BVI – Economic Substance Requirements

The Economic Substance (Companies and Limited Partnership) Act, 2018 (“ESA”) was enacted in the British Virgin Islands (“BVI”) on December 28, 2018, and came into force on January 1, 2019.

The ESA provisions apply to BVI Business Companies and Limited Partnerships registered in the BVI that are conducting “Relevant Activities” unless they can properly validate to be tax resident in a jurisdiction outside the BVI.

All legal entities are required to provide their Registered Agent with sufficient information to enable the BVI International Tax Authority (“ITA”) to determine whether the entity is carrying on any relevant activity, and, if so, if the legal entity is complying with the legislation requirements.

The ESA amends the BVI’s Beneficial Ownership Secure Search System Act, 2017 (“BOSS Act”) to add to the existing requirements such that a legal entity and its Registered Agent have obligations in respect of reporting prescribed information in relation to a legal entity’s Economic Substance.

The ESA outlines the range of penalties imposed for failing to provide the required information, providing false information, and operating in breach of the Economic Substance requirements. Penalties may include fines, imprisonment and/or the entity being struck off the Registry with stringent requirements to reactivate.

A legal entity that carries on a Relevant Activity during any financial period must comply with the ESA Requirements in relation to that activity.

• For a company or limited partnership incorporated or formed on or after 1 January 2019, a financial period shall be such period of not more than one year from the date of incorporation or formation.
• For a legal entity in existence prior to 1 January 2019, such period must commence no later than 30 June 2019.

Therefore, we must update the entity’s information as defined by the Law on Economic Substance in the BOSSS system before October 1st, 2019. This service entails a cost that shall be billed. This amount will be reflected on your annual invoice since this update must be done on an annual basis.

Please note that this fee does not include the entity classification.

To help you comply with this law, we will soon be sending you the instructions to access your economic substance tool that will allow you to confirm whether or not your entity is within the scope of this law.

For more complex cases in which legal advice is needed to confirm whether an entity should establish and demonstrate economic substance in BVI, we can assist you in obtaining a legal opinion based on your case through a qualified BVI attorney.

For entities that must comply with the requirements of economic substance in BVI, we have a complete range of solutions to meet these requirements, adapting to each case. Our solutions include legal opinions, physical space, director services, employment solutions, accounting services, among others.

For more information please send e-mail to mfernandez@gala.com.pa.