The International Tax Authority (ITA) in the British Virgin Islands (BVI) has now released the Rules on Economic Substance (the Rules) which provides guidance on the interpretation of provisions under the Economic Substance (Companies and Limited Partnerships), 2018 (the Act).
The Act applies to all companies and limited partnerships (excluding limited partnerships without legal personality) registered in the BVI (or foreign companies and limited partnerships doing business in the territory), other than BVI registered companies or limited partnerships that are resident for tax purposes in a jurisdiction outside the BVI. The Act imposes economic substance requirements for BVI companies and limited partnerships that claim tax residency in the BVI and carry on “relevant activities”.
The Rules replace the previous circulated draft Economic Substance Code (the Code) primarily in name and formatting, since the substance remains the same except a few changes. One notable change is clarification of the term "expenditure" in relation to the Act, which now clearly only includes expenditure incurred in the operation of a relevant activity.
It is envisaged that the Rules will be updated periodically over time to take into consideration other regulatory changes, and feedback from service providers and client entities.
We will provide further details of the Rules in due course, in the meantime, please do not hesitate to contact Kerry Anderson (kanderson@onealwebster.com) or Christopher Simpson (csimpson@onealwebster.com) should you require further information, including services regarding entity classification.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
