The British Virgin Islands (the “BVI”) has introduced “economic substance” requirements for entities carrying on certain specified activities under the Economic Substance (Companies and Limited Partnerships) Act, 2018 (the “ES Act”). The ES Act, which was brought into force in the BVI as of 1 January 2019, requires certain legal entities incorporated or registered in the BVI to establish and maintain “economic substance” in the jurisdiction.
Broadly equivalent legislation has been enacted in other major offshore jurisdictions, including Bermuda, the Cayman Islands and the Channel Islands.
Is my BVI entity caught?
Under the ES Act, “legal entities” carrying on a “relevant activity” need to establish economic substance in the BVI.
A legal entity is a business, company or limited partnership with legal personality, and includes foreign companies and foreign limited partnerships that are registered in the BVI. Excluded from the definition of legal entities are: (a) entities which are resident for tax purposes outside of the BVI; and (b) limited partnerships that do not have legal personality.
Legal entities which carry on any one or more of the following “relevant activities” are in scope under the ES Act and must comply with economic substance requirements
- banking business
- distribution and service center business
- financing and leasing business
- fund management business
- headquarters business
- holding business
- insurance business
- intellectual property business
- shipping business
Each of these activities is defined in the ES Act and the activities being carried on by the BVI entity must be carefully considered in order to determine whether it is carrying out a “relevant activity”. Please contact Conyers who can assist you in carrying out this analysis.