By Davion Smith, BVI News Staff
Offshore financial services companies registered in the British Virgin Islands are expected to physically set up office spaces in the territory if they are to continue doing business with/through the BVI.
That is the essence of the Economic Substance (Companies and Limited Partnerships) Bill that is currently being debated in the House of Assembly.
Offshore companies will be expected to begin opening offices locally once the bill comes into effect on or before December 31 this year. This was mandated by the global superpower group, the European Union (EU). If the BVI fails to comply, the EU will hurl diplomatic sanctions at the territory.
According to the bill, companies cannot simply set up an office space in the territory. Those office spaces must also be appropriately staffed to reflect the amount of profit the company is generating in or through the BVI.
For instance, if a company typically generates a half-million dollars worth of profits over a certain period, their BVI office must be occupied by the corresponding number of equipment and staff members that can reasonably produce those profits within that period.
Notably, there are approximately more than 400,000 financial services companies actively registered in the BVI.
We don’t agree with this Bill but we have to support it
Legislators from both the government and opposition side of the House have said this economic substance legislation will have unfavourable impacts on the territory’s financial services sector after it has passed.
Government minister Myron Walwyn, for example, said getting the respective offshore companies to relocate to the BVI might create challenges in and of itself.
He said: “We all know that [for them to relocate] between now and the 31st of December is near to impossible. We also know that it’s going to take a decade or more for us to be able to do that as well. There are a number of other issues that would be presented to us from that [legislation] — cultural issues, issues of space, the difficulty of companies moving and getting up from where they are located now, to come to the Virgin Islands.”
Like the eight other legislators that contributed to the debate so far, Walwyn declared his support for the bill. However, none of those legislators are supporting the bill because they agree with it. Rather, they said they support the bill because the EU has twisted their arm, so to speak.
“It (the economic substance legislation) is going to create some issues for us — certainly in the short term — that we are going to have to grapple with. But, as we say, the effect of not doing it would be to get blacklisted, which will create other issues for banking and other complications in terms of our commerce activities here in the territory,” Walwyn noted.
Damned if we do, damned if we don’t
Opposition Leader Andrew Fahie has described the BVI’s position as one whereby the territory is “damned” if it implements the legislation and damned if they do not.
“We have no guarantee when this is passed — even with the amendments — that the EU will say: ‘Well, alright. We accept it fully and you would not be blacklisted. So that’s what I mean when I say damned if you do. And ‘damned if you don’t’ because, if we don’t, we’ll be blacklisted [just the same]” Fahie said.
He and the other legislators recognised that yielding to the EU’s demands is the lesser of the two proverbial evils.
They have referred to the EU’s ‘Blacklist’ ultimatum as political bullying.
The EU is a political and economic union of just fewer than 30 member states that are located primarily in Europe.
The EU Blacklist is a compilation of jurisdictions that the group has determined to be non-compliant tax havens. The BVI is currently among other British Overseas Territories and countries that the EU has targeted.
Copyright 2021 BVI News, Media Expressions Limited. All Rights Reserved. This material may not be published, broadcast, rewritten or distributed.