Update on BVI Economic Substance requirements

The Economic Substance (Companies and Limited Partnerships) Act, 2018 (“Act”) came into force in the BVI on 1 January 2019. The Act requires legal entities conducting “relevant activities” to demonstrate adequate economic substance in the BVI.

Relevant activities include banking, insurance, fund management, finance and leasing, headquarters business, shipping business, holding business, intellectual property business and distribution and service centre business. Entities which are resident for tax purposes outside of the BVI and limited partnerships that do not have legal personality are excluded.

Industry practitioners are expecting Regulations, Rules or formal Guidance Notes to be issued so as to receive further details and a clearer picture on how to practically implement the economic substance requirements. It is anticipated that draft guidance may be available before the forthcoming Easter holidays and education campaigns will be launched in the BVI and Hong Kong afterwards.

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