B.V.I經濟實質法施行細則草案!

Draft implementing rules for the B.V.I Economic Substance Act!

The British Virgin Islands (BVI) recently released the “Draft Implementation Rules for the Economic Substance Law”. The basic contents of the draft are as follows:
1. Applicable objects of economic substance law:
Only local tax residents of BVI are exempt from the application. Enterprises registered locally but who are tax residents of other countries are exempted from the application. If you claim to be a tax resident in another area, you must submit proof of residence, tax payment certificate, or verification notice as supporting documents. It should be noted that if the company declares itself as a tax resident in Region A, then all relevant income generated by the BVI company must be declared in Region A to be eligible.​

2. Only nine categories of related activities
The BVI Economic Substance Law is not applicable to all companies, but to enterprises that mainly engage in nine types of activities. The nine categories of related activities include group headquarters, sales and service centers, financing and leasing, fund management, banking, insurance, shipping, holding companies and the provision of intangible assets. Among the definitions of pure holding companies, the draft identifies them as “relevant individuals that only hold equity investments and purely earn dividend income and capital gains”; that is to say, companies that engage in financial investments such as stocks, bonds, funds, etc., may be excluded. Outside the scope of a pure holding company. For example, when an individual or enterprise establishes a BVI company to engage in investment activities, if the BVI company invests in stocks and falls within the scope of a pure holding company, it must establish substance in accordance with the lower economic substance requirements of a pure holding company. If a BVI company invests in other products such as bonds, real estate, etc., the company is not a pure holding company. If it does not fall into the other eight categories of related activities, it does not need to meet the requirements of economic substance.

In the current BVI economic substance related regulations, there are many conceptual words, such as sufficient, appropriate, and appropriate, without specifying the quantity or conditions; future implementation will be judged based on case-by-case conditions such as the size of the company and actual activities.

Note: To collect relevant information extensively for reference.