The Economic Substance (Companies and Limited Partnerships) Act, 2018, concluded its passage through the House of Assembly on December 19. This was ahead of the December 31 deadline set by the EU for the BVI and other financial centres.
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 has already and continues to respond constructively to the EU’s listing exercise. It is expected that the formal response of the EU will not be known for a few months.
Premier Smith said, “The international business and financial services sector makes a vital contribution to the economy of the British Virgin Islands and facilitates cross-border investment and trade to the benefit of the global economy.
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’. In the BVI’s case it passed the Economic Substance (Companies and Limited Partnerships) Act 2018 to meet these requirements.