The BVI was not among the European Union (EU) blacklisted countries; and this announcement has cemented genuine optimism about the future of the financial services sector. In fact, the 12 March announcement is seen as a small victory for the Territory which now awaits further EU instructions.
Since last December, the matter of economic substance was a concerning factor for residents, industry stakeholders; and the government. In fact, many keenly listened as the Legislators in the House of Assembly took a bipartisan approach to meet the end of year deadline. The passage of the legislation was followed by a suspense across all areas of the BVI; as many had ears cracked to learn whether the EU would find the BVI’s response satisfactory.
This is why the announcement on Tuesday this week was rightfully met with cheer as it was announced that the European Union found the BVI, Bahamas and Cayman Island compliant as was referenced in a document titled Annex II.
The Annex II stipulations echo the conclusions that were adopted by the European Union’s Council (Council) at its meeting held on 12 March; and noted that jurisdictions such as this Territory is cooperating with the EU with respect to commitments taken to implement tax good governance principles.
On Tuesday, EU governments added ten new jurisdictions to the blacklist, including Aruba, Barbados, Belize, Bermuda, Fiji, the Marshall Islands, Oman, the United Arab Emirates, Vanuatu and Dominica.
In the case of the BVI, Bahamas and Cayman Islands the Council noted: “These jurisdictions committed to addressing the concerns relating to economic substance in the area of collective investment funds, have engaged in a positive dialogue with the Group and have remained cooperative, but require further technical guidance, were granted until end 2019 to adapt their legislation.”
The BVI complied with the EU‘s request by passing the Economic Substance (Companies and Limited Partnerships) Act, 2018; which was further amended in January. This legislation states that a legal entity which carries on a relevant activity during any obligation financial period must comply with the economic substance requirements in relation to that activity.
This requirement is extended to entities that carry out more than one relevant activities. These activities include banking, insurance, fund management, finance and leasing business; headquarters business; shipping business; holding business; intellectual property business; distribution and service centre business.
During a press conference on 13 March Neil Smith the Director of International Business and Regulations and CEO of BVI Finance Elise Donovan lauded the opportunities this new economic substance matter will create for the Territory. Both Smith and Donovan stressed that the situation is not a doom or gloom matter but rather an opportunity for the BVI to evolve.
Smith told the media: “From my point of view it is exciting. It is not depressing at all…I think the BVI financial services sector can do better than it did in the past.” He explained that there was a wait to see if the EU would accept the BVI’s position, and now that it has, the government would prepare guidance notes for the industry to ensure compliance. These notes are expected to be ready in the next month or two.
“Now we have to open the conversation with the companies to say how we will operate going forward,” Smith said, as he explained that retooling efforts and other ease of business mechanisms will help the BVI remain on the cutting edge of the financial services industry.
“BVI in our view has been providing economic substance, the challenge is the interpretation,” the Director of International Business and Regulations explained.
Donovan further noted that she is optimistic about this new era of the BVI offering more substance as she noted that preparations will now be made to take the sector to the next level. “We are preparing guidance notes, preparing BVI Finance and preparing the Territory.”
The CEO also said that BVI Finance anticipates an upward trajectory for the industry and noted that the BVI continues to be favored in the Asian market. ________
Premier and Minister for Finance Hon. Andrew Fahie is asking the community to be mindful of things that it says about the United Kingdom and its relationship with the Territory. He also asked for consideration of the fact that the issues of contention as it relates to the beneficial ownership public register is being championed by a small group of persons; and not a reflection of the wish of the entire government.
The Premier’s comments were made on 12 March during the first sitting of the first session of the fourth House of Assembly. The comments came one week after an unsuccessful attempt was made in the United Kingdom’s parliament on 4 March by a faction to make registers of beneficial ownership in the British Overseas Territories (BOTs) and the Crown Dependencies (CDs) public by 2020.
The United Kingdom Parliament’s mandated public register of beneficial ownership is a bone of contention and irritating factor in the long standing relationship between the BVI and its mother country the UK. The matter came to a peak in May last year when thousands took to the streets here in Tortola to protest the beneficial ownership order the UK made calling it Constitutional overreach.
The fact, that the Bill that was pulled last week but must return soon to the UK Parliament, has many eyeing the matter with concern. Therefore, the Premier’s comment on Tuesday is being viewed as timely.
In calling for a balanced look at the matter Premier Fahie mentioned the working with relationship with the Foreign and Commonwealth Office and promised to strengthen that partnership: “We will improve our relationship with the Foreign and Commonwealth Office (FCO) and the United Kingdom government overall,” he said.
The Premier in further noting that there is still a good relationship between the mother country and the Territory said that the UK and the FCO continues to assist the BVI in its efforts on financial services. “I welcome and applaud their efforts and I thank them. It is unfortunate though that a few persons in the UK Parliament are misinformed of the BVI’s role in this sector.”
“In this vein this new government must ensure that we fight to protect our economy and the rights of our people under our COnstitution in a manner that does not disrespect or belittle both the UK government and the people of the Virgin Islands but rather cements unity and a modern partnership that respects the rights and aspirations of all parties,” the BVI Leader added.