The British Virgin Islands International Tax Authority on April 23 published a draft economic substance code. The new draft code aims to further clarify 2018 economic substance legislation that is designed to keep the British Virgin Islands off the EU’s list of noncooperative jurisdictions for tax purposes.
The new BVI code is applicable to nonresidents that want to establish tax residence in the BVI and take advantage of BVI’s zero tax regime while carrying on their business substantially in another jurisdiction.
The code is intended to be relied upon by entities and their advisers and agents as a guide to how the BVI tax authority proposes to discharge its functions, though it is not a legally binding interpretation of the legislation.
Special rules are provided in the guidance for holding companies, intellectual property businesses, and other activity.
The new BVI economic substance guidance does not apply to investment funds.
According to the EU, the BVI tax regime facilitates offshore structures which attract profits without real economic activity in the area of colletive investment funds. BVI has promised to change its rules by the end of 2019 but requires further technical guidance before it can do so.
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