Unofficial Consolidation of the Economic Substance (Companies and Limited Partnerships) Act, 2018 (as at 13 August 2021)

Summary

This is the unofficial consolidated text (as at 13 August 2021) of the BVI Economic Substance (Companies and Limited Partnerships) Act, 2018, maintained by the International Tax Authority. It sets out the substantive economic substance test that BVI companies and limited partnerships carrying on certain activities must meet, and amends the Beneficial Ownership Secure Search System Act, 2017 to impose related reporting requirements.

• Scope: Applies to legal entities (BVI Business Companies, foreign companies registered in the BVI, and limited partnerships with or without legal personality) that carry on one or more listed relevant activities, excluding non resident companies and non resident limited partnerships.
• Relevant activities: Banking, insurance, fund management, finance and leasing, headquarters business, shipping, holding business, intellectual property business, and distribution and service centre business (investment fund business is excluded).
• Core requirement: A legal entity carrying on a relevant activity must be directed and managed in the BVI, have adequate employees, expenditure and physical premises in the BVI relative to the activity, and conduct core income generating activity in the BVI for each relevant activity it carries on.
• IP business presumption: Legal entities conducting intellectual property business face a rebuttable presumption of non compliance, particularly high risk IP legal entities, unless they demonstrate genuine strategic decision making and risk management in the BVI.
• Reporting and enforcement: The competent authority (ITA) can assess compliance, require information (including from registered agents), impose penalties for non compliance, and disclose information to relevant overseas competent authorities in specified circumstances (e.g. breach findings, IP presumption outcomes, or claimed foreign tax residence).
• Appeals: A legal entity subject to an adverse determination or notice has a right of appeal, with a set procedure and time limit for compliance with a section 12 notice.

The Act also requires legal entities to notify the competent authority of their financial period, with specific transitional deadlines depending on the type of entity and when it was formed. Because the document is a consolidation showing multiple amendments (2019 and 2021), readers should check the referenced amending instruments for the exact wording in force at any given time.

Key obligations

• A legal entity carrying on a relevant activity during a financial period must comply with the economic substance requirements for that activity, and separately for each relevant activity if it carries on more than one.
• A legal entity must notify the competent authority of its financial period in accordance with the rules in section 4 (varying by entity type and formation date).
• A legal entity may apply to the competent authority to alter its financial period, subject to a maximum twelve month length.
• Legal entities and their registered agents must provide information required by the competent authority under section 11 to assess compliance.
• A registered agent for a legal entity carrying on a relevant activity must supply particulars required under section 10(3)(g) within a period following the end of the financial period, to be fixed by regulations.
• A registered agent for a legal entity contesting the IP rebuttable presumption must supply supporting evidence within a period following the end of the financial period, to be fixed by regulations.
• A legal entity that is a pure equity holding entity must comply with its statutory obligations under the BVI Business Companies Act, 2004 or the Limited Partnership Act, 2017, and maintain adequate employees and premises in the BVI for holding and, where applicable, managing its equity participations.
• A legal entity subject to a section 12 penalty notice must comply within the time specified, subject to its right of appeal.

Applies to

companies (BVI Business Companies and registered foreign companies), limited partnerships (with and without legal personality, and foreign limited partnerships registered in the BVI), registered agents of legal entities, pure equity holding entities, legal entities carrying on intellectual property business (including high risk IP legal entities)

Deadlines

• 1 January 2019: General commencement date for the Act's provisions.
• 30 June 2019 (or later date appointed by the Minister by Gazette notice before 30 June 2019): Commencement date for section 16 (amendment to the 2017 BOSS Act).
• no later than 30 June 2019: Deadline by which legal entities existing before 1 January 2019 (other than certain limited partnerships) must notify the competent authority of the commencement date of their first financial period under transitional rule (c).
• no later than 1 January 2022: Deadline by which a limited partnership without legal personality formed prior to 1 July 2021 must notify the competent authority of the commencement date of its financial period.
• period following the end of the relevant financial period, to be fixed by regulations: Deadline for a registered agent to supply required particulars (section 10(3)(g)) or evidence contesting the IP rebuttable presumption (section 10(3)(h)(ii)).