to a number of requirements in an area known as ‘economic substance’.
When a financial services provider can prove that the taxes it pays to the BVI are the result of earnings that were generated through “real economic activity” within the territory, that company is said to have achieved economic substance. In other words, proof that an offshore company is paying taxes in the BVI because it largely does its work and earns its profits in/from the BVI.
Below are the requirements of the BVI’s proposed legislation on economic substance.
In commenting on the proposed legislation, which was drafted by two tax law experts from the UK, Premier Smith said: “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.”
“The Government recognises that the legislation will create challenges for some companies and limited partnerships. 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,” he added.
The Premier hopes to introduce the Bill to the House of Assembly when it next sits on December 13. He further hopes the legislation will be approved and becomes law by December 31, 2018 – the deadline set by the European Union.
The BVI will be added to the EU’s dreaded ‘blacklist’ and subjected to diplomatic sanctions if it does not have these laws in place by the mandated time.
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“if yo rush the brush it will geh darb”
Messy stuff
We in the offshore industry do not have a choice to these legislation. The UK is no part of EU no more so they will challenge us in anyway. The BVI does a lot of business with countries in the EU.
This is why leadership is important. This is not a choice we have and we need to press on in order to save our main economic pillar. Keep fighting Premier and keep us in good standing.
So the next HOA meeting is Thursday 13 Dec. and 18 days later is Monday 31 Dec. less 3 weekends and 2 Christmas holidays so more like only 10 working days. If this proposed legislation is passed by the HOA, signed by the guv and published in the Gazette in 10 working days then it will surely set the new benchmark for speedy legislation. Hopefully now the overdue audits, consumer protection laws, etc. will follow more quickly in 2019!
Surely we should be looking for a solution that helps our financial services industry not challenge it! $400k is a lot to pay for cut and past Guernsey/Jersey/IOM law which is overly complicated.
What on earth is ‘upskilling by providing value added services and increased sophistication of the sector’? Pure BS
This government has led us to rock bottom to satisfy its rich and powerful cronies
You are truly clueless about this entire thing. Sad.
Sounds like all businesses of the BVI and that do business in the BVI are now to be controlled by Europe, just as the UK is leaving Europe.
Or do I simply not understand this.
You dont understand. Read it again or try finding more detailed info online.
LMAO!!! You read this article and got that? WTF?
So, the 20,000 or so companies that have been formed in the first 6 months are going to employ their own staff, and, that’s on top of the other 400,000 or so companies that are reputed to be registered in the BVI. Are we totally stupid, if they all employ one person we will have another 420,000
people living in the BVI.