It is anticipated that the International Tax Authority (the “ITA”) of the British Virgin Islands will soon issue its Economic Substance Code (the “Code”). The Code will provide guidance on interpreting the requirements of the Economic Substance (Companies and Limited Partnerships) Act, 2018 (the “ES Act”).

This bulletin provides updated guidance on the requirements of the ES Act taking into account the rules set out in the Code. Reference is made to our earlier client bulletins regarding the introduction of “economic substance” requirements in the British Virgin Islands. This bulletin should be read in conjunction with those other bulletins.

Economic Substance Requirements

The ES Act requires all Legal Entities carrying on a Relevant Activity during a Financial Period to establish economic substance in the BVI. For Legal Entities incorporated before 1 January 2019, the Financial Period starts on 30 June 2019.

The bold faced capitalised terms in the previous paragraph are defined in the ES Act. Their definitions are not ‘standard’ definitions, but rather are precise definitions which determine the application of the ES Act. Reference is made to the ES Act and the Code for the definitions, which are also set out in Appendix 1 to this bulletin.

Irrespective as to whether included in the definition of Legal Entity or Relevant Activity, all BVI companies and all limited partnerships with legal personality will need to make a report under the ES Act starting in 2020 as to their compliance with the ES Act during the previous Financial Period.    

Legal Entity

In short, a BVI company or a limited partnership with legal personality is a Legal Entity unless (a) it is resident for tax purposes in a jurisdiction outside of the BVI and (b) that jurisdiction is not on Annex 1 to the EU list of non-cooperative jurisdictions for tax purposes, the “EU blacklist”.

Robert J.D. Briant

Partner, Head of BVI Corporate Practice

British Virgin Islands

Anton Goldstein


British Virgin Islands

Mark J. Forte

Partner, Head of BVI Litigation & Restructuring and Office

British Virgin Islands

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