On 28 December 2018, the BVI Government passed the Economic Substance (Companies and Limited Partnerships) Act, 2018 (the “Act”). The legislation, which entered into force on 1 January 2019, is similar to other substance laws being introduced in numerous other jurisdictions worldwide.
BVI companies and limited partnerships that are tax resident in the jurisdiction, and which also operate in one of nine defined business sectors, are now required to have “adequate substance” in the BVI. Additionally, BVI companies and limited partnerships will have to inform registered agents of the jurisdiction(s) in which they are tax resident and may have additional reporting obligations.
However, there remains much uncertainty as to how the legislation will work in practice. The regulations to accompany and clarify the Act are yet to be disseminated and it is likely that they will not be made available until March. In addition, it is possible that the legislation will be amended, as dialogue is still occurring with bodies such as the EU.
Due to this uncertainty we are currently unable to provide definitive guidance on complying with the legislation. At this point in time we recommend all our clients with BVI entities to read this note on the legislation in order to understand the fundamentals of the new requirements. A further briefing note, with practically focused information, will follow when the guidance notes to the legislation are issued by the BVI authorities.