A number of “zero or low corporation tax jurisdictions” such as the British Virgin Islands, Bermuda, Cayman Islands, Guernsey, the Isle of Man, and Jersey have recently introduced economic substance tests for companies registered and are tax resident in those countries.
This summary is about the new legislation passed in the British Virgin Islands (the “BVI”) as part of the BVI’s commitment to the European Union (“EU”) to alleviate the EU’s concerns on “lack of economic substance”.
|The draft Code on Economic Substance legislation will be published in late April 2019 and education campaign will be conducted in the BVI immediately following the publication of the draft. Similar education campaign may follow in Hong Kong to cater to the Asian market. The final code is expected to be published shortly after the education campaign.|
With effect from 1 January 2019, a new legislation titled the Economic Substance (Companies and Limited Partnerships) Act 2018 was introduced in the BVI. This new legislation introduces economic substance requirements that are applicable to all “legal entities” carrying on “relevant activities”, unless they can demonstrate that they are residents for tax purposes in a jurisdiction outside the BVI.
- What are the ‘relevant entities’ that are subject to the requirements?
- What are the relevant activities?
- What is the impact?
- What is Economic Substance?
- What are the legal consequences for non-compliance?