In December 2018 the House of Assembly unanimously passed the Economic Substance (Companies and Limited Partnerships) Act, 2018 aimed at addressing the European Union’s (EU) concerns over “economic substance”. Through that legislation, which took effect on 1 January this year, it was announced that economic substance requirements would be imposed on any BVI company or BVI limited partnership as well as any foreign company or limited partnership which is registered in the BVI as a foreign entity. At the time of the passage of the Act legislators worried that the substance requirement might cause businesses to either migrate or economic spinoffs to materialize. However, close to one year later and as the substance requirement draws closer Government is still unsure of what will happen.
Inching close to the one year anniversary of the passage of the Act, Leader of the Opposition Hon. Marlon Penn questioned Premier and Minister for Finance Hon. Andrew Fahie during the House of Assembly on 17 October about what would be the likely outcome of the Economic Substance filings that are due from 2020.
In his question the Leader of the Opposition asked the Premier to tell the House of Assembly if Government has established any Committee to educate the public and business community on the benefits that could be derived from economic substance and potential fallout?
In his response the Premier noted that the system to facilitate filings is in place and that the first batch of economic substance information must be filed with the International Tax Authority from as early as 1 January 2020 and no later than 30 June 2020.
As it relates to public sensitization on the effects and benefits of economic substance the Premier noted that no Committee was formed to take care of this, because there is currently some uncertainty: “There is presently no committee to educate the public and business community on the benefits to be derived from economic substance and potential fallout. This is because the extent of the benefit of economic substance to the local public and business community is not as clear as we would like it to be, and we were hoping to have this date sooner rather than later.”
Hon. Fahie said that presently the Premier’s Office in collaboration with the BVI Finance Limited is trying to gauge from the financial services industry in the BVI the current level of demands for Economic Substance requirement imposed on BVI entity in use around the world.
Additionally, the Premier noted that there is an educational mechanism in place. This – the Premier noted – is in the form of the International Tax Authority (ITA) which is a statutory body. According to Hon. Fahie, one of ITA’s functions is the development of a system of continued education for persons in the BVI.
Further Hon. Fahie noted that both ITA and BVI Finance have conducted more technical education sessions around substance. It was further mentioned that these sessions were geared towards the financial services sector.
Therefore the Premier said that Government plans to partner with ITA for educational purposes: “It is indeed this government’s intention in collaboration with ITA to shortly focus some of this effort on education sessions for the wider public, and business community on the benefit that could be derived from economic substance in the not too distant future.” As such, Hon. Fahie said that the public can expect to see educational campaigns on economic substance as soon as government realize more of what will be needed.