The International Tax Authority has issued the final Rules on Economic Substance in British Virgin Islands (BVI) setting out the implementation of the Economic Substance (Companies and Limited Partnerships) Act, 2018 (the "Economic Substance Act"). The Rules were released on 9th October 2019.

The Economic Substance Act came into force on 1 January 2019 and applies to all “resident” BVI companies and limited partnerships. Companies and limited partnerships that are within the scope of the legislation are required to comply with the economic substance requirements.

The draft guidance notes on clarification of the legislation were issued in April 2019, but the changes have taken place as a result of ongoing discussions with the European Union and other factors.

The final Rules give more clarity regarding the interpretation of the legislation and require the companies to file additional information with the database of the registered agent.

The publication containing the text of the Rules is available here.

In order to meet the new legislative requirements, the BVI companies and limited partnerships need to determine the following:

  • The tax residency of the entity;
  • Whether the entity is conducting one or more “relevant” activities;
  • The level of economic substance requirements depending on the activities;
  • What should be done by the entity in order to establish the relevant level of substance, if needed;
  • What is the entity's financial reporting period in accordance with the legislation;
  • What are the reporting obligations of the entity and reporting period.

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