SOS Substance on Substance - Timing updates and classification requirements

Harneys launches its SOS series, delivering hot takes on critical topics around the Economic Substance legislation.

Each bulletin will give the very latest updates on this ever-changing environment, with an aim to provide consistency and certainty for our audience.

First up, Phil Graham and Josh Mangeot discuss the immediate implications of the presentation Neil Smith, Director of International Business delivered to the BVI private sector on Wednesday 10 July.

Click below to listen.

Key takeaways:

• An update on the timing of the release of the Code and Guidance Notes
• A steer from the ITA on what they will be expecting all BVI entities to do
• Clarification around Tax Residence
• The ITA’s view on the Harneys Economic Substance Classification Solution

Timing update and classification requirements

The first compliance “financial period” has commenced for all BVI registered companies and limited partnerships with legal personality.

On Friday 12 July, BVI Finance reminded the industry that the commencement of the first financial period remains as set out in Section 4 of the Economic Substance (Companies and Limited Partnerships) Act, 2018 (the Act). For legal entities registered or formed before 1 January 2019, the first financial period commenced on 30 June 2019 by default. All legal entities should therefore ensure they have determined their classification under the Act if they have not done so already (and monitor their position going forward).

The BVI International Tax Authority (ITA) has indicated that it will expect to see robust evidence of the basis for such classification. Specifically, the manner in which a legal entity determines its classification should be formalised in such detail so as to allow the ITA to make a determination pursuant to Section 10(1) of the Act and it will be expected that BVI registered agents will retain the relevant details and documentation to ensure that the provision of information pursuant to Section 11(1) of the Act is in a timely manner to meet the requirements of Section 11(2) of the Act and avoid the sanctions set out in Section 11(3) of the Act.

Harneys’ online classification solution is available to all BVI companies and limited partnerships to assist with this exercise at a fixed price point – for more information, please click here

Stay tuned for more Substance on Substance.

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