British Virgin islands has published draft economic substance code
08.05.2019
On 23 April 2019 the British Virgin Islands International Tax Authority (ITA) published a draft Economic Substance Code (the Code) which provides guidance on the interpretation of the Economic Substance (Companies and Limited Partnerships) Act 2018 (the Act) and on the manner in which the ITA will carry out its obligations under the legislation.
After the Code is finally will be adopted in May, the scale of the impact of the New Legislation on our clients' businesses will be clarified, and we will be able to offer a suitable solution for each affected business of our clients.
Key points to note from the draft Code are as follows:
Key points to note from the draft Code are as follows:
- Ownership by an entity of any investment other than equity participations will mean that it is not a pure equity holding entity.
- Investment funds are not subject to economic substance requirements unless they carry on any relevant activities which are in scope of the Act.
- The relevant activity will be assessed by reference to the financial period in which the relevant entity receives income from that activity.
- The initial financial period for new entities is deemed to be 12 months from the date of formation. For existing entities, the initial financial period is deemed to be 12 months from 30 June 2019.
- Holding debt or debt instruments for the purposes of investment will not mean a provision of credit.
The ITA has announced that the final Code will be issued in early May incorporating any amendments deemed necessary by the BVI Government.