On January 1st, 2019, Economic substance (Companies and Limited Partnerships) AСT, 2018 entered into force in the British Virgin Islands. The law introduces a number of new requirements for legal entities registered or only planning to be registered in the British Virgin Islands.
According to the latest changes, the company will have to demonstrate its "economic substance" in the country of registration, thereby becoming a tax resident of the BVI. This condition means that it is possible to conduct business and own a company in the British Virgin Islands only if there is an office, the required number of qualified employees, the financial ability to maintain the company, as well as an adequate number of expenses. The new rules apply to companies conducting the following activities:
•Banking activity,
•Insurance,
•Management of funds,
• Finance and leasing,
• Headquarters activities,
• Activities in the field of transportation,
• Holding activities,
•Intellectual property management,
• Distribution and service activities.
In accordance with the Law on economic substance:
• Management and control of the company's activities should be in the BVI. Consequently, all meetings of the Board members of the company must take place in the British virgin Islands, and all documents must be stored in the BVI;
• The company must have a real office in the territory of the BVI;
• The company must have a sufficient number of skilled employees in the islands;
• The company is obliged to bear an adequate amount of expenses in the territory of the BVI;
• A company whose activities are related to intellectual property is obliged to place the equipment on the territory of the BVI, if necessary for its activities;
Each company will be obliged to prove its economic presence in the country of registration and submitted to the Directorate of international taxation the ITA (International Tax Authority) reasonable and necessary information to verify compliance with the requirements of the Law.
Registration of new companies in the BVI, starting from January 1st, 2019, is possible only with subject to full compliance according to the new requirements of the Law. For companies registered before January 1st, 2019, it is also necessary to comply with all legal requirements on economic presence until June 30, 2019 and to report in accordance with the law "On the system of search of beneficial owners" 2017 by June 30, 2020. (The law has been amended in the framework of the law on economic presence which has entered into force).
In case of failure to comply with the requirements of the law, the company and the beneficiary may be subject to both administrative and criminal liability. And the legal entity will be liquidated. For violation of the law there is a fine, the minimum amount of which is 5 thousand USD. In case of non-payment of the fine, a cascade system of increasing fines begins to operate.
On materials of the following website: https://eservices.gov.vg/gazette/sites/eservices.gov.vg.gazette/files/newattachments/Act%20No%2012%20--%20Economic%20Substance%20%28Companies%20and%20Limited%20Partnerships%29%20Act%202018-%20Revised%2017%2012%202018%20%28clean%29%20%281%29_0.pdf
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