In 2018, the Economic Substance (Companies and Limited Partnerships) Act came into effect. Recently, the deadline for the first filings passed for the BVI International Tax Authority (ITA). ITA has now begun making targeted audit requests to verify the “relevant activities” carried out by BVI entities which have made their mandated economic substance filings.
What is ITA Looking For?
Specifically, the ITA audits are looking for:
Ø Business purpose details
Ø Relevant assets
Ø Nature of their daily business activities
However, they are also interested in details as to what steps the entity took to determine which relevant activities took place during the period of consideration.
BVI entities should therefore (under the provisions of the ES Act) maintain proper documentation concerning any legal advice they might have received in the process of making such decisions. This includes any memos containing director resolutions and relevant advice from BVI legal counsel.
Any organisation that has not already taken these measures should contact their lawyer.
Relevant Activities Must Take Place in the BVI
If you are a BVI entity and you have been determined as executing relevant activities under the 2018 ES Act (passive holding business excluded) – this includes those entities managing investments and those providing multiple interest-bearing loans – you should now be executing such business activity (including decision making) within BVI.
If you have yet to make these arrangements, it’s imperative that you talk to a lawyer to help with your transition and disclose the details to the ITA as required under the law.
The is for general information only. For specific advice about your operational circumstances, you should seek professional counsel.
How can RBCS help?
If you have any queries regarding the economic substance regime, our expert team would be happy to assist. Please click here to contact us.
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