LAW ON THE ECONOMIC PRESENCE KICKS IN AT BVI

HomeNewsLAW ON THE ECONOMIC PRESENCE KICKS IN AT BVI

As of January 1, 2019, a new Law on Economic Presence came into force on the British Virgin Islands. The BVI adopted the Draft on December 19 last year. This day was set by the EU as a deadline for adopting an anti-offshore legislation on this British overseas territory.

What are the requirements of the Law on Economic Presence?

The law introduces a number of new requirements for any legal entities applying for registration on BVI. Registered companies are now required to have a real economic activity on the islands. Doing business through the BVI without any “economic presence” (i.e. a director, an office, “adequate expenses”) becomes impossible. According to the new law, the British Virgin Islands should lose the benefits that attracted those who looked for a low-cost offshore company.

Essentially, the law now requires the following:

  1. Company’s activities must be managed at the BVI with the board of directors meetings held regularly (and with a quorum); all documents are to be kept at the BVI.
  2. The company must employ a sufficient number of adequately trained and qualified personnel who are physically located at the BVI. The law does not specify the number of employees, as this depends on the scale of operation of a company.
  3. The costs adequate for the scale of a particular operation are incurred at the BVI.
  4. An office is present on the Island (once again, corresponding to the scale of the business).

A transition period for the existing and new companies

All companies are subject to the new law, except for those whose owners produce a proof of a tax residency in a different jurisdiction. No specific requirements have been developed for such evidence.

Companies already registered at the BVI are given a short transition period to bring their activities in line with the new law. The requirements must be met by the 1 June 2019. In case of non-compliance with the company will lose its registration at the BVI.

On top of this, violating the law would trigger off a fine of at least USD 5,000. In case of non-payment of the initial fine, a cascade system, increasing its amount, kicks in.

The registration of new companies at the BVI, as of 1 January 2019, is only possible under the condition of full compliance with the Law on Economic Presence.

In addition to the introduction of the “economic presence” clause, any BVI-registered companies must provide financial authorities with any information “reasonably necessary” to verify compliance with the new law.

New rules on economic presence also apply to Belize, the Seychelles and a number of other, once 'clear' offshore territories.