(MENAFN - Caribbean News Now) By Bria Smith
ROAD TOWN, BVI — Premier and minister of finance, Dr Orlando Smith, announced on Tuesday that the British Virgin Islands government has responded constructively to the European Union's listing of non-cooperative jurisdictions and will take all reasonable steps to address EU concerns relating to 'economic substance'.
The premier also announced that Cabinet has approved a Bill to meet this commitment. It is planned that the House of Assembly will be asked to consider the new legislation at the Sitting on Thursday, December 13, with the intention that the legislation will be in force by December 31, 2018 – the deadline set by the European Union.
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 government engaged positively with the EU throughout the screening process. Due to the damage caused by the September 2017 hurricanes, a number of countries/jurisdictions, including the BVI, were given more time to commit to meeting the EU's concerns. The Council of the EU accepted BVI's commitment in March 2018.
The BVI meets the EU's criteria when it comes to transparency, anti-BEPS measures and the general principles of 'fair taxation'. However, the EU required further assurances from the BVI and other low or zero corporate income tax jurisdictions, including Bermuda, the Cayman Islands and the Crown Dependencies, on the issue of 'economic substance', set out in criterion 2.2 under the heading of 'fair taxation'.
The new legislation will introduce economic substance requirements for all companies and limited partnerships which are registered and tax resident in the BVI.
Every corporate service provider registering a company that falls under the scope of the legislation will have to know where the company or limited partnership is tax resident and must be ready to relay that information to the BVI's competent authorities.
If a company or limited partnership is tax resident in the BVI, it must demonstrate 'economic substance'.
Companies and limited partnerships that are tax resident in the BVI will have the opportunity to up-skill those who work in the financial services sector through providing value-added services and increased sophistication of the sector.
Companies and limited partnerships which are tax resident in BVI must, in relation to any relevant activity, carry out core income generating activities in BVI. Relevant activities are: banking business, insurance business, fund management business, finance and leasing business, headquarters business, shipping business, holding business, intellectual property business, and distribution and service centre business.
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. 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.